With the prospect of a potential recession on the horizon, there is a lot of worry and fear about what the future holds for our businesses and our personal finances. Some of those feelings might come from memories of past financial experiences and how they affected your life.
If you remember how things were in 2008, you might be assuming that things will be as bad or worse than they were then. While past experiences can help us set expectations, they can also hinder us from looking for solutions or trying different things to manage stress and uncertainty.
Past Financial Experiences Have Long Term Effects
Our financial experiences shape how we relate to and manage our finances. If you grew up in a household where money was always tight, you might deal with a scarcity mindset in adulthood. If you grow up and money is a constant source of stress, then the prospect of an economic event can have you worrying about every aspect of your finances because you know how bad it feels not to have enough.
How you dealt with the economic crisis of 2008 will likely determine how you respond to the current economic climate. If you made adjustments and weathered the storm, you will probably look ahead with worry, but you will feel confident that you can make a plan and make it through.
If 2008 was stressful and chaotic, and you remember sleepless nights and constant worry, you are probably in panic mode. While it is understandable that you would be scared and worried, these emotions won’t help you. They can hinder you from taking action. When times are tough, being stuck in fear will not serve you, so you may want to examine what your past financial experiences are doing to your current mindset.
Our past financial experiences are the road map for how we will handle future financial stress. If you know that you will need a new roadmap, now is the time to get to work making improvements.
Identify Your Money Mindset
Your money mindset is the set of beliefs that you have developed throughout your life about money, wealth, and success. Many business owners have money mindset issues that affect their business success that they might not even be aware exist. Your money mindset developed through your experiences with money and success. Growing up in a home where money was always tight and stress was high when dealing with finances would lead to money mindset issues centered around scarcity.
How your parents, caregivers, and loved ones spoke and acted about money contributes to your beliefs as an adult. While it can be hard to change your money mindset, it is worth the work. I know this sounds “woo-woo,” but a healthy perspective helps attract money and success, while other mindsets can repel them. Two of the most common types of money mindset are:
Scarcity Mindset: A belief that money is limited and will run out, or there will never be enough. A scarcity mindset can also apply to clients in your business or how you view other companies in your niche. For example, there are not enough clients to go around. So, if a competitor books a client, you are failing.
Abundance Mindset: A belief that there is unlimited wealth and opportunities. You believe there is enough for everyone, and you can and will bring enough money into your business to reach your personal and professional goals.
Signs of Negative Money Mindset
- Fear or anxiety around money
- Feeling that you have a lack of control over your finances
- Negative thoughts about money
- Negative thoughts about how you deal with money
- Procrastinating or ignoring money issues
Signs of a Positive Money Mindset
- You recognize that money is abundant, and what you need can be achieved.
- You have an optimistic attitude when facing uncertainty
- You are in control of your behaviors and the decisions you make.
- You have a solutions-oriented attitude
- You are willing to tackle money problems head-on
How to Change Your Money Mindset
First, take an honest assessment of your current money mindset. Think about the examples you had growing up and decide what you want to replicate and what you want to change. Understand that everyone has stories they tell themselves about money and success.
I also recommend starting a journaling practice around your money mindset. Journaling helps you get your thoughts out of your head and realistically deal with them. You can read about journaling here.
Here, you can also read our full post about money mindset and financial trauma.
How to Learn from Past Financial Experiences
For many business owners, the experiences of 2007-2009 are more than a money mindset; it is financial trauma. That period was rough for personal and business finances, and it can be tough to revisit those memories. So, those experiences potentially coming again can be very anxiety-inducing.
The best way to set yourself up for success is to learn from the past, work through those experiences, and plan for the future. There are ways to unpack the situation and establish a healthier relationship with money and the uncertainty of the economy.
As mentioned above, journaling is a great place to start unpacking your thoughts and feelings. You can also write out all of your successes and lessons learned from your financial past. Often, we focus on all the negatives and do not spend time celebrating the successes or lessons learned. Revisiting your past experiences is a great way to assess what went wrong and what went right.
If your business had to cut overhead costs to stay afloat, right now is an excellent time to assess where you can trim expenses if need be. If you have a plan for the worst-case scenario, it feels better than being reactionary and making a rushed decision.
If revisiting past financial situations is stressful or painful, you can always enlist the services of a financial therapist. Financial therapy is a growing profession that combines a licensed therapist’s expertise with a certified financial planner’s skills in money management and economic behavioral changes. Sometimes both of these skills can be found in one provider, but if not, consider starting with therapy first. Your money mindset might run deeper than you think. Unpacking everything with a professional can be very beneficial.
Your financial story has a lot of influence over your actions and handling of financial stress, but you’ve got this! Get in touch if you want help with your business finances as we navigate these uncertain times! We can help you make a financial plan that works for you and your business.