Have you ever invested money in something only to realise it was a huge mistake? Do you think your emotions come in the way of purchasing decisions? Are you afraid of debt coming in the way of your long-term dreams?
It’s more common to be swayed by money-related matters than you’d think. But have you wondered why we make financial decisions the way we do?
Not many know that spending money has a lot to do with psychology. Understanding the psychology behind money gives us a lot of insight into the way we think and feel about money and making financial decisions. It can also control the urge to spend irrationally.
For instance, some feel hopeful about getting loans for poor credit in the UK while others may feel sceptical about it. There could be a potential psychological reason behind these feelings.
Regardless of your financial situation, certain psychological influences can change the way you feel about money and modify your financial behaviour for the better.
In this article, we’ll explore and highlight various psychological tricks to improve your financial behaviour and health.
1. Identify and Acknowledge Your Triggers
Do you have a weakness for buying on impulse? Does a significant amount of your money go into buying clothes and cosmetics impulsively?
Impulse buying is a common phenomenon, and there are ways to deal with it. Understanding your spending triggers is the first step to acknowledging change. It’s easier to deal with and transform poor financial habits by identifying where you are spending too much.
Track your spending and allocate a budget for each area. However, don’t get overly enthusiastic, as it can backfire and you may end up spending more than usual. Draw the line at spending on impulse or hunting for deals. Maintain a fixed monetary amount to treat yourself from time to time.
2. Embrace Your Financial Fears and Discomfort
It’s natural to experience fear and anxiety when it comes to making financial decisions for the long term. Fear can manifest in multiple ways, be it the fear of the unknown or the fear of failure. A constant stream of ‘what ifs’ stemming from fear can plague your mind and leave you feeling stuck where you are. The other more rational choice is to embrace fear as a part of your journey and be okay with making mistakes.
For example, are you afraid that you may never get rid of the credit card debt you’ve accumulated over the years? Instead of letting the fear dwell on you, focus on making the debt payment right away and drive that fear away from engulfing your thoughts.
Learn to face your financial fears and take charge of your financial future.
3. Use Affirmations to Improve Your Money Mindset
Research by psychologists at the Cleveland Clinic has proven the power of using affirmations to modify your mindset. Affirmations are phrases you say either out loud or in your head to affirm yourself. They’re a way to overcome negative thoughts that can make you doubt yourself and your abilities.
Apply this principle to your money matters by reciting money affirmations to change your money mindset. Over time, it can build up your confidence to achieve your financial goals and help you manage money more effectively.
Affirmations are more powerful when they’re personal, so choose the ones that are more aligned to your goals and values. For example, “I control money; money doesn’t control me” or “Money is a tool to change my life for the better”.
Practice positive affirmations to reprogramme your brain and improve your relationship with money.
4. Don’t Dwell on Your past Money Mistakes
We all make money mistakes; it’s a rite of passage, even when it comes to financially savvy people. Blaming yourself for your financial errors will do more harm than good.
The best way to get over a mistake is to move forward. Rather than dwelling on what you did wrong, use those experiences as a learning tool. Take these experiences, no matter how unsavoury they were, as a guide for what-not-to-do and understand what you could have done instead. Use this newfound knowledge and develop a financial plan to do better financially in the future.
Learn from your past financial errors and grow better as a person. This psychological action puts you back in the driver’s seat and in control of your finances.
Summing Up
Your mindset towards money can drive every big or small financial decision you make, which is why it’s never too late or too early to start. These 4 psychological tips and tricks can come in handy to overcome your limiting beliefs and fear mindsets and improve your financial behaviour.
It may seem difficult at first. You’ll need to put in the effort to change your thoughts, attitude, and behaviour towards finances. But stay at it, make changes one by one, and see your actions transform for the better.
Your future self will surely thank you for it!