Change in Mindset
All of the personal finance advice in the world isn’t going to help someone whose financial mindset is fundamentally flawed. Changes in mindset are required in many instances where large changes are desired. Whether you are looking to live a healthier lifestyle, build better personal relationships, or reach a financial goal, the first thing that may need to change is your outlook on the situation.
After reading Thomas Stanley and William Danko’s book, The Millionaire Next Door, a few years ago (and the sequel, The Millionaire Mind), I came to the same conclusion: Most people won’t become millionaires. It’s not that people aren’t capable of taking the actions that are required, but rather that they aren’t of the right mindset. The thought patterns of the millionaires profiled in these books are in sharp contrast to those of the general population. The perception of the rich and their way of life is also shown to be askew.
Consider two of the main thought patterns discussed:
Live Below Your Means
It’s not about how much you make, but how much you have after you’re done spending. The simple rule is the foundation of many financial strategies, but one that many people can’t seem to achieve. Considering the average American household with at least one credit card has nearly $9,200 in credit card debt, it’s safe to say that many people aren’t living below their means. Living below your means doesn’t mean saving every penny. By living below your means, you position yourself to seize the most rewarding opportunities when they present themselves; something that living beyond your means often precludes you from doing.
Avoid Leading a Status-Centered Life
In a society of rampant consumerism and compulsive spending, it’s easy to get caught up in the wave of attaining social status. The difference between appearing rich versus being rich is often linked to this idea. Going against the norm in regard to leading a status-centered life is often one of the most difficult changes in mindset. Unlike living below your means, which you might be able to keep private, not caring about others’ opinions of your social status is a much more public adjustment.
When you think about the rich, you likely don’t imagine people living below their means without regard for social status, but research shows that this is actually the norm. The rich know that delaying instant gratification can lead to greater future rewards. Those living beyond their means and leading social-centered lives can get caught in a downward spiral. While they’re not getting rich, the desire to feel rich, or what they think being rich should feel like, may grow even stronger.
Change can be hard, but is often required to fix the root cause of your current situation. If a change in mindset is required, your journey may be a difficult one, but one that you can achieve. In fact, using Lending Club and trying person-to-person lending may be a sign that you are of the right mindset already. You may have decided that the time has come to refinance your credit card debt, only to realize that such an action can be a first step to more rewarding financial lifestyle.
Thursday, October 18th, 2007 at 5:59 am