If your business seems stuck in a rut or continuously meets a financial roadblock, the issue could be more in your head than in your pocket. And the good news? It can be resolved.
Why do some people seem to strike it rich overnight, while others continue to struggle, even when they have savings? How can you tackle the psychological barriers that come with money matters and alter your thinking?
What Sets the Mindset of ‘Wealthy’ People Apart From Those Considered ‘Poor’?
The ‘wealthy’ vs ‘poor’ dynamic is something that has been under the microscope for a long time. And experts have pinpointed several thought patterns that define both categories.
Those with a ‘poor’ mentality tend to dwell on the past, while those in the ‘wealthy’ category dream about the future. Those viewed as ‘poor’ often feel that their best days are behind them. They harbor regrets about lost chances and cast blame on themselves and others. They often say things like, “If only I had chosen a different college…” or “If my boss had just given me that promotion…” and so on.
In contrast, those with a ‘wealthy’ mentality realize that their best days could still be ahead of them. They can picture themselves among successful people, envision their kids getting quality education, living the life they dream of, and they genuinely believe it’s within their reach.
Surprisingly, those in the ‘wealthy’ category tend to make more mistakes, but they are quick to set new goals following a failure.
Those with a ‘poor’ mentality, however, tend to default back to poverty imagery and disaster scenarios when they face financial success or failure.
People with a ‘poor’ mentality often fear success, while those with a ‘wealthy’ mentality embrace it. Those in the ‘poor’ category have a certain trepidation towards wealth and the affluent. For example, if such a person happens to be in an upscale restaurant, they might feel physically uneasy – hot and cold flashes, an urgent need to leave. Their mind encourages them to avoid such stressful situations.
This fear of wealth is why such individuals shy away from prosperous settings. Fear is a powerful social emotion. If someone exhibits fear, we subconsciously detect it: their facial expressions, gestures, and even eye movements tell us a story. An automatic response kicks in: if someone is scared — it’s dangerous, so we better stay away.
People with a ‘wealthy’ mentality feel important and appreciated in a successful environment, even if they haven’t quite hit their desired financial mark yet. This mindset can explain the seemingly random stories of them bumping into potential partners or investors, or rapidly climbing the career ladder.
Those considered ‘poor’ are savers, while the ‘wealthy’ are earners. In the mindset of the ‘poor’, the dominant desire is to save, go for cheaper options, and avoid unnecessary expenses. But for the ‘wealthy’, the emphasis is on establishing new financial targets: their thought process isn’t about saving but about earning more to acquire what they want.
The ‘poor’ see income growth as a straight line: “The more I work, the more I earn.” So when they want something significant, they think, “How much extra will I have to work for that?!” Making such goals seem unattainable.
In the mindset of the ‘wealthy’, there’s a recognition that income can grow exponentially — the Pareto principle comes into play: 20% of efforts result in 80% of outcomes.
Interestingly, a person with a modest income now may have a ‘wealthy’ mindset — and the opposite is also true. This implies that the former has every chance of prospering, while the latter could face significant losses. This disparity becomes especially noticeable after a midlife crisis, which tends to hit around 30. By 40, some people rise and succeed, while others may find themselves slipping, regardless of their affluent family background.
So, why is it useful to know if you have a ‘poor’ or ‘wealthy’ mindset? Until a person stuck in a ‘poor’ mentality shifts their thinking, they won’t reach success, even if a windfall comes their way. For instance, studies of lottery winners showed that those with a ‘poor’ mindset ended up in an even worse financial position 5–10 years after hitting the jackpot.
Who Decided Who’s ‘Wealthy’ and Who’s ‘Poor’?
Surprisingly, we do! Our brain consists of two vital systems:
— The older limbic system, in charge of our impulses, emotions, and subconscious responses.
— The more modern cortical system, which evolved later and manages rational decisions and planning.
It’s the limbic system that carries the presets shaping our lives, even when we don’t realize it.
These presets can include:
— The belief that hard work won’t make you wealthy.
— The notion that to earn big, you must slog endlessly.
— The feeling of constant scarcity.
— The idea that money slips away like water, and so on.
These presets generally fall into two broad categories:
— The first category believes that happiness isn’t rooted in money, but in its abundance. This perspective emphasizes a life revolving around money. A person either does everything to amass as much as possible or, in contrast, feels overwhelmed and gives up, as they can’t keep pace with the demands of money.
— The second category believes that joy isn’t found in having piles of money but in having enough. This view promotes a more balanced approach: understanding that money isn’t the ultimate goal, but a tool to help accomplish their ambitions and improve their quality of life.
The article “8 Reasons To Leave Your Job… And One Reason Against!” might also be of interest to you. We recommend giving it a read.
These presets usually take root during our childhood, shaped by our parents’ attitudes towards money. As adults, we either follow their model and tweak it, or we realize we strongly disagree with that lifestyle and choose the opposite path. If positive presets were ingrained in childhood, it works in our favor. For example, a poor family might instill the importance of seeking new opportunities and persevering. When the child grows up with this mindset, they have a higher chance of succeeding.
However, the reverse could happen. For instance, a family might be well-off, but the parents are always anxious about money, continually denying themselves and their children any ‘extras,’ repeating the mantra “We can’t afford it.” As this child grows, they may adopt this negative preset and live in scarcity. Or they might revolt and impulsively spend any money they acquire — after all, it might not be there tomorrow.
So, how do these presets affect our relationship with money? Depending on our presets, we may either seek solutions to our financial troubles or get bogged down and slip into a ‘financial victim’ mindset. This distinction becomes glaringly obvious when people are sorted into financial types.
Understanding Your Financial Personality
Your financial personality plays a significant role in your relationship with money, much like it does in your interactions with people. If you bear a negative attitude towards someone, they’ll likely pick up on it eventually, and their reaction will probably mirror your negativity.
In my work, I utilize the financial personality types outlined by Scott and Bethany Palmer:
— Savers are always on the lookout for discounts and bargains, only buying what’s essential. They compromise on quality and comfort to save money. For instance, they might not use the seat warmers in their car during winter to save on energy costs. Savers seldom seek professional advice, as they view their behavioral pattern as logical and correct.
— Spenders don’t worry about price tags; if they want something, they’ll buy it. They are the ones with wardrobes filled with clothes, many of which still have price tags attached and have barely been worn. Spenders frequently seek professional help, primarily because they struggle with their money ‘slipping through their fingers.’
— Risk Takers love the new and unknown. They fill their shopping carts, not worrying about whether they can afford it. They often live from paycheck to paycheck, are attracted to loans, and may even have a propensity for gambling. Driven by the “what if it pays off” mentality, they often find themselves at financial rock bottom, their lives a rollercoaster of highs and lows.
— Security Seekers differ from Savers in that they only buy what’s familiar and understandable to them. They’re willing to spend, but they always need a safety net for those ‘rainy days.’ Strangely enough, it often feels like they’re anticipating and attracting these ‘rainy days.’ This group rarely takes risks, doesn’t set big financial goals, and seldom reaches the peak of success, since that realm feels uncertain and therefore, unsafe. This type carries a mix of ‘poor’ and ‘rich’ psychology, often driven by the inverse belief that 80% of efforts yield just 20% of results. However, when they venture out of their comfort zone, they tend to achieve notable results.
— Indifferents are unfazed by their financial state because they’re comfortable with their current situation. They wouldn’t be reading this article, and they never seek consultations. However, their partners often do, asking for help to encourage their spouses to earn more. Does the spouse want that? No, they’re quite content.
The article “10 Tips On How To Avoid Burnout” might also be of interest to you. We recommend giving it a read.
Usually, individuals have one dominant and one secondary financial personality type. A psychologically mature person wouldn’t have a combination of contrasting types, like ‘spender’ and ‘saver’ or ‘security seeker’ and ‘risk taker.’ If you currently exhibit such a combination, it’s likely one type has been influenced by your parents, and the other is your own. This situation indicates a turning point, marking the development of a psychologically mature personality.
There are no ‘good’ or ‘bad’ types, ‘right’ or ‘wrong’ ones. It’s vital to know your type to identify potential growth areas and make conscious decisions.
For instance, ‘savers’ could do with treating themselves to something special once a week, while ‘spenders’ could benefit from opening a fixed deposit that requires regular contributions.
Managing Your Money Mindset
Similar to learning to ride a bike, you can’t become proficient theoretically without actually pedaling. The same applies to your financial mindset: you need to work actively with it. Here’s a step-by-step guide:
Step 1. Grab a sheet of paper and finish the sentence “A wealthy person is…” at least 10 times, but ideally 50 times. Write down everything that crosses your mind, regardless of how odd it may seem at the moment. Be honest, and avoid overthinking. Writing is beneficial as it brings unconscious thoughts to your consciousness. It creates a tangible representation of your fears, which you can then manage.
Step 2. Highlight all the negative statements. If over half of your statements are negative, it could be challenging for you to attain wealth.
Step 3. Acknowledge that these negative thoughts are your fears, and make a conscious decision to work through them. Don’t dispose of the paper. Instead, keep it with you for a few days, periodically reviewing it, and analyzing how these thoughts affect your actions. Identify instances in your life, or others’, where these beliefs didn’t hold true. For example, if one belief is “To be rich, you need to work hard,” yet you see a friend who works less but is financially better off, it challenges this belief. The aim is to understand that your beliefs aren’t unchangeable truths, they can – and should – be revised.
Step 4. Re-phrase each negative statement in a positive light. For instance, replace “To have a lot of money, you need to work a lot” with “The growth of financial success depends on my professional skills and my ability to identify profitable opportunities.” Formulate the positive statements yourself; they need to be ones you genuinely believe. As you write each new positive statement, close your eyes, and imagine how your life would be following this new rule. Visualize the details – your body’s response, your emotions, the people and events surrounding you. You can put these statements on sticky notes on your mirror and read them each day, such as when you’re brushing your teeth. You don’t have to revise all 50 at once; you can start with 3-5. Focusing on even one can have a ripple effect on the rest. Commit to this for 21 days – the estimated time it takes to instill a new belief.
The article “50 Tips To Increase Your Productivity” might also be of interest to you. We recommend giving it a read.
Step 5. Apply the new belief. Whenever you’re making a financial decision, whether it’s a significant contract or a small purchase, take a moment to recall how you felt during your morning exercise. Make the decision in this state. It may take a while – success isn’t guaranteed immediately. However, many have reported a shift over time: “My business was stagnant for three years, and then suddenly it started to thrive.”
As you make decisions based on your new mindset, your psyche begins to establish experience – stable beliefs that eventually replace the old ones. Your thought process alters, and with that, you transform.
