Connection Between Critical Thinking and Money

In any society, specifically a capitalist one such as that of the United States, money has an overwhelming importance in one’s everyday life. Being the only physical currency in the country, money is the most commonly used means of trading among people. Yet, despite this importance, it is apparent that several people are careless or do not know how to handle their money. This is especially common among younger people. Lack of money management skills is a massive hinderance for anybody, and can lead to enormous issues, such as bankruptcy.

Because of this, it is not uncommon to see someone making a six-figure salary suddenly go broke. To avoid these issues, one must learn to think critically, which will aid them in money usage decisions. I contend that through the utilization of critical thinking, one can develop a proficient skillset to manage their money successfully.

The process of managing one’s money is no simple task, however, thinking critically will make the task much less arduous.

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Generally, money management is an autonomous task, as the money only belongs to that person (unless the person is married, then the process will be cooperative). Because of this, one must compel themselves to become a critical thinker. Critical thinking is a phenomenon in which people can use their brains in a much more logical and beneficial manner, generally making their life easier. One of the simplest aspects of critical thinking, honest reflectiveness, is arguably the most vital. Honest reflectiveness is plainly the task of thinking to one’s self, reviewing their thoughts and possible decisions (Paul and Elder 2006).

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Engaging in honest reflecting is a jumpstart towards becoming a critical thinker, the other components will follow. Within one’s money management, honest reflectiveness will provide an immediate impact. Using this process is likely to help one avoid making impulse purchases (one of the biggest detriments to proper money management), initiating the development of one’s self-awareness. Maintaining self-awareness is one of the several necessities of proper money management and is the initial one to emerge through the process of critical thinking.

Realistically, there is no method to be a “perfect” money manager, but there are standards that one should adhere to if they aim to manage their money with rationality. These standards in themselves are skills, and they meld thoroughly with the components of critical thinking. The standards are: self-awareness, self-discipline, organization, adamance, and tenacity. On a basic level, these standards are nothing more than mild instruction to manage money properly. However, if one enables themselves to think critically, the standards will become much more refined and truly serve their purpose.

The concept of self-awareness is deeply interconnected to the realm of critical thinking. Self-awareness itself is considered a major component of critical thinking. It is the ability to think for one’s self and recognize the situation that one it is, preferably from various points of view and free of bias, if possible. However, performing this act itself does not immediately make one self-aware. Self-awareness must be learned, but it cannot be taught. There is no specific procedure for one to become self-aware, as all peoples’ minds function differently. The most common way to train one’s self to be self-aware is to take time out of every day to think over the events that took place, evaluating them, and asking one’s self if they handled the situations properly and logically (Paul and Elder 2006). This practice also helps prevent one from engaging in black-or-white thinking, which is when every situation is viewed with only two opposing sides (Paul and Elder 2006). Avoiding black-or-white thinking is a crucial aspect of self-awareness because it enables one to view any situation from various points of view. Once one becomes self-aware, the ability can be applied in situations in which they use their funds. Self-awareness is critical to money management, as it empowers one to prevent injurious situations. If one is self-aware, they understand when they are at their worst and what issues or situations will be disadvantageous to them. This skill is vital as it will allow them to avoid money’s greatest enemy: impulse purchases. Impulse purchases are a common problem for all people, whether it be because of fantastic marketing or a simple interest or desire. Impulse purchases take place because the human mind instinctively assigns positive emotions and thoughts to things that a person desires, leading to an immediate, but temporary moment of joy (Paul and Elder 2006). Being self-aware will allow one to recognize if the product that they are purchasing is a necessity, or simply something that they want. Another extremely common situation in which self-awareness is highly valuable is when one is dealing with a salesman. Obviously, a salesman’s occupation is entirely designated to convince one to purchase a product, but one can prevent this persuasion through their critical thinking. If one were to be shopping for a car, a salesman will always approach them, and generally will attempt to coerce the person in to buying the car they are viewing, or even a higher-end, more expensive model. Immediately, the self-aware person will ask themselves if the higher-end vehicle is something that they need, or if the more basic version will be just as suitable. They will easily see through the salesman’s antics and decide upon the car that makes the most sense to them, as they are already aware of what they were looking for. Situations such as this usually present crucial faults in one’s money management, as the common person is much more likely to be convinced by the salesman, therefore spending much more money than they needed to. However, a self-aware person avoids this issue because of their skilled thinking, which enables them to save their money and purchase the product that they intended, which results in both satisfaction and proper money management. Fundamentally, self-awareness is one of the most prevalent skills needed for proper money management, and through the use of critical thinking, this skill will become refined and irreplaceable.

The three basic functions of the human mind are thinking, feeling, and wanting (Paul and Elder 2006). When it comes to money, wanting many times wipes away the other two functions, becoming quite overwhelming. While the issues that stem from one’s desires can be prevented mentally through self-awareness, they also need to be limited physically. This can be done through the process of self-discipline. Essentially, self-discipline is a process in which one places a limit upon themselves in any given situation. This is a skill that lies on a spectrum, as it is nearly impossible to completely limit anyone at anything (Duckworth 2009). The entire construction of self-discipline is based upon integrity, as it requires one to be completely true to one’s self’s thinking and standards (Paul and Elder 2006). Because of this, one’s self-discipline is developed in the exact same manner as one’s self-awareness, making the two skills greatly intertwined. In fact, the ideas are the same up until the point at which one finally recognizes their weaknesses. At this point, self-discipline branches off into its own world, being the physical counterpart to self-awareness’ mental composition. Self-discipline essentially sets limits upon a subject, so their weaknesses do not get taken advantage of. In the world of currency, the most common method of self-discipline is setting a budget upon one’s self. A budget is a limit on the amount of money that a person will spend, whether it be because they want to limit themselves or because they need to. This is a quick and easy way to prevent overspending, provided that the budget has been thoughtfully and logically developed. This shows that although self-discipline is a much simpler process than self-awareness, it is just as effective. Together, these skills can prove to be invaluable, especially when it comes to money-related activities. If a person is both self-aware and self-disciplined, they will be able to set themselves on a variety of budgets that apply to various categories of products. This will allow the person to acquire more products, while saving more money than if they were on a singular set budget. Setting a budget is one of the most commonly used tactics within the realm of money management, and through the use of self-discipline, one can create and utilize a budget to their advantage.

One of the most components of anything is organization, and this proves extremely true when it comes to money management. Being organized is a skill that will allow one to have easy access to any financial information that they may need at any time and is vital for maintaining a consistent process of one’s money management. Becoming organized for some people can be as simple as utilizing folders, others may need an entire drawer full of binders and tabs and such. Either way, any process in which one can identify any personal financial information that they may need, whenever they need it, is highly valuable. Organization is crucial in the world of money because it helps allot funds into proper locations for when they will be used. This is the reason that it is quite common for people to possess a variety of bank accounts. Generally, one will posses at least a savings account and a checking account. Their checking account is the money that the person intends to spend, usually for their personal usage or consumption within a briefer timeframe. Having multiple bank accounts is one of the many forms of organization that one can possess over their funds and is the most prevalent as well. Organization is also extremely beneficial because it will help one save their money. Having separate bank accounts makes it easier to save money, specifically in a savings account, in which money will accrue interest for the time that it has spent in the bank. But organization at home is extremely useful as well. If one if organized, they are much less likely to pay their bills after they are due. If one happens to pay their bills late, they will be charged various fees that are often times very extreme. Preventing this will save one a great deal of money. Advantages such as these seem invaluable, which can be an issue if someone truly finds themselves unable to become organized. However, in the present day this is no longer a problem, as there are now endless ways to organize yourself. Specifically, nowadays there are various programs online that will hold and organize your information for you, which is extremely useful even if a person is organized already. It may appear that the skill of organization is unrelated to critical thinking, but that is completely false. The importance of critical thinking within organization is simply different than within the other aspects of money management, as critical thinking does not lie directly within organization itself. Critical thinking is not something that is required to develop organizational skills, rather, organization provides great aid to critical thinking. This is present within the fact that organization relives stress and worry from a person. One will no longer have to scramble and search for bank statements or checkbooks at a sudden time if they are organized. This allows one’s brain to be much less strenuous, giving it the ability to focus more on the other skills required for successful money management. While organization’s benefit to one’s critical thinking is subconscious, it is just as vital as the others.

As previously stated, the process of money management is mostly autonomous, meaning that other people generally should not have any involvement within it. However, it is extremely common for one to feel personally attacked by another’s opinion, which can become a massive flaw to how someone handles their money. This brings forward the next skill of proper money management, adamance. The definition of adamance is something that is hard and unyielding, or too hard to cut or break into pieces, like a diamond. When applied to humans, a strong analogy is formed. Comparing a human to a diamond acknowledges the fact that everyone is special, and that they can be their own person. Saying that they are unyielding, however, is more literal, and can be applied within the world of money. Adamance is a trait that is most important for people who do not possess a large amount of wealth. Essentially, the concept is that one cannot view their financial situation as a weakness, unless they are completely self-aware and are able to completely control themselves. Adamance goes hand in hand with an important element of critical thinking: perseverance. People who are within these difficult financial situations are able to persevere, working through the complexities that they are presented despite the frustrations that arise (Paul and Elder 2006). Essentially, adamancy requires self-awareness. Being able to recognize your financial situation as a weakness will prevent the downfall of bank accounts: materialism. Materialism is the idea that one’s possessions make up the person that they are, or that the richer the person appears, the better the person they are (Madden 2013). Materialism is a massive issue in present day, and it stems from people who are unable to think critically. These people live their lives on the basis of intellectual arrogance, thinking that they know more than they do know and making negative judgements about all people who do not adhere to standard that they desire (Paul and Elder 2006). If these people’s opinions reach one who is vulnerable to their effects, it is quite likely that they will go out and spend freely upon items to make themselves appear richer, or what they think is more desirable (Madden 2013). Not only does this provide an extremely false view into one’s life, it is an enormous waste of money, especially for one who is already in a difficult financial situation. If one is able to be adamant, they are able to avoid the problems that arise form these non-critical thinkers, persevering through the frustrations that arise. These people are in a constant state of intellectual humility, knowing that one’s appearance and possessions do not make up a person, as they do not know more than they are able to see (Paul and Elder 2006). Because of this, adamancy is an invaluable asset to anyone while they are handling their money.

The most difficult part within managing one’s money is the process of actual decision making. Trusting one’s self in their financial decisions is very important when managing one’s funds. To do this, one must develop the final skill for proper money management: tenacity. tenacity usually is the hardest skill for a person to grasp, especially when they are handling money. In almost any given situation, one will be second-guessing themselves after making a purchase, especially if the product acquired was quite expensive. This reaction is a completely normal process and it adheres to the components of critical thinking. Questioning everything is critical thinking’s most basic form (Paul and Elder 2006). However, this can be a very unhealthy process. If one lacks all confidence in the decisions that they are making, their mind will become extremely strenuous (Walden 1997). This issue creates an overwhelming sense of uncertainty in one’s life, which will spread to other non-financial situations. This is an issue that must be prevented. To develop tenacity, one must continue to think critically as they have previously, but avoid the process of over-analyzation. If one begins to over-analyze situations, they will lack confidence in their decisions and create the brain strain as described previously. To avoid over-analyzation, they must not apply logic superficially. One must realize that not every situation that they are presented is scientific, and that there is not always a right or wrong. This again ties in the idea of black-or-white thinking, the enemy of critical thinking (Paul and Elder 2006). Once these traps are avoided, and one is able to develop confidence, they no longer will have to be afraid to spend their money. This does not mean that they should go around spending their money irresponsibly, it allows them to have confidence in their purchases, as long as they are relevant to them. In addition, having confidence provides similar benefits to organizational skills, in that they relive pressure off one’s brain, allowing them to think critically within other areas. Tenacity is an extremely important skill to have and is often times the key component of successfully managing one’s funds.

All of the skills presented above recognize the requirements needed to manage one’s personal fund properly. These skills can be developed through the usage of critical thinking and will grow infinitely stronger over time. Being able to manage one’s funds properly is an extremely important task that all people should strive to accomplish, for if they are unable to do so, they will be losing countless dollars throughout their lives. It is evident that not all people will be able to manage their funds properly, as not all people buy into the idea of critical thinking. Unfortunately for these people, without critical thinking, they will never be able to reach the money management skillset that they desire. This is an issue for a large portion of the United States population, as critical thinking is not as much of a commonly accepted idea as one might expect, given the immense benefits that it presents.

Successfully managing money is a challenge that many people are presented with throughout their lives. Nobody is able to manage their money perfectly (everybody is prone to a little bit of free spending) but being able to do so logically is extremely important to living a successful life. Proper money management will lead to one living their life with significantly less stress, more happiness, and more money than they would have had otherwise. One cannot reach this place in their life without extensive critical thinking skills, which are important in all situations, not just money management. Through the process of critical thinking, one can develop a skillset that is strong and coordinated and apply it to manage their money properly. Self-awareness, self-discipline, organization, adamancy, and tenacity bind together to form this skillset, and will forever be the standard within the realm of successful money management.

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Connection Between Critical Thinking and Money. (2021, Apr 02). Retrieved from

Connection Between Critical Thinking and Money

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