4 Ways To Build A Financial Mindset

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t might not be pretty, but don’t worry, part of fixing that problem is accepting your current place. 

The first step in assessing your financial mindset is finding out what your net worth is. Net worth is a common way to see how you stand financially. It’s calculated by simply taking the value of your assets and subtracting your liabilities. The math is quite simple. 

Write down everything that you own that’s considered an asset 
  • Cash in the bank
  • Value of your investment portfolio
  • The market value of your home
  • The market value of your car 
  • Personal property, such as jewelry, art, and furniture
Write down everything that you owe 
  • Personal Loans 
  • Student Loans
  • Car Loans
  • Credit card debt
  • Mortage

Now, subtract your liabilities from assets and you’ll have it. Your net worth. 

Let’s take this as an example, let’s assume you have no other assets or debts besides your home & car. If you own a home that’s worth $450,000 and a car that’s worth $60,000. But look at your liability and realize that you owe $200,000, your net worth, in that case, would be $310,000 (($450,000+$60,000) – $200,000). 

What can we interpret from that you ask? Well, If the figure is negative, it means you owe more than you own. If the number is positive, you own more than you owe. Don’t get too excited thou. The idea of this is to be aware of where you are at this point in life. Financially. And the part that you should focus on is the overall trend. The shift enables you to measure your financial progress from one month or year to the next. Growing net worth is the best sign you’re moving forward; a decline in net worth means you have more work to do.

Step #2 Forgive Yourself 

Forgive. Do not forget. This is crucial in setting the right financial mindset. It’s all about accepting the mistakes you have done and learning from them. No one’s perfect. We’ve all done some terrible things in life that put us down in the ground. But the best part about it is standing back up. 

One of the best ways to start forgiving yourself is by talking about it. We all know that speaking our truth heals, so find yourself a loved one that you trust and start talking things out. Write down a list of all your financial regrets. Take this as an example. “I regret buying a house that I couldn’t afford” or “ I regret not saving money since my early 20’s”. Take that list with you and talk it over. Speak your truth out loud.

While you were talking about your past mistakes with that loved one. The response of his/her was probably “Why did you do that? Why did you buy that house that you KNEW you couldn’t afford? Why did you stop paying your credit card incurring debt?”. Talking things over was part of forgiving yourself but was also part of identifying your mistake. This step is to help you realize WHY you did what you did and help you not to repeat it. 

The best part of this process is to break it down. You don’t want to dwell on your mistakes, reflecting on them can be productive. Start by asking yourself what caused this mistake. Why did I do it? Was it necessary? Did someone else have an impact on your decision?  

Whatever your answers are, you’d probably feel bad about yourself but stop beating yourself up, what’s done is done. Without mistakes, we wouldn’t be able to prepare ourselves for the coming obstacles we shall face. It’s important to spend most of your time thinking about why & how you can avoid these mistakes. 

Step #3 Think Long Term And Create Habits Around Them

Part of shifting your mindset is acknowledging new goals. Think about why are you setting a new perspective. Is it financial freedom you are looking for? Is being debt-free important to you? You’d like to achieve the dream lifestyle?  Sometimes, we get so dragged down with the day-to-day financial issues that it makes it so hard to even think about our financial future. It’s normal. It was never an easy ride. But what is important is to set a goal and periodically check to make sure you are on the right path towards it.

Once you have some goals and your eye on the prize, it’s time to establish the habits that will ensure you meet them. Let’s take a “ Financial Freedom” as an example.  In order to reach financial security, you’d need to save up plenty of money. To save up money you’d need to cut down spending. Piece of cake right? Well, it could be. But how can you cut down spending if one of the main problems is not knowing where you’re money is being spent. A great way to figure that out is to create a budgeting list. Make a habit out of it. Commit to a set of time – daily, weekly, or monthly – to review your finances and monitor your progress.

Another particular effective habit is spending less you need. It is amazing how easy it is to blow through money without realizing that the simple $1 could change your life. Let’s take ordering food as an example. Everyone has an appetite and would love to satisfy it in the heat of the moment. You go crazy when you’re hungry. I don’t blame you, I do too. But what we fail to realize is that the average meal prepared at home costs around $4 for groceries—the average meal costs around $13—that would be a $9 savings per meal. You’ll save even more if you make, and use leftovers. Of course, the actual numbers will depend on where you live, but wherever you are, restaurants tend to charge around 300 percent markup on the meals they serve. You might think $9 is not worth removing that extraordinary feeling a late-night pizza would bring. But trust me, it accumulates. Think about it for a while and ask yourself. How many times do you order per week? 3?4? Well, let’s say you’d cut down to 2 times a week. You’d save almost $864 a year! Let that sink in. 

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