Money—it's a thing that can be emotional (and stressful!) for many of us. We all need it, and most of us want more of it. Whether we feel excitement or fear, it's no secret that money plays a major role in our plans for ourselves or others.

But did you know our money beliefs can affect how we handle our finances and plan our future? In this episode, we explore the most common money beliefs that hold people back from investing. We share ways to rethink them, including the age-old question of whether money can buy happiness.

Finally, we offer practical advice for overcoming analysis paralysis to help you get started in your wealth journey.

What is money psychology?

Have you ever wondered why talking about money can feel uncomfortable or even taboo? Or why do some people seem to be great at saving and investing while others struggle to make ends meet?

This is where understanding our money psychology comes into play. Money psychology is the study of how our beliefs, attitudes, and emotions around money affect our financial decisions. It’s about understanding the thoughts and feelings we have about money. Our upbringing, culture, and past experiences can all shape our money psychology.

Whether we're aware of it or not, we all have beliefs about money that can shape the way we spend, save, and invest our money. Hence, the way we think, feel, and behave about money today influences the quality of our financial future. By becoming aware of our money beliefs, we can consciously work on improving our relationship with money and making smarter financial moves.

Most common limiting beliefs

Money beliefs are powerful ideas that we have about money that affect our behaviour towards it. Sometimes, these beliefs can be limiting. They can prevent us from making positive financial decisions, such as investing or saving.

Let’s explore some of the most common limiting beliefs and how to rethink them.

1.You have to be rich to invest

One common limiting belief is the idea that you need to be rich to invest. In reality, it is investing that can make you wealthy over time in the first place. And you can start with as little as $5. The key is to start the habit and be consistent with your investments.

2.Investing is for men in fancy suits with finance degrees

Many people believe that investing is only for men with finance degrees who wear suits. It can seem scary at first, but there are many resources to help you learn and start investing. You don't have to be rich or highly educated to invest. Anyone who wants to take charge of their financial future can do it.

3.You don’t have enough to invest

Some people believe that they don't have enough money to invest. This is another limiting belief that can hold you back. However, it is important to remember that investing is a way to grow your money over time. Even small amounts can add up to significant gains over the long term.

4.Investing is too risky and complex

Lots of people think investing is too risky or complicated. But while there is some risk, there are ways to manage it and make good decisions. Do your research and work with a financial advisor you trust to help you understand investing.

5.Money and income shouldn’t be talked about

Anything about income and money is often seen as taboo topics in many societies. However, it's important to have open and honest conversations about money. By doing so, we can gain a better understanding of our own money mindset. We can then make positive changes to improve our financial well-being.

Can money buy happiness?

We want to talk about the biggest limiting belief in a separate section. It turns out, the belief that money can’t buy happiness may not be entirely true. A recent study shows that, for most people, having more money can lead to increased happiness.

Matthew Killingsworth, Daniel Kahneman and Barbara Mellers put together a study to reanalyse previous research that offered different answers to the question: “Do large incomes make people happier?”

According to a study by Kahneman and Angus Deaton in 2010, having more money made people happier up to a certain point. But once their income went above $75,000, happiness stopped increasing. However, a 2021 study by Killingsworth found that people steadily got happier as they earned more money.

In the trio’s study, the findings show us an interesting and nuanced response to the biggest limiting belief about money. Indeed, happiness flattened as income rose. However, this is true only for people who were the least happy during moments of their life. Among the happiest bunch, an increase in income intensified their happiness even more.

But what about those who don't find happiness in money? It turns out, how you spend your money is just as important as how much money you have. A 2011 study suggests that consumers should focus on the following:

• buy experiences rather than material goods
• use the money to benefit others
• buy many small pleasures rather than fewer large ones
• delay consumption
• consider how peripheral features of your purchases may affect your day-to-day life
• beware of comparison shopping
• pay close attention to the happiness of others

So, what do all of these mean for you? We need to recognise that our beliefs about money can have a significant impact on our overall happiness.

If anything, the findings above tell us one thing: money buys freedom. It empowers us to explore much more important and fulfilling pursuits in our personal lives. Money buys us the opportunity to give greater happiness to the people we love and care about. The freedom to choose how to spend our money can also contribute to a happier life.

Where do our money beliefs come from?

Money is a topic that we all have some relationship with, whether we realise it or not. We all have beliefs about what it means and how we should manage it. But have you ever stopped to think about where your beliefs about money come from?

As we grow up, our family and community shape our views on money. We may have heard conversations about saving, investing, or financial struggles. Some of us grew up with dinner table conversations about saving and starting a small business. Others associated money with fear and the idea of not having enough.

These experiences can influence the way we approach money management as adults. It's important to reflect on these early experiences to understand how they shape our current financial habits.

For example, some people might know someone who looks at money as a source of stress and anxiety. They may have seen others struggle with debt, bankruptcy, or losing entire life savings after the 2008 financial crisis. These experiences can lead to a negative relationship with money and a fear of investing.

Some people may have had good experiences with money, such as seeing their parents buy a house or save money. These experiences can help us learn about money and encourage us to manage our money well.

Thinking about these experiences can help us understand our own ideas about money and recognise any limiting beliefs. It can be hard to face these beliefs, but it's the first step in changing them. By being aware of and working on our ideas about money, we can change the way we think about it and take control of our financial future.

Focus on things within your circle of control

To help change your beliefs about money, you can think of it in terms of the inside vs. outside circle of control/motivation.

When it comes to tracking your progress with your money goals, it can be helpful to focus on things that are within your control. Personally, we like tracking how much we save and invest each week. Our income, expenses, and money habits are all things are inside our circle of control.

On the other hand, things like the stock market, the economy, or unexpected expenses are outside your circle of control. By focusing on the things within your control, you can stay motivated and track your financial progress.

What is analysis paralysis and how to overcome it

Have you ever felt like you were stuck in a rut? You knew you wanted to do something, but you just couldn't seem to make a move. This is what we call analysis paralysis. It's that feeling of being overwhelmed with information and choices to the point where you can't make a decision.

Analysis paralysis can stop you from achieving your goals, including your financial ones. Let’s explore how to overcome analysis paralysis through the many approaches we mention in the episode.

Breaking down your decisions into smaller action points

Sometimes, the hardest part is just getting started. It can feel overwhelming to try and tackle a big goal all at once. That's why it's helpful to break it down into smaller steps.

For example, if you want to start investing, you can set up an automatic savings plan. This way, you'll make progress toward your goal without feeling too stressed out.

Scheduling time to work on your goals

Another way to overcome analysis paralysis is to schedule time to work on your goals. It's easy to put things off when they're not a priority. But, if you make it a priority and schedule time for it, you're more likely to follow through. For example, you could set aside an hour each week to research investment options and make a plan.

Building your financial confidence

In addition, you can build your financial confidence by learning more about personal finance and investing. Many people feel like they're not good with money, but that doesn't have to be the case. There are many resources available online, including Pearler's Learn Blog , which has articles on saving and investing basics.

Automating your saving/investing habit

Another way to combat analysis paralysis is to remove the choice altogether. You can do this by automating your investing or saving. For instance, you can arrange an automatic transfer from your checking account to a savings account or investment account every month. It’s one way to help you achieve your goal without having to remind yourself to do it.

Giving yourself a deadline

Sometimes, a deadline can be helpful in motivating you to take action. For instance, if you want to start investing, you could set a deadline to open an investment account within the next week. This gives you a specific timeline to work with.

Remembering that action is better than waiting for perfection

It's easy to get caught up in trying to make the perfect decision. But, sometimes, taking action is more important than waiting for perfection. If you're not sure where to begin, start somewhere small and doable right now. Just remember that you can make changes as you go.

Considering the opportunity cost

Finally, it's important to consider the opportunity cost of your time. Is spending hours searching for a slightly better interest rate on your savings account worth the time and energy? Sometimes, it's better to make a decision and move on, rather than get caught up in the details.

Actionable takeaways from the episode

Now that you know where your money beliefs come from, it's time to take action. Take a moment to write down what's holding you back from investing, and what you can do to get started. Maybe it's a limiting belief you picked up from your parents. Or maybe it's just the fear of making the wrong choice.

Whatever it is, reflecting on it and taking action can help you move forward on your financial journey. As always, give the full episode a listen and share your thoughts with us.

Happy investing!