Money Mindfulness: How Your Mindset Affects Your Finances
The idea of mindfulness asks us to be aware of our thoughts, reduce our reactivity and be present in the current moment. But what is money mindfulness?
March 25, 2022
Money can be a prickly topic for many of us. Recent data suggests that around 60% of people report feeling anxious when thinking about their personal finances. And money is the top source of stress for the average American.
Meanwhile, many of us practically ignore our finances. In fact, 65% of Americans don’t know how much they spent in the previous month.
So most of us don’t think about money enough — and when we do, it often stresses us out!
A unique approach to addressing this problem could be called “money mindfulness.” It takes the principles of mindfulness from mindfulness books and teachers, and applies them to our personal finances.
This introduction to money mindfulness will help explain what this concept is, how it works and how you may wish to implement it in your own life.
What is money mindfulness?
Money mindfulness is a practice that involves taking the principles of mindfulness and applying them to money. Some of these principles include:
Living in the present and being in the moment.
Being aware of your choices and emotions.
Making a conscious effort to remain open minded and accepting.
It’s not necessarily about doing anything differently with your money. At its most basic, money mindfulness is simply being more aware and conscious of your money behaviors.
This could include your spending habits, your relationship to money, your financial goals or how you react to financial changes, both positive and negative.
Being mindful with money also doesn’t mean you need to meditate, practice yoga or eat salads everyday. Mindfulness simply encourages you to be thoughtful and measured with your thoughts, actions and values.
Principles of money mindfulness
There’s no clear-cut strategy to practice money mindfulness. Each individual will have their own unique approach to the concept. But the principles below should give you a great place to start implementing these concepts into your own life.
Make mindful spending decisions
Does your current spending align with your financial priorities? More importantly, does it align with your values?
If you're spending a lot in a certain budget category, stop and think about how much value that spending is bringing to your life. Could that money be put to better use elsewhere?
For example, the average American household spends about $3,500 per year on restaurants and take-out.
But if households cut this number in half, spending $1,750 and investing the other $1,750, they could potentially have an extra $318,000 after 30 years (this assumes 10% annual returns, which is the long-term average stock market return).
For a typical household, that extra retirement savings could mean retiring than planned.
But maybe early retirement isn’t your goal. Maybe you want to travel more, donate more to charity or your church or provide financial support to your loved ones.
Whatever your goals are, the point here is to align your spending with your values. By being mindful about our spending decisions, we can get closer to our financial goals, and perhaps live a more fulfilling life in the process!
Understand your relationship with money
Just like we can have bad relationships in our personal lives, we can also have a bad relationship with our money.
If we take a step back and assess, it can be easier to pick up on potential problems.
Maybe we spend money when we’re stressed or go shopping as a form of entertainment.
Maybe we ignore our debts or figure we’ll think about retirement savings “later on.”
Understanding your relationship to money — and what is holding you back from making progress — can have profound effects on your financial wellbeing.
Expect the unexpected
Mindful thinkers will know that life is uncertain. This principle can apply to our financial lives as well. And if we expect the unexpected, we might experience less of a shock when problems inevitably arise.
Even when things are going smoothly, unexpected events can always happen — some bad, some good:
You could lose your job, or have your hours reduced.
You could become injured or ill and be unable to work.
You could have an unexpected emergency medical cost or repair bill.
You could inherit a large amount of money.
You could win the lottery.
By accepting that these things are likely to happen, we can be more prepared for them — both practically and emotionally.
And when the unexpected does happen, you might be able to react more calmly.
For instance, your car breaks down. Instead of putting the repair on your credit card, you can stop and think for a minute. React mindfully, rather than automatically.
Can you dip into your emergency fund to cover the expense? Do you have another car you could use temporarily while figuring out how to cover the repairs?
Could you use a line of credit, instead of a credit card, to save on interest? Or could you simply reprioritize your spending for the next few months to cover the expense out of pocket?
Accept what is out of your control
Mindful thinkers will accept what is in their control and what is not.
We can all control certain aspects of our lives, but many aspects are completely out of our sphere of influence:
We can’t control the health of the economy.
We can’t control the movements of the stock market.
We can’t control inflation or the effects of rising costs on our wallets.
We can’t control the financial decisions of our loved ones.
If we can accept the things we cannot control, we can live calmer, happier lives. Plus, we’ll have more time and energy to dedicate to the things that are in our control.
Pursue financial freedom
Financial freedom means different things to different people.
For some, it’s breaking out of living paycheck-to-paycheck.
For some, it’s having enough invested to retire early.
For some, it’s simply not stressing about money.
Money mindfulness helps people reach financial freedom by identifying priorities. When we are mindful about our spending, we can decide what deserves our attention (and our money) and what does not.
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†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. Based on your credit history, the APR (which is the same as your interest rate) will be between 7.90% - 29.99% per year. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.