When it comes to managing our finances, having a broke mindset is a big disadvantage. But in reality, most of us are conditioned to incorporate negative ways of thinking about money into our lives.
The good news is it’s possible to transform your mindset, which could lead to positive changes in your financial situation.
Let’s talk about what a broke mindset is. Plus, we will explore how to transform this mentality starting today!
What is a broke mindset?
The hallmark of a broke mindset is the feeling that you don’t have enough money. Regardless of your bank account balance, anyone with negative thoughts about money feels like their number is never enough.
In many cases, this thought process is caught up in the idea that more money will lead to more happiness. And without a specific dollar amount on hand, you might feel like you never have enough to truly be happy.
Usually, thinking like you're broke cultivates negative thoughts about money. When you have negative emotions wrapped up in your financial decisions, it often has a negative impact on your financial picture.
How to tell if you have a broke mindset
Money mindset issues are often easy to spot. But unless you are looking for the signs, you might push your broke mentality under the rug.
It’s time to shine a spotlight on your money mindset to determine if you are thinking correctly about it. If you catch yourself making the following money moves, you might have the wrong money mindset.
Thinking about money all the time
Money management is a key part of a stable life. However, money isn’t the only issue at play in our lives.
Coco Chanel said it best, “The best things in life are free. The second-best things are very, very expensive.”
If you are focused on the very expensive parts of life, then you might be living with negative thoughts about money. But if you focus on the free things in life, like your relationships, health, and happiness, you likely have a positive mentality.
Spending on credit
If you spend on credit, you aren’t alone. According to a TransUnion report, the average credit card user carries a balance of $5,474.
With an average APR sitting at nearly 20%, the costs of spending with credit can add up quickly.
Whipping out your credit card might feel good at the moment. But paying for splurges on a credit card is usually tied to a broke mindset.
Putting wants before needs
Everyone has specific needs to keep their household afloat. A few basics include housing, transportation, and food. If you have a negative mindset, you might push to buy things that you don’t necessarily need before covering your basic expenses.
Ask yourself what you truly need. If you’ve been skipping past your needs to cover your splurges, that’s usually a sign that something should change.
For example, let’s say you’ve been skipping your routine doctor’s visits to cover upgrades to your wardrobe. That might mean you are focusing on the wrong things.
Avoiding saving money
Saving money is key to building a bright financial future. Without savings on hand, you are more likely to get stuck taking out loans to cover unexpected expenses.
But someone with a broke mentality might avoid saving in favor of spending on splurge purchases.
Of course, there is nothing wrong with splurging on fun things now and then. However, always choosing to splurge on an immediate purchase over saving for your long-term future is a bad habit.
Sticking with a scarcity mindset
A scarcity mindset will focus on everything you don't have. For example, you might constantly compare your life to others. Someone will always have more than you, especially if you are looking at their carefully curated social media feed.
But at the same time, you might have more than enough to take care of your needs and wants.
If you find it difficult to count your blessings, then a scarcity mindset might be pushing you to feel broke all the time.
How do you avoid the wrong mindset?
A broke mentality can hold you back from achieving your financial dreams, so it's important to gain knowledge and save more in order to avoid thinking negatively like this.
Build your financial literacy
The first way to combat a broke mindset is to build your financial literacy. The more you understand about managing your finances, the more in control you’ll feel.
When you know more about your financial choices, you might take action to improve your situation. Knowledge about money is a key way to change your mind. Reading books about finance is a really good place to start.
Empower yourself about money matters
Empowerment can push you to take control of your financial future. When you combine an attitude of empowerment with your newfound financial literacy, you can transform your mindset.
Empowered women confidently make savvy financial decisions. Instead of feeling trapped by a broke mentality, you can dive into building a brighter financial future.
Build your savings habit
Learning to save money consistently is like building a habit. Although it might not come naturally, you can build your savings habit over time.
If you struggle to save, start with small amounts. It’s also helpful to set realistic savings goals. As you hit your savings goals, consider rewarding yourself with small splurges to maintain your motivation.
A savings challenge is also a great way to start saving more money.
How does one fix a broke mindset?
If you already think the wrong way about money, you don’t have to stick with it forever, and can instead use some strategies to change how you think. It’s entirely possible to transform your money mindset from broke.
Focus on the positive
A positive outlook on your money matters can make a world of difference. When you look at the world with a positive spin, it’s often easy to save for a brighter future. If you have a negative outlook on life, it’s easier to focus on what you don’t have.
It isn't always easy to stay positive in a negative world. But a commitment to positive thoughts might transform your mindset and your financial future.
Find your reason
If you can find a critical motivating factor, it’s often easier to transition out of your broke mindset while building a better financial future. A single reason to make the hard choices, like saving instead of splurging, can make all the difference.
Some common reasons to transform your finances include building generational wealth, providing financial stability for your kids, or pursuing financial independence.
Get comfortable living within your means
Living within your means involves spending less than you earn. If you are spending more cash than you earn, you’ll get stuck with some kind of debt. Learning to live on a budget can push you toward your financial goals.
The key is building a budget that you can stick to. If you don't know how to begin by building a budget, add up your current income and expenses. Hopefully, you’ll be bringing in more money than you spend.
Either way, comb through your spending. Look for ways to trim expenses you don’t care about while growing your resources for the expenses that you do care about.
For example, if you want to build an emergency fund, you might decide to temporarily pause spending on new clothes.
Learn more about money
If you don’t know too much about money, it’s often overwhelming to manage money responsibly. The solution is to beef up your money knowledge. As you learn more, you’ll likely gain the confidence you need to make savvy money decisions.
Set SMART money goals
Setting goals is a helpful tool for all areas of your life. In fact, goals can help you stay motivated.
SMART goals are specific, measurable, achievable, relevant, and time-bound. An example of a SMART goal is to save $1,000 for emergencies in one year.
Take the time to set SMART money goals for your unique situation.
Get creative
It’s easy to get stuck with the idea that money matters are entirely beyond your control. After all, you likely have a primary source of income that is finite.
For example, you might be living with the same paycheck from the same employer for several years.
Luckily, it’s possible to transform your financial situation with a dash of creativity. You can start by looking for creative ways to cut your expenses. But the real magic happens when you build additional streams of income.
The possibilities of a lucrative side hustle are endless. Don’t be afraid to use your creativity to build a side hustle that works for your life and gives your financial situation a boost.
Got a broke mentality? You can change to a positive mindset!
A broke mindset can hold you back from achieving your full financial potential. Don’t let a limiting mindset prevent you from reaching your money goals.
As you transition to a different mindset, be patient with yourself. It will likely take some time to break free from old patterns and start to think differently. But the change is absolutely worth it!