What is your Financial Philosophy?

Have you ever asked yourself: what is my financial philosophy? I’m guessing the answer is no.

I am not surprised; up until this week, I had no idea what the term ‘financial philosophy’ was!

This was this week’s topic of the Rebel Finance School, the personal finance course I am doing.

So what is your financial philosophy? What does it actually mean and why is it that important?

Your financial philosophy refers to your beliefs, values, identity and feelings around money.

Your financial philosophy determines your thoughts, habits, and actions with your finances.

By developing a positive financial philosophy, you can then achieve a better financial future.

In this blog post, I talk about all of the components that make up your financial philosophy.

I also talk about where your financial philosophy comes from and some of the limiting beliefs.

Finally, I talk about how to create your financial philosophy and additional resources for help.

Financial Philosophy: Identity

The first part is your identity: this refers to a set of statement that you believe about yourself.

You can identify an ‘identity statement’ because it starts with ‘I am’. Here are some examples:

• I am great with managing my money.
• I am terrible at maths.
• I am great at spending money.
• I am terrible at saving.

These statements are some of the most powerful and deeply held beliefs that you can have.

They will control the actions that you take on a daily basis, and are usually never challenged.

Having negative beliefs about your identity will stop you from even trying in certain situations.

Having positive beliefs about your image will give you an open mind to try new experiences.

Financial Philosophy: Values

The second part is your values: the things that you place the most importance on in your life.

It is these ‘values’ that dictate how you behave, what decisions to make, and more every day.

You find your values by answering and reflecting on the question: What is important to me?

Examples of values are: Love, Freedom, Connections, Growth, Health, Family, God, Fun, etc.

Now here is a question for you: Is ‘money/wealth’ on your list of values? Chances are is it not.

However, if money is not one of your values, then how to do expect to ever become wealthy?

When I first came across this, I never thought of that before, so I have now added it to my list.

It is not as high up for me as my other values, but it is still on my list as it is actually important.

These values then become a nice list to check against when going about life and daily actions.

When making any decision, ask yourself: Will this move me towards or away from my values?

Financial Philosophy: Beliefs

The third part is your beliefs: the things that you have been taught that you believe to be true.

These beliefs may have developed during childhood or passed from parents. Some examples:

• Money is the root of all evil.
• It takes money to make money.
• Renting is a waste of money.
• You have to work to make money.

The problem with these statement is that because people say them, we believe they are true.

However, just because the majority of people believe them, does not mean that they are true!

Think of the beliefs that you have about money: are they facts or just sayings that people say?

Don’t be afraid to challenge them. You may find that they’re limiting beliefs holding you back.

Financial Philosophy: Definitions

The fourth part is definitions: associations that come to mind when we think of certain words.

We come up with these definitions through life experiences. What is your definition for these:

• Money is…
• Wealth is..
• Business is..
• Success is…

Is your definition ‘money is the root of all evil’ or ‘money is a tool that allows me to live life’?

Can you see which definition would lead to success and a healthy relationship with money?

Start to uncover your definitions for money, wealth, finance, etc. by writing them all down. 

Having positive definitions for these terms will impact your actions and long term outcomes.

Financial Philosophy: Wealth Thermostat

The last part is your wealth thermostat: a subconscious thing you may do to regulate income.

This is an interesting concept I had not thought about before, that I didn’t realise I was doing.

Let’s say for example you work in sales: your goal is to bring in an income of $40,000 this year.

You go out, work really hard, get a lot of customers, close many deals, and achieve your goal.

The next year you go out and do the same thing again, yet end up with $40,000 that year also.

Why is that? In the whole year, you achieved the same result. Why didn’t you achieve more?

Because your thermostat has been set to that figure: you would only work until you reach it.

What’s your wealth thermostat set to? Is your income increasing or staying the same yearly?

It’s good to know what you’re content with, but also good to challenge yourself occasionally.

You adjust your wealth thermostat by consciously setting a new target for you to aim towards.

What is your Financial Philosophy?

You may be thinking: I don’t have a financial philosophy. You do, you’re just not aware of it!

We all have one, built of these different elements, that’s been driving our financial decisions.

How do you uncover your current financial philosophy? By going through all these elements.

Once you have reviewed it, decide which aspects you will want to keep and which to remove.

This will allow you to create your new financial philosophy that will match your financial goals.

If you want to learn more about financial philosophy, go check out: The Psychology of Money.

This book talks about the strange ways people think of money, and how to make sense of it!

What is your financial philosophy? Is it set for financial success? Share in the comments below! 

If you’ve enjoyed reading this, check out my blog post on Cashflow: How to Buy your Freedom.

If you have any suggestions for future blog post topics, please share in the comments below!