Financial mindfulness sounds…fringe. But the fact is, research suggests that “mindfulness practices offer psychotherapists a way to positively affect aspects of therapy that account for successful treatment.” In other words, mindfulness works. And cultivating a keen awareness for how our emotions can dictate our relationship to money gives us the power to transform our financial future.
None of this is comfortable – examining our behavior rarely is – but it’s the kind of work that, once done, makes an immediate impact. Becoming mindful of how you see money, and how you use it, means you’re looking at:
Defining Financial Mindfulness
At its core, financial mindfulness simply means becoming aware of and intentional with our money. Just as with yoga practice or meditation, focusing on the present moment and interacting with that moment in a specific way is grounding. And that’s hard: whose mind isn’t constantly churning through an endless parade of thoughts?
Mindfulness isn’t about abolishing thoughts about money or even specific thoughts in general. In fact, it’s almost impossible to have no thoughts. Rather, it’s about cultivating an awareness of those thoughts so that your actions aren’t negatively influenced by them.
It also doesn’t mean you have to be happy about money (or anything) all the time. Instead, it gives you space to recognize how you’re thinking about money. Sholto Radford, a researcher at the Center for Mindfulness Research and Practice at Bangor University, says that mindfulness, “can help us untangle from our thoughts without judging them or trying to make them go away.”
Emotional Intelligence and Financial Decision Making
Improving your money habits starts with understanding your emotional relationship with it. According to a paper published by the International Journal of Coaching in Organizations: “Our history, early education, and family values will also influence how we relate to our money and make financial decisions.” Who we are now – and how we handle our money now – is rooted in the relationship we had with money at a young age.
Listen to this podcast episode featuring Susan Diamond, money mindfulness coach, to start rewriting your money story.
Consider this: when you log in to check your account are you calm or anxious? That feeling is your emotional attachment to your money. And, for the majority of Americans, that relationship is strained. It doesn’t help that money is often considered taboo; sure, we’ll talk about the great deal we found but we won’t talk about how close we are to filing bankruptcy because we don’t see any other way out. Nor do most of us learn anything about finances in our early education.
We’re just expected to know it.
And that leaves an awful lot of us making financial decisions based on how we feel. (The author of this article herself has been known to buy a new pair of running shoes after an exceptionally bad day...just to try to feel better.)
So how do you start to understand your emotion/money connection?
Start with fostering awareness of how your financial picture makes you feel. As Adam Koren and Elizabeth Markle note in their article, “4 Ways to Bring Mindfulness to Your Money Habits” don’t pressure yourself to fix anything yet. The idea is just to come face-to-face with what emotions your finances drive in you.
Then, explore where those emotions come from. Did you grow up in a household that fought about money? Was there scarcity? What’s in your history that’s shaping your view of money now? Understanding that how you feel about money is tied to a reality that doesn’t necessarily exist anymore can help you start to transform those beliefs, and thus your relationship with your finances.
In a nutshell: You may have a deeply held belief that impacts how you spend.
Juan Carlos Medina expertly summarizes this process in Forbes:
Our relationship and history with money have a huge impact on why we spend and how we spend. This can feel like a scary exercise, but exploring your relationship with money will help you recognize the ways in which you may or may not be holding yourself back from manifesting financial success.
Facing your emotional relationship to money can hurt. It can be overwhelming. Sharing the details of your financial picture, all of them, with someone can unburden the stress of the process. A financial counselor or therapist are both great possibilities.
Connect with a financial coach – for free and anonymously. Find out how here.
Cultivating Mindful Spending Habits
Establishing your emotional connection to money empowers you to build smarter financial habits – habits that align with your goals. Here are 3 steps to start mindful money management:
Understand your full financial picture
To improve your relationship with money, you need to deep dive into your financial picture. Earlier, you sat with your finances from an emotional perspective, understanding what feelings money triggers for you. But now it’s time to get detailed.
Yes, this is going to be work. But you can dress it up a little. Pick a rainy day when you’re stuck inside. Grab your favorite coffee or tea. Light a candle. Put a podcast on in the background. Then, sit down and get familiar with:
- All of your checking accounts
- All of your savings account
- Your retirement account(s)
- Any loans, including the interest, term, and monthly payment
- Any credit cards, including current balance, interest rate, and minimum payment
- Housing expenses, including utilities, lawn maintenance, etc.
- Additional recurring expenses (childcare, car maintenance, insurance)
- Any additional income
You need to know exactly where your money is, where it’s coming from, and where it’s going. Only when you’ve tackled this can you start to adapt mindful money habits.
Examine your mistakes
This is a toughie. Mistakes hurt…especially when we make them more than once. But examining when – and WHY – you made a money misstep gives a clear view of how the emotional connections you explored earlier are driving your habits.
Your emotional connection to money can manifest in a variety of habits. Maybe you binge shop and feel immediate regret. Or maybe you’re a scrupulous saver but harbor resentment about not splurging on “fun” things. Or perhaps you’re a chronic over spender and are too ashamed to tell your partner. Looking at these mistakes objectively allows you to identify what that emotion was. “Oh, I bought all that stuff off Instagram the day my car died.” You’ve connected the fact that shopping soothes you…albeit temporarily.
Recognizing the emotional trigger behind your money decisions opens the door to creating alternate coping mechanisms. That’s being present in the moment – living money mindfulness.
Find out how in this 8-minute video.
Identify Alternatives
Money mindfulness requires you to be present in the moment you’re making a financial decision. From something as small as buying a new shirt to major purchases like a new car. Now that you’ve identified your emotional connection to money and how those emotions can sometimes trigger poor financial decisions, you can exercise alternatives to those triggers.
One powerful way to be more mindful? Pause before you buy. Set the item down, abandon the online cart, and just walk away. If the purchase was rooted in an emotional reaction, the desire to buy will fade.
To satisfy whatever emotional need the purchase was going to meet, try these instead:
- Go for a walk. If you can get outside for even 5 minutes you not only separate yourself from the temptation to buy but you give yourself new surroundings to be mindful of.
- Write it down. Journaling isn’t for everyone, but sometimes just getting your feelings out on paper brings a needed catharsis. And you may find that by releasing those thoughts your impulse to buy disappears.
- Check your goals. If you have clear financial goals, remind yourself how important they are. That vacation next spring is going to feel a lot better than whatever that Facebook ad is trying to sell.
What if your emotional pendulum swings too far the other way? If your emotions are defined by a fear of scarcity, and thus you’re living frugally, mindfulness can help you find balance. Make a “fun budget” part of your savings strategy. You’ll still feel good about saving and can treat yourself now and then to avoid feeling restrained by money.
Not staying mindful of your money can turn your financial status into chaos. Your financial future is worth the time to understand your emotional connection to money, learn from your mistakes, and build better money habits.
- https://psycnet.apa.org/record/2011-10776-012
- https://www.goodhousekeeping.com/uk/health/health-advice/a575799/what-is-mindfulness-how-to-achieve-it/
- https://researchportal.coachingfederation.org/Document/Pdf/2996.pdf
- https://www.mindful.org/4-ways-to-bring-mindfulness-to-your-money-habits/
- https://www.forbes.com/sites/financialfinesse/2022/12/27/use-mindfulness-to-take-your-finances-to-the-next-level-in-the-new-year/?sh=508cc536465b
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