As many across the globe grapple with the harsh realities of a global recession, personal financial challenges have become increasingly prevalent. A financial therapist offers valuable insights into four simple mindset shifts that can help transform your financial outlook and pave the way to wealth.
Amanda Clayman, a financial therapist based in Los Angeles, recently shared her expertise with Business Insider, discussing how most people tend to avoid thinking about their money troubles. She emphasises that altering one's approach to finances can yield the most sustainable and positive results.
1. Identify Financial Disappointments
Clayman advises that if the thought of budgeting feels intimidating, it's crucial to understand why. Often, it's less about the actual financial situation and more about the fear that life will change significantly. She recommends that individuals "mourn" their old expectations and seek creative ways to find joy and peace in their new circumstances.
"Surrender to the reality that this is what it will be for the foreseeable future. That helps you take action rather than hope things change independently," Clayman suggests.
This sentiment is especially relevant for younger generations facing financial disappointment. Despite the significant wealth transfer from older generations—data from Cerulli Associates shows $53 trillion will be passed down from boomers to Gen X, millennial, and Gen Z heirs—the rising cost of living continues to present substantial challenges. Understanding this context is vital in addressing financial anxieties.
2. Find the Purpose of Your Budget
When consumers finally muster the courage to start saving, maintaining this habit can be challenging. Clayman notes that for many, continuously saving requires a compelling incentive. She suggests aligning your financial goals with a personal purpose, such as raising a family or supporting a life of travel.
"The reframing can be around 'how do I find dignity in this effort or struggle?'" Clayman explains. In her own experience of paying off $19,000 in debt during her 20s, she developed "a different definition of strength and what's cool and what's valuable."
Setting broad financial goals can also help maintain focus. This includes encouraging yourself to save more, consistently paying off debts, and monitoring your credit score, all of which are essential for long-term financial health.
3. Maintain Control Over Your Budget
Debt can be overwhelming, and it's easy to blame oneself. However, Clayman emphasises the importance of acknowledging the unpleasant aspects of debt without letting it define you. Many consumers feel so ashamed and overwhelmed by debt that they avoid dealing with it altogether.
Clayman suggests that even without a complete solution, managing what you can is better than shutting down and letting the debt accumulate. By maintaining control over your budget, you ensure a stable emergency fund for unexpected expenses, help control overspending, focus on long-term goals, and allocate time and resources for retirement planning.
4. Make Saving Fun
Despite the stress that saving can cause, Clayman encourages viewing it as a fun challenge. This might involve being inventive with wedding arrangements, starting a profitable side hustle, or finding ways to travel inexpensively.
"On the one hand, there could be an almost unlimited amount of money that one could spend on travel and experiences," Clayman says. "But we also have this other value tool that we're trying to make room for long-term security."
She also points out that engaging in cost-effective "fun" activities can contribute to financial freedom. For example, hiking, visiting parks, and enjoying local events are enjoyable activities that don't require significant expenditure. These alternatives allow you to stay on track toward financial independence while still having fulfilling experiences.
Financial Data and Closing Thoughts
According to a study published by Bankrate, nearly 52% of Americans say their financial situation has worsened over the past year, underscoring the widespread nature of financial anxiety. Additionally, data from the Federal Reserve shows that the average credit card debt per household is over $6,000, highlighting the critical need for effective financial management strategies.
Implementing these mindset shifts can significantly impact your financial well-being. By addressing disappointment, finding a purposeful approach to budgeting, maintaining control over your finances, and incorporating fun into your saving strategy, you can create a sustainable path to wealth.
