3 Things That Drive Your Money Mindset

Money is not the root of all evil, but the love of money is.

Like it or not, money buys you time and options. And I don’t mean luxuries. Imagine you have food poisoning, the public hospitals are all crowded and you need immediate attention, you can choose to go a private hospital which has shorter waiting time. Or have you ever had dreams sacrificed to fulfil the dream of your loved ones?

The list could go on. So how financially savvy are you? What’s your money mindset?

As a marketer I had done consumer insights and interviews at design thinking workshops. While life stage is always used to identify consumers’ financial needs, but their financial needs are largely shaped by their money mindset. So what influence their money mindset? Here’s 3 things that will drive consumers’ mindset and attitude towards MONEY:

(1) VALUE SYSTEM

Values are shaped by one’s upbringing and exposure in the growing years. If you come from a family of savers or investors, naturally your perspective on money is very different from someone who believes in living it up.

Your value will determine your balance sheet surplus or deficit. Some of you may choose to stay in a landed property in prime district and travel on economy. For some, you may prefer to stay in a humble abode, leaving you with more cash to buy “experiences” such as going on a culinary tour in Italy or travel on business class for every holiday.You risk appetite is also influenced by your value system.

A Financial Advisor will need to understand the customer’s value system to be able to construct a meaningful financial portfolio and win over the customer.

(2) FINANCIAL QUOTIENT

The best gift you can give yourself is to gain financial literacy so that you can steer the financial conversations with your Advisors or Bank Relationship Manager and be empowered to ask the right questions. Today, there is plenty of literature and content on the internet that provides you a good grasp of financial concepts.

Here’s a checklist of numbers and ratios you need to be familiar with

o  Assets & Liabilities

o  Income & Expense

o  Basic Liquidity ratio = Cash/Mthly Expenses (Measures the number of months you can sustain yourself if all existing sources of income are lost temporarily)

o  Total Debt Service Ratio = Total Annual Debt Repayments/Annual Take home income (Measures your ability to maintain your debt obligations comfortably)

o  Savings ratio = Savings/Gross income (Measures your savings rate)

 These ratios will help set the context for developing your financial strategy along with your defined goals and time horizon.

o  CPF rules and National Health Plans – https://www.moh.gov.sg/careshieldlife/about-careshield-life

o  The different financial asset classes and category of insurance solutions https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/asset-class/

By increasing your financial quotient, you gain confidence in engaging the Advisor and RM. This in turn will motivate you to take a proactive role in managing and growing your finances.

(3) MOTIVATION

All of us have a financial destination or financial pit stop at various life milestones. Your motivation level (on a scale of 1 to 10 – Most) has a big bearing on your money mindset. If you are highly motivated to take a year off work (in 3 years) to travel the world your money mindset will be on steroids, with a more aggressive financial strategy. And if you want to ensure you give your kids a head start in life, your money mindset would be different.

In writing this, I have found that these 3 things have greatly influenced my money mindset which in turn shaped how I manage and construct my financial portfolio.

10 years ago as I embarked on a banking career, I completed 4 modules of Certified Financial Planner (CFP) Program with the intent to improve my financial literacy so that I could have intelligent conversations with colleagues. I did have meaningful conversations.. but with my Advisor and RM on my MONEY. Today, I keep an eye on the larger economic landscape and world events so that I can take proactive step to engage my RM to calibrate my financial strategy.

Remember – money is not the root of all evil.

There is no harm to living modestly, but there’s nothing gracious about being broke. So relook at your values, financial quotient and motivation. Start adopting a positive money mindset.

Money buys you time and options.