When we see money (in figure either on tv, on our bank statements or on actual banknotes) ie. N500; $60; €20; ¥8000; and so on. A lot of things come to our head I dare say 90% of the time we think about all the things we can afford, things we can buy with such money. That’s how our brain has been wired around money.
You can’t blame us though even the very definition of Money says:
From the definition above you see Money described as a medium of exchange. An average person sees money as a medium of exchange for goods and services and that is the only way he/she sees money. That is what forms his behavior around money ie. His money psychology. It is, therefore, no surprise when all he uses money for is acquiring needs and wants.
However, in Business class you are taught money is not only a medium of exchange but is also a store of value which is definition number two. Money as a store of value simply means money is wealth that can beget more wealth ie. Money as an asset. Therefore, money can be kept, retrieved, exchanged and has the possibility of getting you more money. The average person will ask how? Because in reality that makes no atom of sense.
A lot of people fantasize about “making their money work for them” ie. Letting their money make more money. But they don’t know how to go about it because they don’t even know how money which they see as a basic need to acquire their needs and wants can make them more money. So they confuse this statement for working harder and earning higher. Which is totally wrong.
I read once about a secretary who in her will gave $7m to charity and that astounded everyone. Why? Because she lived a basic life on a basic salary doing one job all her life and in her lifetime she was able to amass a wealth of $7m based on the little savings she put aside that was invested on her behalf over her lifetime. What that lady had that most of us lack was a mindset that allowed her to see money as more than a medium of exchange.
The average person’s psychology of money is “money is to be spent“. They can’t see money as a store of value because they haven’t been introduced to money in that manner. This is detrimental to their personal finance because they earn to spend, they know they should save and invest but they never do, this is part of the reason why a lot of people are in debt. And this needs to change. To change poor money behavior and switch it out for better money behaviors one must first understand his or her own psychology of money and unlearn old money mindset.
Why don’t I just meet a financial advisor? You may be asking yourself at this point. That’s a great idea but if you meet a financial advisor most times he or she will appraise your finances and give you advice on what to do with your money. However, a lot happens in the human mind. So the ability to understand, take this advice and act on them requires a particular mindset understanding and working on your money psychology can only get you. I wrote an article some time ago talking about The money habits of very wealthy individuals
In this article, I studied the money psychology of the wealthy and how this helps them create wealth instead of spending all. It all starts with their mindset and behavior toward money. Wealth creation starts from understanding your behavior around money and understanding money is a tool with many possibilities.
Asking yourself some very important questions is the first step to understanding and changing your money psychology.
How do you behave around money?
What pops into your head when you see or receive money?
What emotions have you associated with money?
Do you believe money can get you more money?
When we start answering these questions we can then proceed to budget, saving, investing, side hustles and passive income. Because at this point you will start seeing money more as a tool with multiple possibilities and less as a need. One step at a time. One doesn’t need a fancy degree to handle his/her finances properly all they need is a shift in mindset. Therefore to gain control of our money we have to understand money psychology and identify what is lacking in our own mindsets to create the change needed.
The only difference between you and the person who makes their money work is not information its a mindset and a positive money psychology. This is what enables them make the best decisions when it comes to their money.