The attitude you take when thinking about money might have a more dramatic impact on your finances than you realize. Experts suggest that your money mindset directly leads to what kinds of choices you make and strategies you undertake, which can influence how robust your finances actually are.
In simple terms, people tend to fall into two general attitudes — a “rich” mindset or a “poor” mindset — when it comes to their financial life. Here, experts explain what each of those mindsets may look like, and what you can do to shift yours.
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Identifying Your Money Mindset
In order to know if you have a rich or poor mindset, you need to first realize you even have one. “Most people do not know that they have a financial mindset and that it plays a significant role in driving their money-related behaviors and habits,” said Jenny Whichello, a former startup executive turned money coach for women and founder of Bliss+Wealth.
She said another way to frame “rich” and “poor” are “abundance” and “scarcity” mindsets.
Scarcity or ‘Poor’ Mindset
A scarcity mindset, or poor mindset, is associated with having a very near-term focus, Whichello explained. “Individuals with this mindset are more concerned with meeting their immediate needs and wants than planning for the future or saving for long-term goals.”
These folks might also lean into hoarding tendencies, because they tend to have a common root belief that money is scarce and fleeting, she said. “They see money through a zero-sum lens. They tend to be very risk-averse and unable to stay committed to investing when the market has a downturn. They shop for deals rather than lasting value and often waste money in the long run.”
Abundance or ‘Rich’ Mindset
An abundance mindset, or rich mindset, on the other side, “is more aligned with the idea that money — and the ability to make more of it — is unlimited and that there are ample opportunities to build wealth,” Whichello said. She called this a “growth-oriented” mindset, suggesting these folks look at financial challenges as opportunities, rather than setbacks.
“They understand the connection between risk and return, make short-term and long-term plans and have the resilience to stay focused on their end goals despite market turbulence.” Additionally, “rich mindset” people make decisions driven more by intention and strategy and less by emotion. Their financial decisions are less driven by their emotions and are more intentional.
A Rich Mindset Is Proactive and Optimistic
A rich mindset also entails being proactive and optimistic about opportunities, according to Michael Hammelburger, CEO of The Bottom Line Group, a cost segregation firm.
“Those who have this mindset believe in their ability to create wealth through hard work, ongoing learning and calculated risks,” he said. “They prioritize development, seek solutions and view challenges as learning opportunities. They frequently place a high value on investments, both in themselves and in their businesses.”
A Poor Mindset Takes a Negative Outlook
A poor mindset, on the other hand, can tend toward a negative outlook, which is frequently accompanied by a fear of risk-taking and change, Hammelburger added. People with this mindset may dwell on limitations, avoid challenges and have a scarcity mentality. “They might not prioritize personal development or actively look for ways to improve their financial situation,” he said.
A Rich Mindset Learns From Failure
Another thing that sets apart those with a “rich” mindset, according to Thomas Codevilla, CFA, business attorney and co-founder of SK&S Law Group, is that they “embrace failure as a stepping stone” toward goals. They see setbacks as lessons to bring them closer to success and don’t don’t fear failure. People with a rich mindset think, “I learn from it and adapt my strategies accordingly,” as he said.
A Rich Mindset Becomes a Value Creator
Those with a “rich mindset” also may see wealth as a result of creating value in the lives of others, Codevilla said. “By focusing on solving problems and meeting needs, I can contribute positively to society while also reaping the rewards.”
How To Change Your Mindset
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The first step towards changing your mindset is awareness, Whichello said. “People often focus on the external steps they should take — or stop taking — and don’t understand that their mindset is the wizard behind the scenes.”
Financial progress can be undone by a “poor” mindset that “drives unhelpful tendencies.” She posited that, by becoming aware and then making a commitment to look at your mindset with clarity, you can make progress.
Look at Core Beliefs
“Most of our money mindset is the result of what we experienced early in our lives, like the way our parents dealt with or spoke about money,” Whichello said. She recommended you become curious about your underlying beliefs and then ask yourself what is really true. “Look for examples that contradict your beliefs,” she urged.
Finally, she suggests tools like affirmations to “rewrite your beliefs” and reinforce them. “Change won’t happen overnight, but it can happen faster than most people think, if they are intentional about doing the mindset work every day,” Whichello said.
Take an Active Approach
Changing one’s mindset from poor to rich can take work, Hammelburger said, which may be why people struggle with it. “Setting clear goals, practicing gratitude, seeking knowledge and surrounding oneself with positive influences are all ways to cultivate a rich mindset.”
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He said it is critical “to prioritize self-improvement, resilience and taking advantage of opportunities while remaining adaptable to change.”
