April is Financial Literacy Month and one of the most common questions I get asked is, “What exactly is financial literacy?”
The answer, according to Investopedia, is: the ability to understand and effectively use various financial skills, including personal financial management, budgeting, and investing. Financial literacy is the foundation of your relationship with money, and it is a life-long journey of learning.
There are so many tools to help people develop that relationship with their money. From apps that help you track and save to free online classes. But the most important tool and the real foundation to developing that relationship starts in your own mind. Until there is a shift in your money mindset, all the tools in the world won’t help you create success with your money.
I spoke with Shannah Game, CFP, MBA and creator of the Money Mindset Journal to find out how each of us can shift our mindset to create long-term financial success.
What exactly is a money mindset?
A money mindset is simply the way you think, act, and feel about your money. It’s shaped by how you were raised, the decisions you’ve made, your general outlook on life, friends, family, experiences, and so much more. You can find out a lot about your current money mindset by answering the question, “How does money make me feel?” Understanding how you feel about money can help you spot patterns or blocks in your thinking that might be keeping you from achieving your money and life goals.
What is the ideal money mindset?
Cultivating a healthy money mindset brings the power of attention to your thoughts and actions and offers a way to move from stressed, anxious, overwhelmed, complacent, to a place of peace and understanding. Cultivating a healthy money mindset is a daily practice. You don’t ever “arrive” at a great money mindset and stay there.
An ideal money mindset starts from a place of acceptance. You are where you are, but that doesn’t mean you need to stay there. A healthy money mindset always asks this two-part question: ‘How is my current thinking stopping or hindering me from achieving a goal?’ and ‘What is one action step I can take today to move closer to that goal?’
Why is the mindset the missing ingredient to achieving money goals for most people?
It’s easy to overlook the mindset piece when we’re talking about money. Articles, books, podcasts, and TV shows all focus on the how-to when it comes to money, which is important. However, the mindset is a big part of the why behind it all. When you think about what keeps most people stuck in debt cycles, afraid of investing, not willing to track their expenses, etc., it almost always comes down to the mindset.
When we’re stuck in patterns of negative thinking it’s almost impossible to make sound financial decisions.
What are the steps to get to a healthy money mindset?
The first step is to focus on mindfulness, which is the act of being fully present each day. When you are mindful of your money, you are actively deciding where to put your focus. Redirecting your focus puts you in the driver’s seat to make decisions about how you spend and save your money, what goals are important to you, and how you choose to frame your current money situation. For example, it’s easy to say that you’ll never get out of debt, but a healthy money mindset would instead focus on putting $20, $50, $100, etc. towards your debt this week and being proud of taking one step closer to being debt free.
Is the money mindset the first step to personal financial success?
I believe the money mindset is the first, and crucial first step to personal financial success. Before you jump into all the money tips and tricks, you need to first understand your thoughts and feelings around money. Think of it like figuring out your risk tolerance before you invest. If you’re conservative you shouldn’t be invested in risky stocks. Likewise, if you have past trauma or anxiety around money, you might be stuck in a fear cycle and unable to made headway towards your goals and the life you want to live.
Tell me about the importance of journaling, tracking and goals?
Over the years there have been many studies done that show that journaling has a positive impact on happiness, achieving goals, and even your health. Journaling helps you explore and understand yourself and create a clearer mind by releasing mental blocks. Journaling about your goals specifically helps you clarify what you want and encourages you to consider the why and how, not just the what. Journaling about a daily goal helps you stay focused on the steps you need to take today to move closer to that goal. In my world, journaling about your money mindset is one of the best acts of self-care, just like working out or taking a long-hot bath.
How does someone create a vision for themselves?
You need a vision for where you want to go and what you want to do in life. Think of your vision as the GPS system for your future directing what steps you take and where your money goes. Start by thinking about the ideal vision for your life. Where do you want to live? What do you want to do as a career? How much money do you want and need to make? Who are your friends? What do you do in your free time? What makes you feel purposeful and fulfilled? Have fun and be creative with your vision. You must see it before you can figure out how to achieve it. In the Money Mindset Journal, we’ve created a two-page vision board journal style where you can post pictures, write, draw, and go to town creating your vision. This vision then informs everything moving forward – your mindset, your goals, how you save and spend your money, and so much more.
Jeanette Pavini is an Emmy Award winning journalist specializing in consumer news and protection. She is the author of “The Joy of $aving: Money Lessons I Learned From My Italian-American Father & 20 Years as a Consumer Reporter.” Jeanette is a regular contributor to TheStreet. Her work includes reporting for CBS, MarketWatch, WSJ Sunday, and USA Today. Jeanette has contributed to “The Today Show” and a variety of other media outlets. You can follow her moneysaving tips on Facebook: Jeanette Pavini: The Joy of $aving Community. Find links to her social media and her book at JeanettePavini.com.