Have you ever wondered why managing money is so hard? It seems so straightforward—save diligently, spend wisely, pay off debt. Yet, it remains a challenge for many.

If you’ve ever wondered this, you’re not alone. As a financial coach, the majority of people I work with know what they are supposed to be doing. The problem isn’t knowledge—it’s figuring out how to make it happen.

What nobody tells you about personal finance is that it’s not about the numbers. Managing money isn’t a math problem that can be solved by throwing some numbers into a spreadsheet. Yes, numbers play a role, but the real game-changers are your emotions, habits, and mindset.

In this blog post, you’ll learn five unexpected ways your mindset and behaviors are influencing your finances. Get ready to shift your perspective and transform your relationship with money in a whole new way!

1. Emotions Drive Financial Decisions

Money isn’t just about numbers; it’s deeply tied to our emotions. That’s precisely why managing money is so challenging. We don’t live our lives according to formulas or spreadsheets because we are human beings, and emotions are part of what drives us.

• We go out with friends to nurture relationships and cultivate a sense of belonging

• We go to concerts, sporting events, and movies to have fun and experience something extraordinary

• We buy something special to make ourselves feel better when we’re having a bad day

The role that emotions play in our finances can be both good and bad. 

Seeking emotional fulfillment—happiness, a sense of meaning, love, independence—is what makes life worth living.

If we operated on pure logic all the time (meaning we only spent money when absolutely necessary for survival or financial gain) we would never buy things simply because we want them. We wouldn’t go on vacations, decorate our homes, enjoy our favorite foods, or go out with friends. 

As humans, we all have a range of emotional needs, and it is perfectly acceptable to spend money to fill those needs. 

However, emotions can also lead us to compromise our financial well-being, both now and in the future. Fear, guilt, and shame often influence our financial choices, leading to overspending or, conversely, underspending.

It’s normal for emotions to influence our financial decisions. There’s no shame in that. But it does call for awareness and learning to manage them effectively. The goal is to reach a balance where you can use your money to fulfill your emotional needs while still safeguarding your future and working towards your financial goals and priorities.

2. Your Money Mindset Matters

Our beliefs about money shape our financial reality. Your mindset influences aspects such as:

• Whether you view money as a source of stress or a solution to problems.

• How you manage your spending and saving.

• Your ability to set and achieve ambitious financial goals.

• The amount of income you generate.

• Your risk tolerance and comfort level with investing.

• Your capacity to accumulate wealth.

• And much more…

At its core, your money mindset consists of unconscious beliefs about money, many of which stem from childhood.

For instance, if you grew up believing that money was taboo—that discussing finances or desiring wealth was frowned upon—you might find yourself avoiding financial planning or not tracking your expenses.

Alternatively, if you were taught that spending on “unnecessary” items was wasteful, you might struggle to allow yourself to enjoy purchases that enhance your life or bring you joy as an adult.

By understanding and adjusting your mindset, you can make more informed and beneficial financial decisions, leading to a healthier financial life.

3. The Power of Small Habits

As a financial coach, I often encounter the belief that saving is futile when you don’t have much money to save. It’s understandable to feel that way. After all, saving $10 a month only totals $120 a year, which doesn’t seem like much.

It’s certainly not enough to suddenly afford a house, keep up with rising insurance costs, or fully fund your retirement account. 

But it’s not about the amount. It’s about habits and the mindset. 

Building the habit of saving helps you build discipline and create momentum to keep going. 

Saving even $10/month puts YOU in control of your finances because you’re making conscious decisions instead of acting on impulse or allowing everything to happen to you. 

When you start saving, you feel more empowered. You’re confident that if you can save $10/month, you can increase that amount over time. 

With personal finance, behavior and emotions play a much larger role than most of us acknowledge. We think managing money is all about the numbers. Because of this belief, we tend to underestimate the power that building habits and confidence can play in transforming our finances and the way we feel about our money. 

Once you have the belief that saving is possible, you’re more likely to increase the amount, search for more ways to save, and feel confident enough to delve into your finances and make better financial decisions. 

Don’t let your belief that a small action doesn’t matter hold you back from taking action.

4. Every financial decision involves an opportunity cost. 

The opportunity cost is the idea that when you spend money on one thing, you’re giving up the chance (opportunity) to use that money for something else.

For example, let’s say that you walk into Costco and you see that they have paddleboards on sale. You’ve been thinking that you should get some and picture yourself floating and relaxing on the lake with your favorite beverages. 

We’ve all been in these situations (though maybe not with paddleboards). 

If you think back to these times, you might notice that your brain is only considering whether or not you want the item. And maybe you’re thinking about whether you have the money to buy it. 

But at no point do you consider what you are giving up when you purchase that item. You’re not thinking “if I buy the paddleboards I will have less money for the trip to Europe.” You’re only considering whether you want (and can buy) the paddleboards. 

This is just how our brains work—it is not natural for us to think about items we purchase in the larger context of our financial priorities. 

Yet our purchases have effects beyond the immediate consideration of “do I want it and can I buy it.” When you spend money on one thing, you have less to spend on or save for other things. 

If you are constantly feeling stressed about money or wishing that you had more money for things that you want, considering the trade-offs is one of the best things you can train yourself to do. 

Get in the habit of asking yourself what you might be giving up when you buy something. 

You might still decide to make the purchase, but at least you’re being intentional and understand how it affects your larger financial stability and goals.

5. Lifestyle Inflation in Sneaky

As your income increases over time, it’s natural to upgrade your life. Maybe you get a bigger apartment or home, you finally buy a new dryer that doesn’t take three rounds to dry your clothes, you go on nicer and/or more frequent vacations, and pay less attention to grocery costs. 

This makes perfect sense and is a normal and expected thing to do. You should be able to spend more when you earn more. 

The problem is that it can be challenging to know how much more you should be spending and to know when to stop. 

As you start earning more, your mindset starts shifting. You might go from always paying attention to prices and being as frugal as possible to having the freedom to buy things without worry. 

Your brain adapts to each lifestyle upgrade as the new normal. Before you know it, you’re questioning things less than you used to, and you find yourself wondering how you can be making $X and still not be getting ahead and building wealth. 

Don’t feel bad or embarrassed if this happens to you. It doesn’t mean that you’re a bad person or that you’re bad with money. It’s a normal human phenomenon. 

But it IS important to be aware of it and take measures to keep it under control. You can do this by: 

• Tracking and reviewing where your money goes. People are often surprised because what they actually spend is often far more than what they think they spend. 

• Making intentional spending decisions. You don’t have to give up all joy. It’s okay to upgrade your lifestyle as long as you’re intentional and aware of what’s happening. 

• Automate your savings and pay yourself first. Identify how much you want to be saving, whether for retirement or other (fun) goals, and make that happen first. Immediately after you are paid, set up automatic transfers to savings accounts. Once you’ve done that and have paid your bills, spend the rest as you’d like without feeling guilty!

Ultimately, your money mindset is what drives your financial life. You’ll encounter many difficulties in your financial journey, many of which are beyond your control. But remember that you always have a choice over how to respond—what you think and do when life gives you lemons. 

I hope that after reading this article, you’ve uncovered a few ideas for how you can take action in your financial life in a way that feels right for you. If you would like someone to help and guide you through these challenges, please reach out! I’d love to talk about how I can support you in your financial journey!