One of the most common responses to negative money situations is irrational thought patterns. Often, we aren’t fully aware of these money beliefs or the significant effects they have in life.
By noticing your thoughts and taking a more realistic view of your finances, however, you can challenge and change your thinking. And by extension, you can change the way you manage your money.
4 common irrational money thoughts
The field of cognitive behavioral therapy (CBT) highlights how irrational thinking can make you feel anxious or stressed. These irrational thoughts also are called cognitive distortions or thinking errors.
When you treat such thoughts as if they were true, they can contribute to depression or anxiety, and weaken your ability to make positive behavioral changes. They also can make your finances or student debt feel out of control and less manageable than they really are.
When you challenge those thoughts, however, you can become empowered to see your financial situation clearly. You’ll be able to make money decisions that match your values and are based on logic — not on automatic emotional responses.
Here are four common irrational thoughts that almost everyone has about money, and tips on how you can start to change the patterns.
1. ‘Only bad things happen with my money’
A common pattern of irrational thinking is mental filtering, in which you ignore or forget about the positives and focus solely on the negatives or bad things instead. When it comes to money, our minds automatically tally up mistakes or misfortunes and forget about good luck or positive progress.
For example, you might beat yourself up for going over your budget by $20. “I keep going over my budget, I’ll never get the hang of this,” you think.
But consider the shape your finances were in before you started following a budget — chances are you’re spending far less now than you were before. Instead of berating yourself for going over the limit, you might want to think: “Wow, I’m sticking to my budget within $20. It might not be perfect, but I’m getting better at budgeting each month.”
2. ‘This money setback is a complete catastrophe’
Too often, we might respond to setbacks by blowing them out of proportion and turning them into a crisis or catastrophe in our minds. Instead of seeing an overdraft fee as a minor and fixable mistake, for example, you might think, “There goes my budget — now I’ll never get back on track.”
This thinking error is called “catastrophizing.” In this process, we get caught up in financial anxiety and stress, and feel like the money problems we face are too big to solve.
To combat catastrophizing, put your problem in perspective. Maybe an overdraft fee put you over budget, but it’s a few dollars. Instead of getting stuck in disaster mode, calm down and remind yourself of what you can do to make up for a money mistake.
3. ‘I feel like a financial failure, so I am’
The above thought is an example of “emotional reasoning,” when we take an emotion or feeling as fact. For example, you might feel embarrassed about your student debt, so you assume that it is, in fact, something to be ashamed of.
Remind yourself that your feelings are not facts, but often are temporary reactions to your current situation. Is it possible that your feelings don’t reflect the reality of your situation?
For example, you might feel like having student loans is embarrassing and you’re alone in dealing with it. But the truth is student debt is a common thing faced by about 44 million Americans. Or, you might feel like you’re a financial failure after a discouraging week, whereas in fact, you’re trying hard and likely succeeding in many ways.
4. ‘I should have a better financial situation by now’
How often do you tell yourself what you should be doing? These “should” statements are a cognitive distortion — and on second look, they aren’t always true. “I should be closer to paying off my debt by now,” you might think. Or, “I thought I’d own my own house by now.”
Instead, think carefully about what’s beneficial for you to do to improve your financial situation. Notice if the action you think you should take is truly important for your well-being or an expectation someone else set for you. In each situation, decide what’s best for yourself at the moment.
How to change your irrational money thoughts
When you use logic and evidence to challenge irrational thoughts, it becomes easier to put yourself back in control of your mind and money. Here are some steps that can help you do so.
- Pay attention to your thoughts. Sometimes, irrational thoughts can pass so quickly or are so automatic that we barely notice them. If you start becoming more mindful with money, you might notice when you get stuck on unhelpful or erroneous ideas.
- Challenge your own thinking. Remind yourself that thoughts and feelings might not be facts and don’t reflect your financial reality accurately. As you recognize your pattern of irrational thinking, consider alternative ways of viewing yourself or your money situation.
- Look for evidence. Irrational thoughts are irrational because they contradict what’s actually happening, or they fail to account for the whole context of your financial situation. When you notice an irrational thought, look for evidence that could disprove it. Consider whether thinking this way is helping or holding you back.
- Practice self-compassion. It’s important to hold yourself accountable, but that needs to be balanced with compassion for yourself. Resist the urge to jump to self-judgment. Practice healthy self-care and give yourself permission to make some money mistakes occasionally.
- Seek help from a licensed mental health professional. Some people can get the best results if they work with a licensed mental health therapist or counselor to apply therapeutic techniques to improve their mental, emotional, and financial wellness.
It’s important to keep in mind that change is hard and most of the progress in life is not linear. Everyone makes money mistakes, encounters setbacks, or has bad habits that are difficult to shake.
By cultivating healthier thoughts about our money, we can set ourselves up to make better financial choices and more effectively deal with stress.
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