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One of the principal reasons many people struggle with their finances for years and years and sometimes their entire lives is their money mindset.
Many people learn their money habits from their family, and for that reason, sometimes they hold the same beliefs as their parents. Because of financial difficulties or financial disorders in their young lives, they get a wrong mentality that has not allowed them to grow.
Often we have money mindsets that limit our potential. Our beliefs about money often limit what we can accomplish with our finances. For this reason, here I bring you 10 mindsets that can help you build financial freedom and change the way you see the money.
The minute you become comfortable, you stop growing. Being comfortable and fearful has killed more ideas, opportunities, actions, and more growth than anything else combined. If you want to grow, you have to take risks and make mistakes. Instead of being afraid to take uncertainties, see each opportunity as a way to learn new skills.
Your comfort zone not only challenges our ability to spend smarter, but it can also affect our ability to earn more.
We tend to think about our future earning potential relative to our current salary; after all, raises are often traded as a percentage of what we currently earn. However, if we start with a low anchor, we may find ourselves stuck in a pattern of earning much less than we should.
Also, according to Forbes, employees who stay in companies longer than two years get paid 50% less:
Staying employed at the same company for over two years on average is going to make you earn less over your lifetime by about 50% or more. Keep in mind that 50% is a conservative number at the lowest end of the spectrum. This is assuming that your career is only going to last 10 years. The longer you work, the greater the difference will become over your lifetime.
Your past earnings shouldn’t dictate your knowledge, but the value of your performance today and how much that value commands in the current market.
Scientists have found that when people are allowed to connect to their future selves, they’re more likely to prepare for that future. So the more vividly you imagine your future, the more you heighten your emotional responses to that future become, and the less likely you are to discount behavior like saving or investing that will benefit you later on.
It’s not about sacrificing everything today for the sake of tomorrow, just as it’s not about saying that “you only live once” at the expense of your future. It’s about making financial decisions with equal consideration for both.
Most people are trapped in survival consciousness. They are worried, cautious, and careful with money. But another mental shift you have to make to achieve financial freedom is to stop thinking about money as a way to solve your problems, but also a way to make something big.
That means that you have to look at every new product, service, every technological market, or breakthrough as a possible opportunity to succeed in some way.
Instead of thinking about how little you have or how little you earn, start thinking about how much you want to achieve and how much you can do with what you currently have.
You cannot achieve financial freedom by playing it safe. You become financially independent by leading the game. This doesn’t mean that you risk your money or waste it in the first opportunity you see. It means that you are willing to step out of your comfort zone and try something new and different before others start trying or doing it.
Saving in a bank account monthly will not make you a millionaire. Invest wisely and use those savings to create additional forms of income will.
I had met countless people who completely changed their lives by recognizing an opportunity and taking action on it before most people even knew about it. Most of them didn’t even have capital. They just had a good idea.
When many people receive their salary, the first thing they think about is where they will spend their money this month. But saving first ensures that you will keep a portion of your income every month.
W. Clement Stone, a businessman, philanthropist, and New Thought self-help book author, said that,
“If you cannot save money, the seeds of greatness are not in you.”
We grow from a young age spending everything we can get and more. The average married couple in America spends 110% of their income, making up the difference with credit and loans. With this attitude and approach to life, especially when it becomes a habit, your ability to save, accumulate and acquire wealth is almost nothing.
When you save first, you put your mind to think that accumulating is much more important than spending, so when you want to buy something unnecessary, the first thing you will think is if it is worth sacrificing money that you can save and invest for that thing.
Financial freedom requires you to change your thinking from wish and hope to think and do. Desires without action only serve to make us believe that we cannot achieve something. When you put your mind that something you want is a goal, instead of a wish, there are more possibilities to achieve it.
When you program your mind that you can achieve everything you set your mind to, it will begin to think of solutions and actions to achieve it, instead of just thinking about the desire and the result.
If you don’t learn how to drive properly, you will never get a license. It is not safe for someone who doesn’t know basic rules to ride in a vehicle. The same goes for money.
If you don’t know how money works, you will never make money work for you. For this reason, the first thing you need to do if you want to grow your wealth is to learn everything you can about your money.
I know people who do not know how taxes work or why companies reduce certain amounts of their salary. I always wonder how they know that they are not being scammed if they do not care about what the companies are using their money on.
Financial education enables people to visualize their opportunities better, make smart decisions, know where to get help and take action to resolve conflicts.
The belief that you don’t have enough can induce a kind of stress and anxiety that hinders your ability to focus and work toward long-term financial goals. When you work under a scarcity mindset, your mental bandwidth is consumed by your immediate needs, and long-term plans fall by the wayside.
The scarcity mentality results in poor long-term decision-making. So even if you don’t live in poverty today, the daily anxiety surrounding common financial stressors, like paying off debt or short-term savings goals, may be contributing to a scarcity mindset that affects your ability to make smart financial decisions.
“Be thankful for what you have. You’ll end up having more. If you concentrate on what you don’t have, you will never ever have enough.” — Oprah
Bridget Casey, in her article “Your Scarcity Mindset is Ruining Your Finances,” says:
Maybe you’re not poor. You might be earning enough to pay your rent and buy food, but chances are that if you are worried about debt and saving on a daily basis, it is negatively affecting your ability to make decisions.
If you operate from a position of abundance with your finances, you believe that there will always be enough, or even more than you need. To push back against the belief that you don’t have or will never have enough, start fostering the belief that you do or will have enough.
Loss aversion doesn’t just play out in financial goal setting and budgeting; it’s also a major player in investment decisions.
The tendency to want to sell off stocks when their value is dropping, even if they’re a good long-term investment, is triggered by loss aversion. To succeed as a long-term investor, you have to fight against this natural tendency.
For this, I use the “big risk, low investment” mindset. This is basically putting money that I don’t mind losing in a high-risk opportunity, like 1% of my cash flow. In this way, I don’t lose the chance to earn money, and I don’t care about it.
You can buy a volatile asset such as Bitcoin when you know how much money you can lose. For example, you can choose to buy only $50 in Bitcoin. This means that you can take advantage of the benefits without exposing yourself to many risks if the price of Bitcoin decreases.
Ramsey Solutions conducted a study of over 10,000 millionaires, and one of the most interesting statistics was that 97% of millionaires believed that they could become millionaires.
They believed that it was within their control. They believed they held the key to their success. And having that mindset, not an inheritance, fancy education, or wealthy parents, is exactly what caused them to succeed.
“Whether you believe you can do a thing or not, you are right.”— Henry Ford
What you believe will drive your behavior, which will lead to positive results. So if you are certain that something will happen, it is a matter of time for you to achieve it if you are doing the right steps.