What’s Standing in the Way of Your Successful ‘Money Mindset’?

Many of us have common biases that keep us from making the best financial, and other, decisions. Knowing what they are and addressing them can help us set a new path forward.

A man doesn't let orange caution cones stop her from conquering common financial biases.
(Image credit: Getty Images)

Common financial biases, and one big syndrome, could be preventing you from developing a successful “money mindset.” But you can move forward once you know what they are and how to address them.

For most of us — and for better or worse — our financial education begins well before our first savings account or credit card. In fact, by the age of 3, we can grasp money concepts, and by 7, we have money habits. And certainly, no research studies are required to tell us that by the time we’re fully formed adults, those behaviors are much harder to change.

Maybe that isn’t an issue for the type of person who is considered “good with money” — broadly, someone who knows how to create and grow wealth. But for those who fall on the opposite side of the spectrum, an unproductive “money mindset” can lead to professional and personal struggles.

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That mindset is developed over years, takes many forms, and even the negative behaviors that influence it may be well-intentioned, if misguided.

Changing the attitude to one that positions you for success begins with recognizing inherent money biases, then creating a plan to move forward with new behaviors.

Most People Have at Least One Bias That Hurts Money Decisions

The vast majority of Americans have at least one money bias — an ingrained, but ultimately limiting behavior — that damages their financial decision-making.

These are some of the most common biases:

  • Present bias. Those of us with this bias tend to live in the present, meaning they prioritize immediate rewards over long-term goals that may provide larger returns. Think of it as a “keeping up with the Joneses” mentality — and it’s only been exacerbated in today’s social media age. For example, a lavish vacation or unnecessary home project probably feels better and gets more instant gratification than putting money into a 401(k) or paying down debt. The latter goals, however, are certainly better for a person’s or family’s financial health.
  • Base rate neglect. Investors often weigh probabilities incorrectly. If someone sees the market going up, there is an impulse to believe it will always go up — and the same thinking applies to when the market is shrinking. Market trends especially imprint themselves on people taking their first steps into investing. Many Millennials entered the workforce and began investing just as the 2008 recession was peaking, creating an impression that the market is always on the brink of collapse and perhaps making them risk averse. Experienced investors, too, can fall prey to this bias.
  • Loss aversion. The feeling of winning, quite simply, is not as powerful as that of losing. When we walk past a store or receive an email from a retailer that says in big bold letters, LAST DAYS OF OUR BIGGEST SALE OF THE YEAR, we’re more inclined to walk in or click through — then buy something unnecessary. On the other hand, the fear of losing money can cause investors to miss out on a major opportunity or sell at the wrong time.
  • Mental accounting. Frequently, people make money decisions based on the source. Biweekly income from work? A portion goes to the 401(k). A $20 bill found in old jeans? Time to splurge on ice cream. Those are small-scale examples, but thinking a little bigger, this behavior partly explains why about 70% of lottery winners go bankrupt within a few years.

Not all our roadblocks to a healthy money mindset are necessarily biases, but they are also worth a longer discussion here — and troubleshooting.

Don’t Ignore Impostor Syndrome Either

“Impostor syndrome” is a common phrase among professionals, but its origins stretch back decades. First coined in 1978 following a study of successful women in the workplace, the researchers found many of the subjects felt inadequate or undeserving of the rewards for their success — or, rather, they felt like impostors.

Today, we recognize that impostor syndrome is hardly limited by gender, while its effects are harmful to mental and financial health. High levels of anxiety, stress and depression negatively affect decision-making and hold people back from taking risks that may be necessary to meet a monetary goal or prevent them from asking for a merited raise.

Overcoming impostor syndrome isn’t always easy, and internal problems often require external help, such as mentorship, professional coaching or traditional therapy. However, these are some basic tips someone can manage on their own:

  • Acknowledge you’re not alone. There is strength in numbers, and although it varies depending on how it’s measured, as much as 82% of the population experience impostor syndrome, according to a 2020 review.
  • Track victories. Accomplishments don’t lie. Reviewing — and documenting — career highlights can serve as a reminder that someone belongs in their position.
  • Recognize natural talents. Very few of us are experts at everything, but most of us have abilities that come naturally and help us thrive personally and professionally.

Creating an Abundance Mindset

Another way to describe a successful money mindset is an “abundance mindset,” which enables an individual to see more opportunities, options and resources. It’s the opposite of the “scarcity mindset,” the belief that there is not enough of these things, that holds many of us back.

Shifting from the latter to the former isn’t as simple as telling someone to embrace the power of positive thinking. Changing beliefs is difficult — but it’s not impossible. For many, it’s a series of small steps that eventually become a large leap:

  • Set a goal/challenge. Go big. Pay off the student loan that’s been a monthly drain on the checking account, or finally resolve to get to the gym four days a week for a year.
  • Make a plan. Big goals won’t be accomplished in one day, so brainstorm solutions. That student loan? What about adding an extra $100 to the monthly payment? The gym campaign? Ask a friend to join for extra support and motivation.
  • Recognize strengths and weaknesses. Like the note above on recognizing natural talents, it helps to know, particularly, where we are not strong. While we can always hone our skills and improve, surrounding ourselves with people who counterbalance our weakness will create a more cohesive support system.
  • Replace “but” with “and.” It’s no longer about, “I’d love to take that two-week-long overseas vacation, but I can’t afford it.” People with an abundance mindset say, “I’d love to take that vacation, and here’s how I’m going to do it.”

Acknowledging money biases, eliminating impostor syndrome and building an abundance mindset are part of developing a successful money mindset — not the end-all, be-all. However, those actions highlight that a big part of growing wealth is based on self-reflection, rather than external influences.

Indeed, our success is in our hands.

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product, including the investments and/or investment strategies recommended or undertaken by Waldron Private Wealth (WPW), or any non-investment related content, made reference to directly or indirectly in this article will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from WPW. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. WPW is neither a law firm, nor a certified public accounting firm, and no portion of this content should be construed as legal or accounting advice. A copy of WPW’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at www.waldronprivatewealth.com.


This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Ali Swart, CFP®, MBA
Managing Director – Wealth Planning, Waldron Private Wealth

Ali Swart is responsible for strategic leadership and management of Waldron’s Wealth Planning Team, focusing on providing a world class financial planning and client experience. In addition to her management and leadership responsibilities, Ali simplifies the wealth complexities for a select group of multigenerational ultra-high net worth families. Ali also leads Waldron’s Diversity, Equity and Inclusion endeavors, co-hosts the Wealth Simplified podcast, and has a passion for increasing financial literacy and awareness.