There are a lot of damaging money mindsets you need to change now to help you pivot back and up from the effects of the health crisis.
Admittedly, this is easier said than done. The reason is that money mindsets are similar to the financial habits that you develop. These things take a lot of time to build up. As a result, it also takes a long time to unlearn. You could have been relying on these money mindsets for years and believed that it helped you reach your financial goal faster.
You might make an argument that the end justifies the means. But you have to remember that no one really knows what the future holds. Just like what happened last year when the health crisis blew up. No one was able to predict the damage it would bring. It overloaded the health care facilities and slammed the brakes on the economy. Pew Research shares about 25% of adults say they or someone in their household lost their job.
You might be fortunate enough that you were able to hold on to your job. But a lot of Americans were let go at the height of the pandemic. This was done to help several businesses cut down on operations. Since the crisis forced a lot of people to stay inside their homes, a lot of companies had to make drastic changes including reducing operations or putting employees on furlough. And damaging money mindsets will not help the situation.
This is one of the reasons why you need to get ahead of this mindset. They will only make it a lot more challenging for you to bounce back this year from the negative financial effects of the pandemic. Do not expect to see immediate results but working on improving your finances now than later will help you get there faster in the future.
I will save money when I start earning more
One of the damaging money mindsets you could be holding on to even before the health crisis could be about saving money. You might think that you can only start saving money when you are earning a whole lot of money every month. Though a big paycheck can definitely help you reach your goals faster, you do not have to wait for it to get started.
The goal is to begin setting money aside regardless of how much you make every month. In turn, you are able to create the habit of saving money. This is crucial and will sustain you over a long period of time. You can start with a minimal amount every payday as long as you make sure that you set money aside to save.
Over time, this habit will come naturally for you and regardless of how much you are making every month. You will always make sure that you set money aside to save. In fact, it will help to prioritize our savings. After that, you spend and pay what is left in your paycheck. This will give you the chance to stay on track and reach your savings goal faster.
Putting yourself last
Being selfless is a great attribute but that can be one of the damaging money mindsets that will hold you back in realizing your financial goals. You might believe that you need to always think of other people first before yourself. You save for your children’s college fund more than your retirement fund. It is also possible that you choose to lend money left and right rather than save for your own future needs.
Though it really is important to make sure that your children get the best education without getting into huge debt, you also need to plan for your own needs. If not, you could end up working long after your desired retirement date because you did not save enough. In the end, your children might end up supporting you as well.
It is also good to help other people but you need to make sure that you are in a position to help. Do not spread yourself out too thin. You risk using all your resources up and in the end, you become the one who needs to ask for help. Take care of your needs as well while you help your family and even relatives and other people.
Working as long as you can
One of the most damaging money mindsets you need to address now has a lot to do with your retirement belief. A lot of people can not seem to picture themselves in retirement. They believe that they will be working all their life. There are some who really love their job and prefer this setup but this is not always the case.
You need to understand that retirement is not optional. Sooner or later in one way or another, you will have to retire. The goal is that you get to do it on your own terms. This means you plan for it so you can retire when you want to and be able to enjoy life in retirement the way you envisioned it to be. Whether it means reading books or spending your days at the beach.
Remember that failing to plan simply means you are planning to fail. You cannot take those chances when it comes to your retirement plans. In order to get the life you want in the future, you need to start planning and preparing for it at present. The sooner you begin saving for it, the more you will realize that you do not need to work for as long as you can. You just need to be smart about it.
Retirement fund as an emergency fund
During the height of the health crisis, one of the damaging money mindsets people made is choosing to dip into their retirement fund to make ends meet. Though it is something you can definitely do and in fact, it was made easier with the CARES Act that was passed in 2020 to help Americans access their retirement accounts.
According to Forbes, the CARES ACT took out the 10% withdrawal penalty for qualified account holders for valid COVID-19 hardship. This made it a lot easier for so many people to gain access without paying penalties on early withdrawals. What you may not realize is that you could also be losing potential gains on the money you are taking out.
Though an option, dipping into your retirement fund should not be your priority when times get tough. You can explore other funds or sources of money to help tide you through. There will always be drawbacks whenever you make unplanned withdrawals from accounts meant to used in the future. This is the primary reason why you need to have an emergency fund saved up.
Not paying attention to inflation
You need to save smart and this means paying attention to inflation. Yes, you can choose to simply save as much as you can every time but you need to keep tabs on its growth as well. Falling below inflation could actually decrease the value of the amount that you are trying to save. This can prove to be disastrous in the long run.
One simple thing you can do is identify the inflation rate every year and make sure that your investments are at least earning over that rate. To beat inflation, you need to make sound investment decisions. It will help to spread your money across different investment platforms. This way, you spread risk and increase potential earnings as well.
There are a number of damaging money mindsets you have to overcome if you want to improve money management this year. Staying ahead of these destructive money beliefs can also propel you closer to your financial goals.