Attitude to money – mastering your journey to financial freedom
Your attitude to money is your number one tool in building your long term wealth. In fact, I think it’s the ONLY tool you need. Once you have that right, everything else will follow.
You need the right attitude to money in order to get out of debt. You need the right attitude to start saving. You need the right attitude to invest well. You need the right attitude to become wealthy. You need the right attitude to stay wealthy. You get the picture – YOU NEED THE RIGHT ATTITUDE TO MONEY.
But, what is the right attitude to money and how do I know if I have it?
Recently I have posted many articles where I believe that people can make the “right” decision when it comes to their finances. If you are making sure you are doing these things right, you probably have the right attitude towards money: choosing avalanche repayment over snowball, never taking a loan on your car, ditching the bottled water.
However, these are all small isolated matters. In my opinion, there is one over-arching very simple test to determine if your attitude to money in the short-term is aligned with your long-term desire to be wealthy. And it takes 3 seconds!
I call it the “£250 test” and I think it applies to anyone at any level of wealth.
The 3 second test
The test is as follows.
Woohoo! Great news (in a monopoly game style) you’ve just won a beauty contest and received £250.
Within 3 seconds, answer this question out loud. Make sure you say the words out loud. But, don’t think about it, just answer. Okay. Ready?
What do you want to do with the £250?
Okay, got an answer? Let’s have a look at some possible answers.
Wrong answers
If your answer is “I want to spend it on X”, you are not there yet. Sorry.
Don’t get me wrong. I’m not saying that spending is wrong. You need to buy shoes, bags, coats, and other material items. However, your incentive to buy it should be that you NEED it. Once you have determined that you need it, then you should determine how to finance that purchase (clue: the answer is “in cash, built carefully into my budget”).
Under no circumstance, should having money be THE incentive for spending money. All too often, people receive a tax rebate or a bonus at work or a Christmas gift on money and immediately think “great, now I can buy those new shoes, bag, coat, or some other material item”. If this was your answer, you lose. You should think more about your current situation and about your desired financial position. If these aren’t the same place (and for financially successful people, these NEVER are), you need to think more about how your short-term decisions are impacting your path to that financial goal.
If your answer is “I don’t know”, you are not there yet.
This certainly isn’t the worst, or the most common, answer.
However, if you don’t know what to do with it, you haven’t quite mastered your own personal finance journey. You should have your short-term and long-term financial journey mapped out. If you don’t know what to do if your income or expenses unexpectedly change, you haven’t prepared properly.
Right answers
If your answer without even thinking was “add it to this month’s debt repayment”, “add it to my emergency fund”, “save it in X” or “invest it in X” where X has already been thought about beforehand, you are there. Congratulations. You should always have a plan. Even if you win a beauty contest that you never even entered and receive £250, you should have a plan.
So, who passed the test? Who failed? Or did you have a different answer you want to discuss? Let me know via the comments below.
haha, I passed. Money’s fungible. If I have a plan for money from our paychecks, I have a plan for money found off the sidewalk.
Great work Mrs. Pop. The first person to pass!! 🙂
I passed the test! Yippee!!! I totally think my mindset has changed now. The only thing I ‘want’ money for (and need) is to pay off debts.
Definitely a win. After reading your blog, that only ‘want’ seems to be having a great positive impact. I think you need to change your commenting name to “debtfreeoneday…verysoon”!!
I need to get my cavities fixed, which is kind of an investment seeing as it might save me from having another expensive extraction and dental implant.
Oooooo…tricky answer.
Although it might be a “spend”, assuming that you’ve previously identified this as a “need” (which you seem to have done due to the investment argument) then I would agree that its a PASS. 🙂
Honestly? My mind went blank as I kept thinking “what do I need, what do I need?”… hmm, looks like I failed. Silly test, lol! 😛
Doh!!
Maybe come back tomorrow and take the test again…
I said “save it,” however that’s not to say I won’t spend it in the future on something I need…it just means I take the time to think about it.
Save first, spend later. Another win!!
Any windfall money goes right into savings until we find a purpose for it. It used to go toward eating out, so I guess I’ve made progress!
That’s the perfect example. People who are getting themselves into debt usually think “Wahey, £250. Champagne and dinner out to celebrate!”
Congrats on the progress and thanks for leaving a comment.
Woohoo I passed the test!
Heh, I immediately said “Buy a railroad!” I guess I passed!
In a Warren Buffet style?
I’d just put in in the bank. 🙂
I might be different if the amount was larger like $10,000 or something like that. I’d probably deposit 90% and spend the rest on fun stuff.
The bank is a pretty good place for it until you have more than 3 seconds to think about it!!
Having the correct mindset is definitely key to achieving financial success. It’s really a combination of desire/drive (attitude) and the correct type of thinking. Those that fail the 3 second test probably don’t care though! That’s the problem.
Spot on Mr. Utopia, thanks for the comment.
LOL, the first answer about the shoes definitely would’ve been my old answer, but now, I would for sure win this contest. Attitude really is the name of the game here, and truly does make the difference between winning and losing when it comes to managing money. Great post!
I’m not sure anyone didn’t have the attitude of “I want to spend it on…” at one point. Even if it was “sweets” when you were 6!!!
Its todays’s answer that matters!
I think I failed this one…my first thought was “spend it on that fancy new watch you’re after” but then I realised that there is no way $250 would cover the cost. My next thought was “might as well invest it then”, so I guess that might be half marks?
The wording of the question affected my answer. In an ideal world I’d want to spend the money, but in an ideal world I also wouldn’t have a mortgage to pay. While I want to spend the money, I don’t think I would have actually spent it in the real world.
Pass for me too.
I’d deposit it in the bank account and then when I do my weekly Friday assessment of the spreadsheet/bankaccount I have 250 more than expected when I make an the extra mortgage payment or contribute to the retirement accounts. Buying a thing or eating overpriced restaurant food is probably the least interesting thing I can think of doing with it. I know now much I need to set aside for every day of retirement so I’d look at that money in terms of how much it moves up my early retirement date.
The only exception to this might be, if we were about to go on our annual holiday, I might consider using some of it for a splurge activity we might not otherwise budget for on the trip.