I’ve been researching positive money psychology for more than a decade, and I can say for certain that many adults face financial obstacles in three areas — debt, money mindset and skills.
To get over limiting beliefs and gaps in financial know-how, targeting these three areas cannot only be empowering, but change the financial course of your life.
Here are a few pro tips on where to focus your efforts.
Crush your debt
If consumer debt — car loans, lines of credit used for non-assets, credit card balances, etc. — have been plaguing your financial progress, it’s time to take control. The most efficient method to reduce debt quickly is straightforward, so follow these steps.
Earmark at least 10 per cent of your take-home pay toward debt reduction. If this is hard to do, it probably means you’ll need to trim back in other budget categories like wellness spending, or switch to a discount grocery option versus high-end.
Try to consolidate your balances into a single low-interest loan. If you apply for a consolidation loan or line of credit and are declined, that’s OK. Keep making progress on your regular payments and reapply every six months.
Figure out a way to pay a bit extra on your highest-interest balance every week. Even an extra $ 20 will make a difference. Once the first balance is out of the way, move on to paying a bit extra on the next one, and so on.
Don’t get into more debt while paying off existing balances. This would be the pits, right? The best way to deal with bad debt habits for good is to understand why it’s happening in the first place. Then replace those behaviours with a higher purpose — what is this whole debt-reduction process for, anyhow? Is it to build financial security, a stronger retirement, more support for your family?
Anchoring yourself to the big picture should make you think twice before replacing that car … again. Sometimes it’s hard to keep up. If this is you, reach out to a credit/debt counsellor or agency for support.
It takes time to pay off debt, but your efforts will be worth it. Once it’s gone, you’ll have a clear path to build up an even stronger retirement nest egg.
Strengthen your money mindset
Money is a tool that can help open doors to a future that you get to design. That’s why you need to make friends with it, and fast.
Shifting your money mindset to one of empowerment starts with believing that you deserve a better relationship with money, and are willing to work for it, too.
Here are some proven techniques to help get your mindset into a better head space:
- Express gratitude every day for the money you do have (shifts our focus to what money can do for us).
- Park negative financial self-talk (reduces skepticism about our ability to be better with money).
- Speak openly about your finances with your spouse (releases financial tension that causes stress and anxiety).
- Adopt a small but meaningful daily money habit, such as etransferring $ 5 to your emergency fund when you wake up each morning (small steps like this can build positive momentum for the larger behavioural shifts).
- Set a realistic goal — or two — for the month and year ahead (helps focus your vision on the future, key in the financial planning process).
Sometimes getting mental health support is helpful when remapping our money mindset. If you’re finding it hard to focus on the positive, or you’re simply being too hard on yourself for the current condition of your finances, reach out to a counsellor. You may even have benefits for this service through work.
Sharpening your financial skills is an act of self-love
When you pair your money-mindset work with skill development, you’ll really start to make progress on your finances. Probably the most powerful skill set you can build, especially in light of the financial pressures of the pandemic, is budgeting. Sit down and envision the month ahead; what needs to get paid, how much money is coming in (extra important if you are on commission), what amounts can comfortably go to your emergency fund, retirement or debts.
In this process you’ll likely find opportunities to make cutbacks, or even dial-up spending in other categories that are more of a priority.
The goal is to spend less than you make, and the real magic of this skill is that it allows you to be way more proactive, and hopefully avoid debt. It’s also the backbone of how you’ll ultimately fund your goals for the future.
It’s never too early to get to work on a financial plan. Even if you don’t feel your financial literacy is high today, going through the planning process will expedite your learning, and give you peace of mind knowing you have a road map to a secure future.
Not sure about where to go to get a plan? You can hire a financial planner, work with a money coach, or take a financial-planning or wealth-building course.
Financial literacy is a journey, not an event. So make a point of learning more about money every day, so that you feel empowered about your future.