When you think about “personal finance,” what comes to mind? Most people automatically think about financial strategies, like investing or saving for retirement. But effective financial management isn’t just about these tactical actions. There’s another crucial part: mindset.

Your financial mindset involves how you think and feel about money. Your perspective and mindset form the basis for the tactical decisions you make about your finances. An effective financial plan requires both sites: the tactics and the mindset.

When you work with a financial planner, they may spend most of the time helping you decide which tactics to use. But it’s crucial to consider the other side of the equation too. Combining tactical actions with a mindset that reflects your values and goals is the key to the best financial plans. 

Strategies and tactics

Financial tactics are the things you do with your money: saving, investing, spending, and giving. Managing your money effectively involves understanding the available strategies and choosing which ones are right for your unique situation.

Here are some examples of financial tactics:

  • Making and following a budget
  • Investing in stocks and bonds
  • Contributing to a 401(k)
  • Financing/refinancing your home
  • Converting a traditional retirement plan to a Roth IRA
  • Negotiating a salary or job offer

There are countless different strategies, all designed to make the best use of the available funds. Working with a financial planner often involves discussing tactics and deciding which ones to use. Not every strategy is right for every person – you need to determine which financial tactics fit your life best.

Mindsets and behaviors

Knowing what you can do with your money is important, but it’s not enough by itself. You also need to know how to implement those strategies into your life. And to do that, it’s important to clarify the perspectives that support those tactics.

For example, if you decide you want to create a budget, it’s vital to be clear on why you’re doing so. Do you want to save more money every month? Are you trying to pay off debt? Do you feel disconnected from your money and unsure of where your paychecks go each month?

Those are the kinds of questions that can form the basis of your financial mindset. And once you know the answers, you’ll have a much better idea of why you’re creating a budget, which gives you a greater chance of sticking to it.

Another way to look at your financial mindset is to think in terms of a “money script.” Your money script is your core belief or approach to finances. 

Money scripts can be positive: “It’s all going to work out,” or, “Hard work will give me financial freedom.” They can also be negative: “I’ll never have enough,” or “I need to work harder,” or “I’m not sure I’ll be able to retire.”

Your financial mindset can even be as simple as feeling like money is “easy” or “hard.” Figuring out your script gives you more insight into how you relate to money so you can use that knowledge to drive your financial strategies.

What is your relationship with money?

When you think about your money and your perspective on finances, what emotions do you feel? Is money always a stressful and overwhelming topic? Or do you feel like you can enjoy your money? Identifying those emotions can help you decide whether you want to try to change your financial strategies. 

When your financial tactics don’t align with your values, money can be a source of frustration and sadness. But if you can implement strategies based on your priorities, you’re more likely to find fulfillment – and even joy – in your finances.

Pairing your financial tactics with your money mindset

You can learn about strategies for managing and growing wealth from financial experts, books, and websites. But before effectively implementing those tactics, it’s essential to consider the other part of the financial equation: your mindset.

Ready for more practical and encouraging financial advice? Don’t miss our brand-new podcast: Everyday Money with Hannah Moore! In each episode, Everyday Money founder and Certified Financial Planner™ Hannah Moore offers expert advice without judgment or shame. 

The Everyday Money with Hannah Moore podcast covers many financial topics in a quick, interesting format. Tune in to learn about everything from investing in the stock market to building generational wealth to identifying your money values. Listen and subscribe here!