Podcast Episode 278: Money Mental Blocks – How to Break Free and Achieve Your Financial Goals
Created: November 11, 2022
Modified: November 7, 2022

Podcast Episode 278: Money Mental Blocks – How to Break Free and Achieve Your Financial Goals

What You’ll Learn:
Do you find yourself struggling to save money? Do you feel like you are constantly at war with your finances? If so, you are not alone. A lot of people have a hard time managing their money because they let mental blocks get in the way. In this podcast, we will discuss some of the most common mental blocks when it comes to money and how to break free from them.

Do you find yourself struggling to save money? Do you feel like you are constantly at war with your finances? If so, you are not alone. A lot of people have a hard time managing their money because they let mental blocks get in the way. In this podcast, we will discuss some of the most common mental blocks when it comes to money and how to break free from them.

Let’s start with one you might not have heard of before: the IKEA effect. This mental block happens when we place a higher value on things we partially created ourselves, like the furniture we put together from IKEA. By doing it on our own, we create and attach personal value through the effort we put in. With money, this happens when people become reluctant to abandon a strategy that isn’t working, but we value it more than we should because we came up with it on our own. Don’t let pride keep you from doing what’s needed.

The next mental block might seem positive but the effects can be negative, and that’s extreme optimism. This is when we believe that everything will work out in our favor, no matter what. So, even if our financial situation isn’t ideal, we tell ourselves things like “I’ll make more money soon” or “The stock market always goes up in the long run.” While it’s important to be optimistic, blind faith is not going to help. It’s great to hope for the best-case scenario to come true, but we have to plan for the worst.

On the other side is extreme pessimism, which might be more dangerous. People often make things much harder than it needs to be when they have this mental block. So, if our financial situation isn’t ideal, we tell ourselves things like “I’ll never be able to retire” or “The stock market is going to crash soon.” This kind of thinking can lead us to make poor decisions out of fear. We might sell investments that are doing well or we might avoid investing altogether.

Alright, this next one might not be one you’ve heard of, but bike shedding or the law of triviality happens when we pay attention to the small things rather than the larger problems. This can happen with money when we get caught up in the details and lose sight of the bigger financial picture. We might obsess over finding the perfect financial planner or the perfect investment strategy, but in reality, those things don’t matter nearly as much as we think they do. Let’s focus on prioritizing the things that are truly important and can benefit us over the long-term.

The last mental block is one that every person has to overcome, which is status quo bias. This is when we want to maintain the status quo or keep things the way they are because it’s comfortable. With money, this can look like not saving for retirement because it’s too far away or avoiding financial planning because it’s overwhelming. But if we don’t make changes now or have the tough conversations, we’ll never get to where we want to be.

If you’re struggling with any of these mental blocks, don’t worry. You can overcome them by being honest with yourself, getting help from a financial planner, and staying committed to your financial goals. We might not hit on each of these topics during the Money Map review process, but it’s the best place to begin the conversation about your financial future.

Here’s what we discuss in this episode:

1:37 – The IKEA Effect

4:35 – Extreme optimism

6:10 – Extreme pessimism

7:45 – Bike shedding

10:13 – The Status Quo Bias 

12:05 – How the Money Map review process helps this

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