Financial Dieting & the Psychology of Money

Consumers can get the “blues” quickly when bills arrive in mail. With varying payments, due dates and interest rates, keeping track of it all can get very overwhelming. A budget or financial diet can help improve your financial health. Similar to watching one’s weight, a financial diet provides a system to become more money conscious. Money changes the way we think and behave. You simply cannot begin to get a handle on your finances until you have a full understanding of exactly how much money you make and where it’s going on a month to month basis. So much like a nutritional diet, keeping track of your spending is essential. Once you have seen where you spend your money, you can start cutting out some non-essential categories where it makes sense. Learning about the psychology of money will empower you to take greater control of your finances so you can start building towards your financial goals and objectives. You can do this by splitting purchases into “needs” and “wants” categories.

Much like keeping physically fit, staying financial fit begins with understanding the psychology of money and having motivation not to just get yourself in shape but to stay that way. Many people believe that handling money is a habit we acquire from parents, in truth, research is proving that our habits are not just based on conditioning and money management lessons we learned as we were growing up. There’s much more to it. We each have a choice in how we spend our money, which is why having a spending plan in place is always proactive and empowering. Having gainful employment, cash in bank and adequate investments bring intense pleasure and financial comfort. Conversely, being unemployed, with no cash money and no investments create uncertainty and stress.

It’s not money that makes you happy, rather it is how you use it. Indiscriminate and unplanned use of cash flow can lead to financial distress. One of the most direct ways to change your life and live stress free, is to change your attitude surrounding finances. This brings me to the B-word: Budget. Most of us have good intentions when it comes to saving money, but if you’re not aware of what’s coming into your bank account and what is going out, chances are you do not know how much you can devote to your saving goals.

Some people think millionaires spend more but most millionaires are not known for “impulsive” purchases; rather they tend to live well below their “means”, save and invest more than ordinary folks. So in order to take control of your finances and live a healthier, happier and more frugal lifestyle, try to start developing these four habits:

The First habit deals with being “proactive”, which means taking responsibility. Regardless of how you were raised, you can choose your financial behavior and change your attitude towards spending.

The Second habit is to begin thinking with the end result in mind and that means having a clear vision and established financial goals. Look to the future and ask yourself how much money you would require to retire comfortably. If you do not visualize your success and what you want, you are at risk of allowing other people and external circumstances to influence the direction your life takes.

The Third habit is to set your priorities. This means putting first things first. It may be hard to say no, or give into temptations to buy things you do not really need but simply want, but this is exactly the skill you have to learn to keep your goals first and foremost in your mind.

The Fourth habit, is learning to think in terms of a win-win mindset that will allow you and your loved ones to see the mutual benefits from all of your interactions. You are the greatest asset you have on your journey to achieving the lifestyle you want.

Money management requires real commitment and attention to budgeting. For help in budgeting and gaining control of your finances, contact MNP Ltd for a free, no-obligation consultation. Achieving financial freedom is completely possible, it just takes a little work!

Syed Hussain is a Senior Insolvency Manager within our Markham location. To learn more about how MNP Debt can help you, contact our local office at 416.515.3878.