According to VeryWell Mind,

Your mindset is a set of beliefs that shape how you make sense of the world and yourself. It influences how you think, feel, and behave in any given situation.

Naturally, your mindset also affects your attitude to money. Do you find it impossible to save? Is your impulse to stash away the cash? Do you just not care? Let’s dive into the psychology of saving — how our brains and our past affect our saving habits and whether we can develop a healthier relationship with our finances.

 The Basics of Money Mindset

Your money mindset plays a huge role in how you handle your finances. We’re going to break down three common mindsets, including their benefits and drawbacks, and give advice on how to overcome the challenges unique to your mindset.

Scarcity Mindset

If you’ve got the scarcity mindset, you view money as a limited resource that can easily run out. Maybe you grew up in a household where money was tight or you experienced a sudden change in fortunes, like losing your job. You tend to hoard money and avoid spending. This mindset has some benefits as it can encourage saving and you’re more likely to prioritize financial safety nets, such as creating an emergency fund.

However, unless you’re actually living hand to mouth, there are real drawbacks to the scarcity mindset. It can engender negative emotions around money like constant fear and stress. Additionally, the fear that money will run out may lead to hoarding your funds in a bank account. The money is easily accessible, but it’s not earning significant returns.

People with a scarcity mindset should consider safe, low-risk saving strategies like fixed deposits. Your investment is guaranteed, meaning that you won’t lose any money, and you can save more than if you just park your cash in the bank. You can also try to change how you think about money. Instead of worrying about whether your money will run out, remind yourself that you’re working towards financial independence and celebrate reaching your saving milestones.

Abundance Mindset

On the flip side, if you have an abundance mindset, you believe there’s plenty of money to go around. You’re probably someone who has a more optimistic outlook on life in general. This mindset has a myriad of benefits. You’re more likely to be charitable and generous. And, unlike the scarcity mindset crew, you’re more relaxed about financial matters.

However, an abundance mindset can also be associated with a love of shopping; you get a thrill from buying beautiful things or dropping cash on memorable experiences. You may also be more willing to engage in risky financial behaviour, without weighing up the pros and cons. A friend mentions that something is a good investment and bam! you’re in, no questions asked.

People with an abundance mindset should carefully research their financial decisions. There’s nothing wrong with shopping in moderation; however, be wary of overspending or giving in to impulse buys. Try to practice mindful spending by making purchases intentionally instead of impulsively. And don’t forget to save! Remember that your mindset must match the money in your bank account. If you don’t actually have abundant resources, you may need adopt a more cautious attitude.

Indifferent Mindset

If you just don’t care much about money, you’ve probably got an indifferent mindset. Maybe you were raised in an environment where your family never discussed money. Maybe you’ve got different priorities and you don’t want to spend your time thinking about saving and budgeting. Believe it or not, there are some benefits to this mindset. You’re less likely to overspend keeping up with the Joneses, and you’re more likely to be content with your current financial situation.

However, your lack of planning for the future can really come back to bite you. If you’re living pay cheque to pay cheque, losing your job or encountering unexpected expenses can negatively impact your standard of living. Even worse, if you’re relying on credit cards or loans to fund your lifestyle, you may find yourself saddled with significant debt.

You don’t have to become the sort of investor who’s glued to the stock market and always deciding whether to buy or sell. But you should set savings goals and conduct a regular review of your finances. And if you want some help, you can even ask a financial expert to come up with simple saving strategies to safeguard your future.

Remember, your money mindset isn’t set in stone. You have the power to change your financial story and develop healthier habits. By understanding the psychology behind your saving behaviours and implementing the relevant strategies, you can build a more secure and satisfying financial future. Happy saving!