And how our beliefs impact our actions
Did you know 44 per cent of lotto winners lose their entire fortunes?
That’s because it’s not about how much money you have; it’s about what you do with it.
Money is a core survival issue. It’s central to our lives, regardless of how much you earn, where you live, what you buy or the decisions you make. Yet most people have very little idea about how to manage their money or training on how to financially prepare for the future.
“Poor” financial literacy
Most people never receive a formal financial education. Financial literacy is not taught in Australian schools, so you’re forced to rely on the lived experiences of your role models, usually your parents. This is how you form your money mindset.
Money mindset is your relationship, attitude and beliefs towards money. It’s usually formed unconsciously between the ages of two and 12, yet influences your decisions for a lifetime, unless challenged.
Without a good understanding of money or a clear financial plan, it’s difficult to get ahead, save or maintain a good financial position. And, unfortunately, if you make too many poor financial decisions, money can have a negative impact on your life.
However, if you can change your mindset, you can change your behaviour. And when you change your behaviour towards money, you’re on your way to achieving financial success.
Which “school of finance” did you attend?
“I learned Ancient History, but nothing about how to manage my money.”
Currently, there is no independent financial literacy program taught in Australian schools.
“I manage my money the same way my parents did, even though our circumstances are completely different.”
Youth today still rely on their parents as their leading source of financial knowledge, despite most Australians reporting financial stress. Consequently, bad habits are passed on.
The hard way
“I wish someone had taught me this when I was growing up.”
Most people learn money lessons from making costly mistakes.
“John at work invested in a new business, so that’s what I did too.”
Asking your mates, work colleagues or “rich friends” what they do with their money.
Managing your emotions
Just as your money mindset affects your financial decisions, so too do your emotions.
Fear, greed and desire are often the key drivers in financial decisions. Combined with a lack of experience or confidence with financial issues, you can end up making very costly mistakes.
Did you know sadness induces impatience and narrow-mindedness? When making financial decisions, this emotion can lead to “present bias” in which you favour instant reward over long-term returns.
Given that financial decisions often come with a sense of trepidation or urgency, you’re biologically wired to experience negative emotions, such as sadness or anxiety. However, when you learn to recognise these emotions, you can start to make better choices.
Making your money work for you
And the choice is yours. You can change and you can update your beliefs to suit your circumstances and goals. But you must be willing to see and do things differently if you want to achieve a different result.
This is where financial coaching can help.
The role of a financial coach is to educate you and give you the tools to bridge the gap between your money mindset and your real-life financial situation. With this skill, you can redefine your past, align your present and master your financial future.
Book a free consultation with a Reventon Money Coach today!
Talk to the Reventon team and we’ll give you all the guidance you need to be a successful at investing your money.