How to Improve Your Financial Mindset to Achieve Your New Year’s Goals

 

Each year, millions of people set New Year’s resolutions. There’s excitement around the promise of potential that a fresh start in January brings. 

But according to a study conducted by the University of Scranton, only 8 percent of people are able to stick to their New Year’s resolutions. Put another way, 92 percent of people fail to achieve their goals for the New Year.

Whether it is sticking to a healthier diet, better workout routine, wiser financial habits, or even less time spent watching television, we all know people who have fallen off the resolution bandwagon. 

So why does this happen? How is it that so many people from varied walks of life are unable to keep their own promise to themselves for a better year?

It all comes down to mindset. I know it might not sound like a major differentiator, but let’s take a look at the dictionary definitions:

Resolution: “A firm decision to do or not to do something.”

Mindset: “The established set of attitudes held by someone.”

The unfortunate truth is that “resolving” to do something entails some degree of emotional friction. If you are trying to lose weight, for example, resolving to eat less and exercise more can result in frustration, impatience, and discouragement every time there is a setback. On the other hand, a new mindset will change the way you approach the challenges before you. Instead of approaching goals with fear and the what-ifs of failure, you will enter into situations with a positive outlook, excited about the opportunity to learn, grow, and ultimately succeed! 

So, let’s get specific: what mindset do you need to achieve your financial goals in the New Year?

New Year Mindset #1: Self Affirmation

Affirmations are the foundation of a healthy, effective mindset. Every journey has challenges that can create self-doubt and self-sabotage. Without self-affirmation, the “resolve” to achieve any goal, especially financial goals, can quickly crumble. 

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Chances are that you’ve already told yourself affirmations without realizing it. For example, thoughts like “I believe in my ability to succeed” or “I have what it takes” are both affirmations. These statements, though they may feel like simple thoughts, shift your focus away from perceived failures and challenges. Instead, your mind focuses on your strengths that will help you overcome the challenges at hand. This is the power of self-affirmation!

However, positive thinking and self-affirmation isn’t an end-all-be-all solution.

After all, if self-affirmation is all it takes for financial success, then wouldn’t we all be millionaires?

Rather, affirmation is the first building block of a healthy mindset that will help you stay focused on your financial goals. 

Ready to take on this new mindset? Ronald Alexander, PhD. is a specialist in somatic psychotherapy and integrative mind-body therapy. He published an article in Psychology Today outlining the five steps to make affirmations work for you. These steps include:

1. Writing down a list of what you thought of as your negative qualities.
2. Writing an affirmation that counters each point of self-judgment.
3. Setting aside time morning, midday, and evening to speak the affirmation out loud for 5 minutes.
4. “Anchoring” the affirmation in your body by placing your hand on the part of your body that felt uncomfortable when you identified the negative qualities during Step 1.
5. Finding a friend, family member, or coach to repeat these affirmations to you.

While affirmations are not a definitive solution, Alexander says that this process will help you accept what is so that you can find the power to move towards what is possible. Try this and see if you are better prepared to meet your financial goals!

New Year Mindset #2: Frugal Mindset

Just as there is a difference between a resolution and a mindset, there is also a distinction between being frugal and being cheap.

Individuals who are cheap are driven by saving money regardless of the quality of the item they are purchasing. In other words, the cheap mindset focuses on spending less at all costs. Frugality, on the other hand, maximizes total value and is willing to pay a little bit extra for better value. 

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Here’s a real-world example: a cheap person will only consider the price, but a frugal person will consider the price while also looking at reviews, durability, reliability, and overall quality of a product.

• A cheap person might spend $10 on clothes that only last six months and need replacing, whereas a frugal person might spend $40 on clothes that last for years. 
• Cheap people might cut corners when tipping at a restaurant (especially when using a coupon), but a frugal person puts people above savings.
• A cheap person might refuse to go to the dentist to save money, but a frugal person realizes that annual dentist visits can save money in the long run by preventing cavities, root canals, and other costly dental issues.

At the end of the day, there is no scientific way to truly quantify the difference between a cheap person and a frugal person. Perhaps, the best distinction comes from a mindset that understands the value and not just the cost. Remember, just because something is cheaper than an alternative, it doesn’t mean that it’s still cheaper when all long-term costs (maintenance repairs, replacements, or unforeseen issues) are included.

So, the next time you find yourself making a purchase, ask yourself: Am I only looking at the monetary cost of this purchase? Or am I also taking the value of this item/service into consideration?

A frugal mindset will help you save money in the long run so that you can achieve your financial goals!

New Year Mindset #3: Abundance Mindset

A scarcity mindset is what keeps most people from achieving their goals. 

The belief that there will never be enough results in feelings of fear, stress, and anxiety. How can anyone make objective financial decisions with those emotions clouding their judgment? Investing, for example, has an inherent amount of risk, but someone with a scarcity mindset is likely to be completely risk-averse.

Someone with a scarcity mindset only sees the problems, but someone with an abundance mindset recognizes the possibilities.

So… how do you get an abundance mindset? Train your mind to recognize areas of opportunity in every situation. The abundance mindset allows you to see more options, more choices, and more resources. Even if you “fail” at something, that is an opportunity to learn a lesson so that you don’t make the same mistake twice.

Here are a few examples differentiating the scarcity vs. abundance mindset:

• There will never be enough vs. there is more where that came from.
• Hoarding knowledge vs. freely sharing knowledge.
• Avoiding risk vs. finding opportunities.
• My peers are my competitors, vs. my peers are potential collaborators.
• Constant worry vs. constant gratitude.
• I win / you lose vs. we both win.
• Focus on costs vs. focus on results.

An abundance mindset can help propel you forward just as much as a scarcity mindset holds you back.

If you find yourself struggling with the scarcity mindset, I encourage you to make sure you have a fully-funded emergency fund. An emergency fund should help alleviate worries of unexpected layoffs, economic downturn, or random expenses (i.e. car repair or new roof). Remember, the scarcity mindset is rooted in fear. By creating a safety net for yourself, you can create the foundation for a switch towards an abundance mindset.

Personally, I recommend using the CIT Savings Builder. Savers can earn up to 0.45% APY, which is much higher than most banks. Because CIT Bank is an FDIC insured online bank, this opportunity is available to everyone, including both high balance and monthly savers.

To reiterate, having a strong savings account will help you shift your mindset from scarcity to abundance, especially once you fully realize that you have a safety net for worst-case scenarios.

Like anything else, embracing an abundance mindset takes practice. The next time you feel fear, stress, and anxiety, ask yourself whether you are approaching the situation with a scarcity vs. abundance mindset. This is not to say that an abundance mindset will remove all fear and anxiety, but it will help you find the excitement in the potential opportunities!

New Year Mindset #4: Gratitude

How can you ever be thankful in the future if you are not thankful for what you have now?

The slippery slope of money is to want more and more and more… and more!

Don’t get me wrong: we all want to be financially stable and independent! But gratitude is what separates greed from security.

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This isn’t to say that you shouldn’t want to improve your current situation. For so many people, this has been an incredibly difficult year, especially financially. This isn’t to diminish any of those struggles. Yet no matter where we are in life and matter where we are going, we can still practice gratitude. Here are just a few of the unexpected benefits of this mindset:

Patience – which results in wiser financial decisions.

Generosity – which promotes a healthier relationship with money.

Contentment – which separates the greedy from the frugal.

Of course, practicing gratitude is easier said than done, especially when things do not appear to be going your way. Here are a few ways to make gratitude a part of your 2021 mindset:

• Start by observing… everything. Gratitude isn’t limited to just financial matters. Do you say “thank you” when a stranger opens the door at a grocery store? Do you take time to smell the flowers… literally? Take a few moments each day to identify things that you take for granted.
• Start with one interaction a day. How often do we say “thank you” as a reflex rather than actually meaning it? The next time the words “thank you” come to the tip of your tongue, pause. Can you think about what you are specifically thankful for? Take a mental note to truly appreciate the moment, then say thank you!
• Practice gratitude through intention. The next time you are cooking dinner for the family, “cook the meal with love.” Be intentional about thinking about the people that your food will feed. Practice gratitude during the preparation of the meal you will share together.
• Focus on quality time with your kids or spouse. No amount of money in the world could ever replace the people you love. We just finished the holiday season, but how would your life be different if you interacted with loved ones the same way you do on Thanksgiving or Christmas morning? Use that feeling of warmth as a jumping-off point to truly feel gratitude for the ones your love.

I hope these tips help you make the most of 2021. From my family to yours: Happy New Year!