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By Debra Ohstrom, CFA
Our money mindset has to do with our beliefs around money which impacts the money decisions we make. Many of these beliefs start from attitudes that we learn from our parents and don’t even realize that we have them. I know personally that my mother had a lot of stress and anxiety around money and definitely lived with a money scarcity mindset. Back when my mother was younger, awareness around these hidden attitudes and fears wasn’t something that was discussed or that people were even aware of.
The scarcity mindset around money is about negative beliefs that there isn’t enough money to go
around. This can definitely cause some negative thinking and actions which can hurt you in the long run.
One example, that sticks out around this for me, is a huge fear around any debt which can prevent you from using debt as a tool to grow your wealth. If you have a lot of anxiety around your credit cards that can also cause you to try and pay them down too quickly which can cause you to have a cash crunch. This then can create the need for you to go back to using your credit cards again. A long term balanced approach is always best, so building an emergency fund and paying down your debt a little at a time can ease your stress around money. This also will build better money habits going forward. I kind of view this similar to Yo-Yo dieting. I think we all know that crash diets aren’t good for the long term or our health and we are better off creating new healthy habits a little at a time to really transform our life and your financial health is the same way. This negative thinking may also make us overly fearful around other debt that is being used for an investment like a real estate mortgage. If the interest rate is low and the asset your are purchasing will appreciate in value over time then that type of debt can be useful.
I also see this short term mindset when clients decide to pay off all debt before they start investing for their long term future. I know credit cards are bad and the high interest is painful so that can be a smart move but once the credit cards are paid off you want to start investing for the long term as soon as you can. Many people in the U.S. have student loans but many of those have low interest rates. Investing for your retirement now while you are still paying off your student loans is also a smart move. The more time you have to get your money to compound over time and grow, the better off you will be in the future.
Another myth I hear often about money and investing is that it takes a lot of money to get started or to make it worth while and that just isn’t the truth any more. There are so many apps out there that help you get started with investing in small amounts. The most important thing you can do is take action and get started. I also hear often that people are intimidated about picking their own stocks and they think investing is very risky. The truth is you don’t need to be a math expert or pick individual stocks in order to grow your money over time. The best thing is to invest in Mutual Funds or Exchange Traded Funds and to think long term and your money will grow for you. Stock markets around the world do go down from time to time but its usually only 3 years out of every 10 years. Like many other things in life, in order to get the most benefit of the positive returns, you need to put up with a few down years. To me it’s kind of like a garden full of roses. You have to put up with a few thorns in order to get those beautiful blooms.
The last money myth I will touch on but remember there are still more out there, is that wealthy people own a lot of high priced cars, handbags, shoes and jewelry. That is also a big myth. Many wealthy people who have worked many years achieved their wealth by saving and investing over the long term. The people who spend their money on a lot of flashy items are often living above their means and not investing for their retirement. One of the biggest traps I often see people and many women fall into is spending money on botox, expensive face creams, handbags and shoes while they don’t put money away for their future. Unfortunately, Social Media has created this world where we sometimes have a false picture of what someone’s real wealth is and women have more pressure to look a certain way then to be financially independent and secure. If we can all help each other understand that we as women are so much more valuable to the world as empowered, educated and financially independent than whether we look a certain way, I think the world will be in a much better place.
Bye For now,
Debra
Debra Ohstrom, CFA
Founder | DebraOhstrom.com
I offer the Womenhood community a $50 discount on my courses and if you have any questions, feel free to email me at debra@debraohstrom.com
About the Author
Debra has worked in the financial industry for over 27 years at firms such as Merrill Lynch, Morgan Stanley, Citi Private Bank and Allianz Global Investors. She has worked in different roles such as research, asset allocation and account management. She has an MBA in Finance and the Chartered Financial Analyst designation. Debra created her education business, DebraOhstrom.com to help women get the education they need to become confident investors and be in charge of their financial future.
Debra Ohstrom, CFA
Founder | DebraOhstrom.com
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