Most people think money is just about maths, but really, it’s about behaviour. It’s what we do every day that drives our fiscal outcomes. Do we engage regularly with our money and check our accounts or stick our heads in the sand? Do we reflect on purchases or spend mindlessly? Do we set goals, or does it feel too overwhelming?
Of course, there are things that impact our personal finances that are outside our immediate control, such as the rising cost of living, a job loss or a relationship breakdown. If you need more immediate support, there are resources available to assist. But in good times or bad, identifying what’s driving our daily behaviours around saving and investing can be an enormously helpful step towards increasing our overall levels of financial resilience and fitness.
Your money and your mind
Mental health is a key component of our overall wellbeing, but did you know your mindset can play an important role in your financial health, too? According to Beyond Blue’s financial wellbeing hub, “Financial challenges can cause significant stress, which can impact our mental health and wellbeing. Similarly, the state of our mental health can make it harder to get on top of our finances.”
If you struggle with your mental health, seeking appropriate support and guidance could pay dividends for your finances, too. No matter where we are on our financial journey, we can all benefit from considering how our financial outcomes are affected – positively or negatively – by the way we think, feel and act.
Humans are predictably irrational
In recent years, behavioural economists have looked at how people make money decisions and unearthed myriad ways in which we act on autopilot that don’t serve us – or our finances – well. One of these is present bias, which is when we prefer instant gratification over a bigger, long-term gain. There’s also loss aversion (when we fear losses more than we enjoy the possibility of bigger gains) and anchoring effects (where the first price we see is the one we gravitate to).
Being aware of these defaults can help us make better decisions, says CommBank chief behavioural scientist Will Mailer. “Having language around it can help us think about how we set up our financial lives in ways that might avoid those same errors. One helpful exercise is to look back at your past spending and identify what brought you the most joy and the spending you might have been able to do without. Use this as a guide to spend in ways that bring you more ‘joy per dollar’.”
And how does that make you feel?
Psychologists, on the other hand, have explored the way our emotional states drive our behaviour. Fear makes us turn away from something and not engage. Curiosity, by contrast, makes us want to explore. So, what drives our emotions? Our thoughts.
Basically, there’s the world around us – the facts of our lives – and then there’s the thoughts that we hold in our head about that world, often subconsciously. And what we think drives our emotional state, which influences our behaviour and, in turn, our financial outcomes. The popular movie franchise Inside Out is a good summary of what psychologists have been explaining to their clients for years now.
How our thoughts drive our emotions
You can see how this chain of causation can play out in a negative way. If, for instance, you think money is a scary topic, that may make you feel overwhelmed, ashamed or anxious and that’s going to drive money avoidance behaviours. But we can harness the chain of causation and turn it in our favour.
We can experiment with thinking of money as a powerful tool and we can use this tool to build the life we want. We can encourage the thinking that there are steps we can take to feel more in control of our finances and that nobody is inherently “bad” at money – some of us just need to learn a little bit more about it.
These positive thoughts and associations are going to drive you down a better path when it comes to feeling good about your money. And when you feel good about your money, you’re going to do better with it. So, how can we reframe our money mindset and boost our financial EQ to not only feel better but experience more positive outcomes?
How to check in on your money mindset
Identify your money thoughts
A simple exercise to get you started is to get a piece of paper and pen and write “Money is...” at the top. Then write out a list of all the sentences that come to mind. Perhaps you’ll write that money is “...a source of stress in my life and my relationships”. Or that money is “...something I don’t understand”. These are your “money thoughts” or what you think about money. Just go with the flow and try to come up with at least three.
Identify your money emotions
Take a moment to read those sentences and notice in your body how they make you feel. Stressed? Anxious? Or, if you’ve unearthed positive money thoughts, do they make you feel optimistic? Curious? If you struggle to identify your emotions, it can help to look at something called a “feelings wheel”, which you can find online with a quick search. Identifying any uncomfortable thoughts and emotions you have around money is the first step to reframing them.
Experiment with a new thought
How can we reframe unhelpful thoughts and emotions about money? One way is to go through your list of money thoughts and write those sentences out in the reverse. If your thought is: “Money is a source of stress in my life,” try to flip it into a positive. For example: “If I invested time in learning about my finances, I could feel more in control.” Crucially, you don’t have to believe what you write – yet. You just have to go through the process of experimenting with what an opposite thought would feel like.
Take action
Once you do have some more positive thoughts about money, it’s about putting them into action. This could mean checking your accounts, being more mindful when you spend or engaging with financial education books or podcasts. And these are the daily behaviours that will drive good financial outcomes. It can help to make a list of positive money thoughts and stick them on the fridge or read them every so often, to keep you on track.
Remember you can grow
The most important thing to remember when it comes to your money mindset is that everyone can improve their relationship with money. It’s called having a growth mindset – a phrase coined by psychologist Carol Dweck. A growth mindset, in this context, means recognising that nobody is inherently bad with money. It’s just a skill set we all need to learn. It’s about engaging with your finances and implementing small daily habits that are going to move you towards your larger financial goals.
Seek support
That said, some financial issues and barriers are too big to overcome on our own. If you are struggling with your money, reach out for support. If your bills are overwhelming, talk directly to the hardship division of your utility or credit providers. They can discuss the possibility of repayment holidays or an altered repayment schedule with you.
If you need more help managing your debts, call the free and confidential National Debt Helpline on 1800 007 007 and they can connect you with a free financial counsellor.
Mental health support is also available 24 hours a day from Beyond Blue on 1300 224 636 and Lifeline on 13 11 14.