Improving Your Financial Situation Requires Changing Your Thinking

There are plenty of articles on the internet about habits, attitudes, and behaviors of the wealthy, famous, and successful people of the world. 

Here are few we found through a quick search:

• 9 Success Habits of Wealthy People That Cost Nothing
• Behaviors of the Wealthy: 6 Powerful Habits
• Attitudes of self-made millionaires

We think most of these habits and behaviors are good and should be followed but the articles miss one key point. 

We all read the article about the habits, marvel about the wealth they’ve created, and then go back to our own behaviors and thinking.

You Have to Make a Change

There are thousands of different habit, behavior, and overall mindset combinations that can lead to success and wealth.

But, if you want to improve your financial situation, you cannot simply just read about the different characteristics and actions of these people. 

You must work to change your thinking if you want to improve your financial situation.

Using a budget, a spending tracker, debt pay off planner, or other finance-related worksheet doesn’t automatically change your financial situation.

These worksheets and tools are designed to change your behavior and your thinking.

More importantly, they get you to think about your finances. 

The first rule of fight club is: You do not talk about fight club.

It’s completely the opposite with your finances.

The more you think, talk, and acknowledge your finances, the better off you’ll be accomplishing your financial goals.

Why tho? 

Because, strong thoughts dominate weak thoughts. 

That’s why budgets can be successful agents of change. 

Creating a budget forces you to set a concrete limit of how much you want to spend on different aspects of your life.

Changing the Way You Think

Before the budget, here’s the thinking while in a clothing store:

I really like these shoes … but I should be saving money …

… well, last time I checked I had this much savings so it should be okay …

… and I really like these shoes.

You kind of know, but not really.

What about after a budget?

I really like these shoes … how much have I spent on clothing this quarter? 

Well, I bought those two shirts and jacket last month but I should still have a little left over … 

Are there any other clothes that I might want to buy? 

… No, I really like these shoes. 

Wait a minute, in both cases the shoes were bought. 

Yes, but the thought process is so much different. 

The goal of a budget is to accomplish your financial goals but, it isn’t done by writing down numbers on a spreadsheet.

It’s done by you thinking about your financial transactions.

The Goal is to Consciously Think About Your Choices and Results

The hope is that when you set a budget limit on some spending item, you will keep that in the back of your mind. 

You’re also more willing to sacrifice or at least consciously understand that you’re choosing between two things.

Let’s revisit the clothing store thought process but this time you’re going to spend more than your limit.

I really like these shoes … how much have I spent on clothing this quarter? 

Well, I bought those two shirts and jacket last month but I should still have a little left over … 

Are there any other clothes that I might want to buy? 

… Oh yeah, I need to buy some shorts and a swimsuit to replace my old ones for the upcoming trip. 

But, I really like these shoes and they would be great for the trip …

… Maybe I could spend less somewhere else this quarter?

Are these shoes worth missing my spending and savings targets?

What do you think? 

Maybe there’s a different area of expenses you could spend less.

Maybe the shoes are really worth saving less this quarter. 

It’s totally fine to do either of those things if you really want the shoes … or whatever your considering purchasing.

Why?

Because you’ve thought through your choices and how they’ll affect your financial goals. 

That’s how a budget or whatever financial worksheet is supposed to help you. 

It’s supposed to subtly change the way you think. 

What is Your Thought Process?

Our goal is to help you change your thinking so that you can achieve your financial goals.  

Your thought process is one of the reasons why you can earn unlimited money and still end up broke. 

Ask yourself, if you received $1,000,000 what would you do with it? Where would you allocate it? 

There’s four options that we can think of:

• Spend it
• Invest it
• Repay debt (although this is a version of spending it)
• Give it away

This isn’t a question to trick you or make you feel stupid.

Don’t feel bad if you didn’t consider investing a portion of it or repaying debt. 

You’re not stupid. 

It’s simply to show you three things:

1. Americans (maybe other people in different countries too) are conditioned to first think about how they can use their money to consume.
2. Once that $1,000,000 is spent, used to repay debt, or given away, IT IS GONE.
3. Your money can make you money.

Unless you grew up seeing someone invest money, money has likely always been seen as having one purpose.

To be spent now to be spent later.

The first step in accomplishing your financial goals is to change how you think about money.

Start Reflecting on How You and Others Think About Money

When the chief financial officer looks at the money for the company to use, he or she is thinking about the return they can generate on that money. 

How can they best use their capital (money) to generate more profits? 

Instead of thinking about how you can turn a dollar into some gum, think about how you can turn that dollar in $1.50.

Hey, maybe you can make $1.50 by buying gum and doing gum tricks for people.

I know, it’s a dumb example. 

Who would pay to watch gum tricks and what even are gum tricks?

But, it’s a good example to show you the difference in thinking about purchasing the same exact thing.

One way focuses on self-enjoyment and the other focuses on investment.  

And, you don’t have to do this with all of your money.

You should spend money on the things that will bring you enjoyment. 

We believe that money should enhance your life, not hinder it. 

You Are Going to Have to Make Choices

But, you also have to make choices about how much money you want to spend, invest, and give. 

And, if you don’t think you have to make a choice, you’ve already made a choice.

Every situation is unique and a lot of your financial chocies depend on how you want to live your life. 

Think about what you want today, tomorrow, in 5 years and in 25 years. 

Some people are content working throughout their life because it allows them to brunch every weekend. 

Other people are willing to forego a lot of things if it means they can choose how they spend every minute five years from now. 

Discuss it with your partner, your friends, your family. 

People are going to tell you things so crazy and different from your own goals. 

Its totally fine to dismiss what they say because this is your path in life.

But, try to understand why they have those ideas about their money.

It will help you to change your thought process and how you think about money.