What is Your Money Mindset: Why Does it Matter?

Money Mindset

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What is Your Money Mindset?

Your money mindset is the beliefs and attitudes you have about money. 

It is likely your initial money mindset was heavily influenced by your parents’ attitudes.  Later on, friends, colleagues and social media influences tend to rub off too. 

It is important to examine your adopted money mindset to evaluate whether it is still serving you.

Two opposing mindsets are often described – the scarcity and abundance mindsets. Popular media states that a scarcity mindset is bad, and an abundance mindset good. 

The Scarcity Mindset

A scarcity mindset often develops in families with little financial resources, or those that overstretched themselves with huge mortgages or poorly managed cash flow.

Those with a scarcity mindset think “I can’t afford that” or “I’ll never be able to achieve my financial goal”. 

If you don’t think achieving financial freedom is possible, you will never make the changes needed. 

We have been fed unrealistic expectations for our incredible lifestyles, and as a result can feel like we have no room for saving.

I remember thinking about saving to invest as a new graduate doctor. When I looked at my budget, the amount I could save would make no meaningful difference!  I decided to wait until I was on a better wage. 

A decade later, on a generous salary, the amount I could save still looked pathetic in comparison with my goal.  Of course, my goal was now more ambitious given I had a decade less to achieve it. 

With any big hairy audacious goal, the end result always seems far-fetched.

The Scarcity Money Mindset in Above Average Earners

Common sense would suggest that households earning over the Australian median household income ($116K gross in 2017-18) have saving and investing capacity.  

But, if the extra is tied up in lifestyle commitments such as bigger mortgages, car payments the saving potential can be lost. 

The definition of “Rich” is not double your own income as most of us believe!  There will always be someone more wealthy. 

When your peers are high earning professionals, perspective can become grossly skewed. 

If you allow yourself to fall victim to the scarcity mindset, you will never have the right attitude to build financial freedom.

The Abundance Mindset

There is a lot of talk online about “Manifesting” your desires (and poof!  They will suddenly appear). 

If you are a minimum wage household with several kids, wishing for wealth is clearly not going to cut it.  Extremely dedicated and strategic hustling is going to be required. 

But a positive attitude is definitely required.  Without it, no hustling or planning will be done!  

Positive mental imagery, writing down your goals and believing in yourself are important tools are important in all achievements. 

What difficult goals have you achieved in the past?  I bet you used these tactics to get through.  Imaging my relaxed and happy life after passing postgraduate exams was probably the most powerful motivator.     

Your habits are the thing that will determine whether you achieve your goals or not.  You just need the right mindset to set goals, and stick with the steps required, especially when they take a long time. 

The idea of the abundance mindset is to believe you have more than enough money, and you just have to choose your priorities. 

The Abundance Money Mindset for Above Average Income Earners

For higher income earners, keeping your feet on the ground is essential.  Instead of comparing your income with your wealthy mate, remember to compare with the Australian median household income. 

When the Abundance Mindset Goes Wrong

“I can afford it”.  It’s not just doctors who get sucked into this mindset, but they may be the worst culprits. 

The average Australian could not imagine that a household earning over $200K could possibly not become rich. 

Financial planners tell us doctors, like many other Australians, fail to save for the future.

Superannuation is a great safety net of forced savings for most employees.  But self employed individuals are at risk of losing out on this safety net.  It is common to be cash poor setting up a business, and without the government mandating super contributions, they often don’t get made. 

Consistently contributing extra to superannuation from a young age is the easiest and cheapest way to achieve wealth over the long term.

The abundance mindset that comes with a decent salary can lead to a belief you can (and should) afford every luxury you can think of over the years.  It can lead to an assumption that you will be able to retire when you like, and will never be susceptible to financial shocks. 

By the time many realise this is not true, they are 50+ getting very interested in when they can retire… and with too little time to build substantial wealth.  

A financial plan is essential.  Although you can pay a financial advisor for a plan, you need to choose a trustworthy advisor, and be able to weigh up options and assess risk/benefit yourself.

Once you have your plan, and your investment money is put aside, you know how much you have to treat yourself with.  You only live once!  But the plan and saving should come first (your future self will thank you for it!)

Marketing Placebo effect

Even though placebos are inactive, they have a positive effect. 

If a new pain killer for back pain was being tested, half the study participants would take the new medication, half would take a placebo. 

Neither patient or doctor would know which the patient was taking, as both can be susceptible to the “Placebo effect”. 

When taking (or prescribing) medication, we expect it to improve the medical condition. 

This positive attitude towards the medication can lead to improvement even if the pill is completely ineffective. 

Bizarrely, treatments that are more expensive, and those that hurt (i.e. an inject-able medication) tend to have a more powerful placebo effect.

There is a marketing placebo effect also.  “Luxury” products are more attractive because of their high cost.  We expect to “Get what we pay for”, but this is not necessarily true. 

Chanel presumably have sold at least one of these bags, an extreme example of the ludicrous susceptibility we have to marketing. 

What could possibly be so incredible about this bag that its is worth 20 times the cost of a similar good quality bag? 

It is not possible that the quality, durability or aesthetic appeal makes up for the price gap.  The prestigious brand appeals to our desperation to fit in, be accepted and admired. 

Companies spend big money working out how to manipulate our minds to pay them more money for less. 

Negative Attitudes Towards Money Itself

“Money is the Route of all Evil”

This common phrase that may have seeped into our subconscious. 

Money, of course is neither good or evil.  It is just a bartering currency.  Money can be used to support your family, donate to effective charities and build businesses that help others.

You could use it to fund evil purposes.  It’s clearly the human controlling the money that is making moral choices. 

The quest to amass money can encourage some to abandon morals to increase profits. 

Trafficking children or selling drugs is presumably motivated by money, and are the extreme examples. 

Assuming I have no super villain readers, you are unlikely to start committing crimes to increase your wealth! 

There are more nuanced decisions which can help keep your investing in line with your principles.  Choosing an appropriate ethical investment is complex, but there is a good introduction at Frugality and Freedom.  


Guilt about your own financial success is an issue for some.  I am not financially independent and don’t have an unusual amount of wealth in comparison with my peers. 

But I am sharply aware, and sometimes feel ashamed, of my level of wealth in comparison with the rest of the world. 

I am often conflicted between wanting to have my comfortable life, and being appalled at the excess.  There are many in the world without even the basic living necessities of food, water, shelter and safety.  It’s hard to work out where the line is, when it’s reasonable to look after yourself, before giving more to others. 

But then, in contrast, I want to have plenty of time with my kids, a flexible schedule and long holidays to create lifelong family memories. 

Paying it forward with effective charity donations, avoiding too much lifestyle inflation and focusing on creating inter-generation financial security for my children have been effective strategies in managing this guilt. 

How to Change Your Money Mindset

“No point Crying over Spilled Milk”

Whatever mistakes you have made in the past (we’ve all got some), let it go and move on. 

Focus on factors you can actually change.  Anything else is wasted time and energy. 

Start now.  NOW.  No excuses.

No matter whether you want to retire early, adopting an “FI mindset” will provide you flexibility and options.   

Work out how much you can afford and set a direct debit up to force a savings habit.  It doesn’t matter if it’s a ridiculously tiny amount.  It doesn’t matter if it seems ridiculous. 

As savings grow, confidence compounds. 

Practice Gratitude

I know this is a bit trendy.  But so many people have lost perspective, and as a result desperately unhappy. 

Forcing yourself to think of things to be grateful for seems a bit silly at the time, but really does have a powerfully positive effect on your mindset over time. 

We all need to be reminded sometimes how lucky we are to be born into circumstances that allowed us to use electricity, the internet and drink clean water.  It’s just too easy to take for granted. 

Set Huge Goals

Set huge goals.  Dreaming is fun.  Turning those dreams into goals is powerful.  Set some big hairy audacious goals. 

Question Your Parents Money Mindset

Learn to (perhaps without telling them) challenge the money mantra your parents passed down. 

Mine, like many of their generation and social status, were focused on buying the most house they could afford (on the best street), then working 6 days a week for decades to pay it off.  It worked out well for them, but is not a strategy that suited my family. 

Congratulations on spending a little time thinking about your money mindset.  Thoughts often control actions, so adopting a healthier money mindset can provide an outsized return on investment.

Aussie Doc Freedom is not a financial adviser and does need offer any advise.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

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This article may contain affiliate links. If there are any in this article they are marked *. An affiliate link means if you click on the link and purchase a product, at no extra cost to yourself, I will receive a small commission.

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