What is the first thing that comes to your mind when you hear the word “money”?
I need more!
I hate it!
It causes me misery because I can’t handle it!
Or:
I can afford everything I wish.
I have enough.
I live in abundance.
Chances are that you think the first three—or some similar version of them—if you bought this book. I can understand you completely. I come from a family where money was always scarce due to financial illiteracy and mismanagement. It didn’t matter if my parents earned more or less; they still couldn’t get a hold of it.
I remember when I was about 13, my parents managed to sell one of our properties for good money. Their first deed afterwards was to go on a huge shopping spree, buying me all kind of stuff to put together a trousseau. It is a very old-fashioned Eastern European thing to do, and certainly wasn’t necessary when I was 13. I truly appreciate their kindness but I know their motivation wasn’t purely generosity. They bought it the moment they had money because they were expecting that they wouldn’t have money later. Their fear turned out to be true.
Some people are luckier. They are born into a family who are financially literate. I don’t necessarily mean rich. They just know how to handle money and they transfer this knowledge to their children.
One thing I learned thanks to my parents’ misfortune was that thinking more about money won’t help you make better financial decisions. There are many things to think about when it comes to handling our finances (better mortgage rates, greater credit opportunities), but thinking more will not help. Thinking better might, but not always.
Making bad financial decisions is almost coded into our DNA. Even if someone is financially literate and great at handling money, they might still fall prey to some traps “set” by their own brain. One would think that a $50 shirt paid for in cash or with a credit card is the same $50, right? Studies of the subject prove otherwise.
Apparently, we are much more comfortable paying for this shirt with our credit card than with good ol’ cash. We are also more prone to leaving a bigger tip in a restaurant when we pay by card. The fun part is that we are not conscious of it. Credit card money is not as visible and tangible as cash is. Thus, we don’t see it physically leaving our wallet. Sometimes we even forget we made a credit card purchase if we don’t check our bank statements regularly.
If you think that using cash would erase all your bad financial decisions, I must disappoint you. Cognitive traps are not only hidden in how we spend money, but also on what we spend it on; regardless of whether we pay by cash or credit card. Take the example of a locksmith and your door. Who is a good locksmith? The one who fixes your door in two minutes for $200, or the one who spends an hour with your door for $200? If you think like most folks, you’d say that the one who takes an hour-he spends more time working for his money. This example brings us to another cognitive error, namely how we spend our time.
People consider it a wise decision to drive around to find a cheaper parking spot, a gas station selling gas that’s a few cents cheaper, or the best value apples in town, even if it costs them minutes or hours. Time is money, y’all.
These are self-created bad financial decisions. But in our lives, we encounter many more bad influencers other than our brains. As we grow up, we are fed different ideas about money and finances. Since finances aren’t often taught in school, you are left mirroring what your family has told you. Unfortunately, not many of us win the financially aware family lottery, and our folks aren’t the best examples of how we should handle money. Mirroring bad financial patterns can lead to you having a negative view of how money works later in life.
The secret to living in abundance is not the amount of money you have, but your mindset toward it. There are some common money myths that easily lead us to bad financial decisions. Here are a few of them. Which one do you “believe in”?
a.) “It was on sale.”
A few years ago, I went out shopping with my friends at the nearest mall in Hungary. I wasn’t really expecting to buy something, because at the time, I was working a few jobs and just trying to stay afloat in terms of money. Knowing that if I bought another new top my roommates would hound me, I just went to enjoy the company of my friends.
We were walking through the mall when my friends started getting really excited. I looked in the direction they were staring and found out the reason for their frenzy. “Glamour Days, Big Sale, Up to 75% Off!”
Twice each year, we have a Black Friday kind of thing called Glamour Days, which in fact is a country-wide sales scam. Most of the items on sale have only a 20% discount and include some restrictions, and only one or two kinds of products are discounted to 75%. They are usually the most hideous ones. I’m sure you know what I’m talking about. I knew it. Everyone knows it. Still, somehow the country gets into this shopping frenzy, buying a lot of useless things they would have never bought on a regular day.
“It’s on sale” is one of the greatest traps in our financial lives, and yet we all fall prey to it. Look around your household and in your closet. How many things did you purchase not because you needed them, but because they were on sale?
What pushed me forward? I guess the lack of options. We were all kids and no one really had money of their own. My classmates often told me, “Don’t worry, I don’t have money, either.” Sure, but your parents do. They don’t give you money, but pack you up with so much food for five days you could live on it for a month. That’s different. The true motivation kicks in when you have no alternative. Maybe that’s why so little gets done in today’s world; we have way too many options.
Hey, on the bright side, I will help you in this article with how to manage your money and find a way to save a little or more, depending on your income.
Key Takeaways:
- Mirroring bad financial patterns can lead to you having a negative view of how money works later in life. The secret to living in abundance is not the amount of money you have, but your mindset toward it.
- When you buy a dress for $50 instead of $200, it seems like you saved $150, but you actually spent $50!
- Do not sabotage your peace of mind by emptying your emergency fund because you had a bad day.
- If you cannot manage the money you currently have, you won’t be able to effectively manage more money.
- The true motivation (to save money and change your mindset about finances) kicks in when you have no alternative. Maybe that’s why so little gets done in today’s world; we have way too many options.
