This article is all about the poverty mindset.
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Having a poverty mindset is a huge reason why so many people have trouble handling their money.
You might think that this does not apply to you, but if you are limiting your potential to earn money because of internal beliefs, you may have a poverty mindset too.
This mindset is not set in stone and you can overcome the poverty mindset, but you will need to change your beliefs about money.
Money is a tool meant to give you more options. Understanding the impact of spending today versus saving for tomorrow will give you a different perspective on the value of a dollar and the real cost to spend it.
This article is all about the poverty mindset.
How to Conquer the Poverty Mindset
Understand the basics of financial literacy
Knowing the basics of financial literacy is critical to overcoming the poverty mindset. There can be fear surrounding the concepts that we don’t understand, which can cause us to make uninformed decisions.
Where you choose to place your money will impact how well it serves you. There is so much content out there about money that gives you access to the knowledge to have a better financial future.
A few books that I recommend are The Psychology of Money by Morgan Housel and Rich Dad Poor Dad by Robert Kiyosaki. These books are great for people who want to get their feet wet and increase their understanding of money.
Financial literacy can sound daunting, but it consists of a few things, give or take a few topics:
- Interest
- Debt
- Credit
- Budgeting
- Saving
- Risk
- Investing
The cool part about these concepts is that you interact with some of them every day in your life. They are not concepts that only experts use.
You would use these concepts if you ever wanted to make a large purchase like a house or a car. Student loans, college savings, and managing your money also fall within these categories.
One of the most effective ways out of the poverty mindset is education. If you educate yourself, so that you make better decisions around money, you can avoid being manipulated.
Another post that you will enjoy: https://thrivingindependently.com/how-to-be-better-at-saving-your-money/
Know your numbers
This part of financial literacy is vital to achieving and sustaining a great financial future.
Some great numbers to know are your net income, how much you owe, minimum monthly payments, and how much you can afford to spend.
Knowing your net income is important because it indicates your available resources. You would know whether or not you can afford items and it can provide a timeline on how long it would take you to accomplish your financial goals.
You’d be surprised at the number of people who do not know exactly how much they owe to creditors. This is important to know because it gives you a good starting point.
Those who have more awareness of their finances are likely to do better financially than those who have a general idea of what their finances look like but are uncertain.
Change the language that you use
The language that you use is one of the biggest indicators of whether or not you have a poverty mindset or not.
Some questions to ask yourself are:
- What do I think about money?
- Is money difficult to find?
- Is money a source of stress?
Someone with a poverty mindset would see money as a limitation. They would stop themselves from pursuing opportunities due to money, or lack thereof. The money would be an obstacle between the person and their aspirations.
Another manifestation of the poverty mindset comes in the form of people who hoard money. The people that do this are influenced by the fear of not having enough.
One thing that can curb the fear of not having enough money is having an emergency fund.
They reject opportunities and experiences that require money because they lack the confidence that they will always earn more money.
We use money as a resource to be present in the world, but it should never be the lens that you use to govern your decisions. It won’t serve you to live a life where you are afraid to use the money you earn.
We want to get you to a place where you become efficient at managing your money so that you can be confident when you do make money-related decisions.
Consider Risk
Risk assessment is a key part of managing money and making good financial decisions. Someone who is good with money can mitigate risk and optimize for their financial benefit.
With the vast majority of financial transactions you will make, there is some sort of risk involved. If you store cash or keep your money in a bank, you have to consider the risk of inflation.
If you choose to invest in anything, there is a risk that you could lose all of your money.
If you need to borrow from anyone, you need to account for the risk surrounding the interest rate that you are given.
This truth may discourage someone with a poverty mindset because they may choose not to invest or save their money at all.
There is risk in most transactions that you will make, but becoming effective at managing risk will carry you far.
Another post that you will enjoy: https://thrivingindependently.com/stop-comparing-yourself/
Engage with the people who are where you want to be
One way to change your language or perspective around money is to surround yourself with those who are where you aspire to be. They have probably had the same or similar issues with money as you and have found ways to overcome them.
You may find that you overcomplicated your relationship with money and see that it comes to other people easily. By speaking to these sorts of people, you can learn the lessons in an easier way and new methods to get where you want to be.
Observing people who have a more productive or abundant mindset can have a positive impact on you.
Direct your money or else it will direct you
It is much easier to direct your money when you know your numbers. Being more informed about your financial situation will help you make better decisions.
Someone with a poverty mindset may not believe that they have the power to direct their finances.
For example, if someone has a lot of debt, the minimum monthly payments are paid before anything else happens with their money. This can be de-motivating for someone who is trying to accumulate more money.
If you can get ahead of your debt, you will be able to determine where your money can best work for you. You do not want to be on the dark side of debt being subject to late fees, increasing interest, and being overextended.
Practice Gratitude
One thing that everyone can do right now is to practice gratitude. Developing an appreciation for the money that comes into your hands will make you think twice about the money decisions you make.
Someone who practices gratitude for the money they have would find it more difficult to waste it or not use it to its greatest potential.
It is always good to be grateful and being grateful can improve your perspective on your finances therefore, improving your finances.
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