Want Financial Freedom? Change Your Money Mindset

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According to a 2012 study by the Financial Industry Regulatory Authority (FINRA), “Americans demonstrate relatively low levels of financial literacy and have difficulty applying financial decision-making skills to real life situations.”

Specifically, in the study, over 60% of U.S. adults failed to answer three or more (out of five) basic financial literacy questions correctly.

Among the other interesting findings:

  • 56% of those surveyed have $0 in emergency savings.
  • 36% are operating at a break-even level (i.e. living “hand-to-mouth”).
  • 19% spend more than they earn each month.

Yikes.

I’ve got to believe that we’re smarter than these numbers would suggest. Right?

 

The “Regret-Free Money Mindset”

In hopes of moving the conversation forward, here are seven lessons I’ve learned that have led me to a healthier (financial) life.

I call this collection of beliefs the “Regret-Free Money Mindset,” and they serve as the foundation for my new guide Regret-Free Personal Finance. If you read these beliefs and they resonate with you, the ideas and approach described in the book should resonate as well.

 

1. Money is a Tool — a Means to an End, Not an End In-and-of-Itself

It’s not how much money I have; it’s what I do with it that counts. (Tweet this thought.)

All things being equal, I assess the value of an individual based upon their net impact on the world (i.e. the good they do) as opposed to their net worth.

 

2. The “End” (or Outcome) I Ultimately Aspire to Is Freedom

More than a pile of money, what I really want is to wake up every day and have the freedom to spend my time, energy and resources in a way that makes me feel alive, loved and relevant to the world.

 

3. There is No Freedom Without Financial Freedom

We are often asked, “What would you do if money were no object?” That may be a fun lunch or dinner conversation but, for better or worse, money is always an object. If I want to be truly free, I must figure out a way to pay for it.

 

4. I Am Financially Free When I Spend Less Than I Earn and Am Protected From the Unexpected

Financial freedom to me is simply having enough money to keep a roof over my head, put food on the table and pay for those things that create value in my life and impact in the world. Financial freedom means I must stay cash flow positive and have the correct insurances.

 

5. My Financial Freedom is My Responsibility; No One Will Care As Much As I Do

Many of the men and women with whom I work expect to simply delegate the management of their investments to an “expert” (i.e. a financial advisor or fund manager). I get that. Humans are generally loss-averse when it comes to managing their money, and it just feels better to give the control over to a specialist. Prior to the stock market implosion of 2008, I felt the same way.

Since the crash, however, I have come to believe that the only way to achieve a lasting financial security is to take responsibility for it ourselves. Sure, I’ll still consult experts, but I must invest time in developing and enhancing my personal finance expertise.

 

6. Financial Freedom Is a Habit — Positive Steps, Taken Every Day

When it comes to money, there are no shortcuts to sustained success. Slow and steady gives us the highest probability of winning the race. In order to achieve lasting financial freedom, we must create a consistent and sustainable approach to managing our money.

 

7. It’s Okay to Make Mistakes; It’s Not Okay to Make Excuses

Much like building a company or a career, creating a financial decision-making system will not only take time; it will likely include some missteps along the way. The fear of “screwing up” (aka loss aversion) wants to hold us back — we can’t let it.

We don’t need to know everything about money to begin building a financial foundation; we just need to know enough to get started. When it comes to achieving financial freedom, we need action, not excuses.

What steps will you start taking toward financial freedom today? Share in the comments!

This post originally appeared on Regret Free Life.

Image: Flickr

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