By: Julie Cole
The psychology of money, known as behavioral science, has a very simple formula. Decreasing stress increases happiness. Try a new mindset in 2014 by taking responsibility for your finances. Stop blaming the Washington out-of-control spending or what’s happening “out there” in corporate America or Wall Street. Take control of your finances with a positive attitude and positive changes in your money habits. Get into action with these 7 tips:
1) Learn to want less. We’ve been programmed by very clever advertising to buy things we don’t need. We must have the latest and greatest car, smart phone, TV, and other stuff. Once you master your mind, you can master your money.
2) Set defined realistic goals. In the 1980’s, Yale University started polling graduating students about their goals. Twenty years later they discovered that the ones with clear, defined, and realistic goals had made more money, saved more money, invested with better results, and were happier than the others. Define where you want to be in 2034.
3) Plan your spending. Find out how you are spending your money by tracking it for a month. Learning to live within your means will allow you to feel more empowered in accomplishing your goals.
4) Save more and invest wisely. Nothing saved + nothing earned = No retirement. There is a misconception that you have to be a good investor to build a retirement nest egg. You have to be a good saver first.
5) Don’t put your family at risk. Protect what is yours. Manage risks. Risk Management is the 2-step process of first identifying risks followed by the second step, taking action to minimize, reduce, avoid, or transfer the risk of loss. Insurance is the means by which we transfer the risk of financial loss. Make sure that you have auto insurance, homeowners insurance, health insurance, disability insurance, and life insurance. Insurance transfers the risk of financial loss from you to the insurance company. Warren Buffet, probably the most notable billionaire and investor in American, has always been an advocate of insurance and has been quoted about his insurance philosophy: “Rule number one – never lose money. Rule number two- don’t forget rule number one.”
6) Start talking about money. The number one reason for divorce is financial stress. Open up, talk about money, and get your kids in the game. Don’t keep secrets about money. Make decisions about goals and purchases together.
7) Identify the roadblocks to financial happiness. Identifying roadblocks is the first step in finding a solution. Example: You are stuck in a low-paying job because you don’t have the education and experiences to get a better job. Identifying the roadblock and considering various solutions are the first steps to overcoming the roadblock. The solutions are never easy to achieve, but that’s no excuse for whining about it. You can control the outcome and you need to take action.
There is no quick fix to achieving financial happiness. Make a commitment to action for the long-term.
Wishing you a stress-free and happy 2014!