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Why Your Attitude Towards Money Matters

And how it affects our financial decisions

BY Beryl Karimi

May 16, 2023, 11:47 AM

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Money is a fundamental part of our lives, yet our relationship with it is often faced with complex emotions such as stress, nervousness, fear and anxiety. We are always thinking about it.

The way we think and feel about money can have a significant impact on our financial decisions, from how we spend it and save it, to how we invest and plan for it in the future.

We will explore the psychology of money and how it can affect your financial decisions now and in the future.

Your Attitude Towards Money Matters.

Your attitude toward money heavily influences your financial decisions. It is often shaped by a variety of factors including your upbringing, cultural background and your personal experiences with money and those around you.

Someone who grew up in a family that struggled with finances and has had countless struggles with money may have a negative attitude, always feeling stressed and anxious about it. They tend to have a scarcity mindset and believe they are always going to have limited resources despite the amount of money they acquire.

Contrary to that, those who grew up in a more financially stable environment, where there were no issues or struggles with money, will have a more positive attitude and mindset toward money.  

Your Beliefs About Money.

Your beliefs can affect everything you know about money from your spending habits to your investment strategies. Those that believe that any amount of money they receive is important for their future are bound to put that money into investment plans including stocks, and money market funds so that they can enjoy it in the future. 

Those who believe that money is the key to happiness are more likely to spend it on material possessions or spend it on a trip to one of their favourite destinations. It all comes down to belief at the end of the day.

The Phenomenon Of Mental Accounting.

Mental accounting is the tendency to mentally sort money into separate accounts which affects the way we think about our spending, even if the money has the same value.

You might be more willing to spend money you receive as a gift than the money you earn through doing your job or a hard task. It also comes down to how you view money. 

If it is something that you have received without having to do something physically or mentally tasking you might feel more inclined to spend it more than money earned through your hard work.

Cognitive Biases.

Cognitive biases also play a role when it comes to making decisions regarding our financial situations. Cognitive biases are mental shortcuts or simplifications that our brains use to process information through a filter of personal experience and preferences. These mental shortcuts can lead you to make irrational decisions. 

For instance, you might decide to take out a new car loan because everyone is doing it instead of taking your time, using other means of transport while saving up some money, and waiting until you have saved enough money to get one.
The psychology of money plays a significant role in how you make financial decisions. By taking time to learn how you view money depending on your upbringing and your current standard of living you can learn how to spend, save and invest.

By understanding your physiological relationship with money, you can make more informed financial decisions and create a more positive financial future for yourself and your loved ones as well.

Read More: Easy Ways You Can Make Money