Do you know that in the last couple of decades two fields of finance have evolved which are exclusively studying the link between our psychology and the money that we make?
How we think, whether we are conscious of it or not, is literally causing the financial mess or the financial abundance that we are in.
If you are like most people, you probably belong in the former group.
In my extensive experience talking to people about their money situation, goals and habits, I can say that most people do not have a mindset that is conducive to financial success.
I have met many people who have a financial mediocrity mindset, many with a poverty conscious mindset and very few who have a financial abundance mindset.
I personally prefer the financial abundance mindset, because it is conducive to attracting, making, keeping, growing and retaining wealth.
People forget that more money can allow you more control over your life, afford you more options in life and also provide you with the means to contribute towards causes and people that you care about.
Having said that, I have come across people who have a mindset that is aligned with making money and growing wealth, but the mindset is coming from an unhealthy place.
Many people do not understand that true wealth is more than just money.
It's also about having health, time for yourself, quality relationships, diverse experiences and doing work that is fulfilling.
Money problems are one of the major reasons for personal and relationship stress.
People who struggle to manage money are more likely to split up with their partners and have a higher incidence of diseases such as ulcers, anxiety, migraines and depression.
Australia and America have some of the highest incomes in the world yet more and more people are failing with managing money and growing wealth.
As a wealth planner, I see the reasons : overconfidence, seeking instant gratification, too embarrassed to seek professional help, looking for a magic bullet, lacking discipline & commitment, procrastination, addiction to consumerism, indifference, not being able to trust and many more..
However, this article is not about those reasons.
Although good quality professional financial advice will assist, the reality is also that most people have an invisible money block that prevents them from putting knowledge into action.
Until you are aware of this block and deal with it, a significant change in your financial situation is unlikely to happen.
A lot of information about becoming wealthy is already known.
Spend less than you earn, pay yourself first, don't buy things you don't need, invest early, invest often, do not take unnecessary risks, do not follow fads, be prepared for emergencies, buy good quality assets, minimize taxes etc are all known, and not exactly rocket science.
But most people don't follow them. In fact it is estimated that over 80% of people don't do what they know they should do and therefore find themselves in a bad financial mess.
Here are some interesting examples of the unhealthy link between childhood conditioning and money.
1. Sammy, a qualified nurse who finds herself late with bill payments, overspends & never knows how much is in her bank account. Any time she finds herself in any kind of financial trouble, instead of confronting her behaviors, she engages in retail therapy (sometimes on credit cards) to numb the feeling of hopelessness. She grew up in an environment where you didn't discuss money.
Unconscious Belief: I am not a money person.
2. Nina, who many years ago decided that money was the most important thing in life and arranged her life to maximise her ability to earn. She worked a lot and many times put her career ahead of her family, resulting in a divorce. Nina was raised by a single mother on social security and she despised her childhood so much that she pledged that she would become wealthy at any cost, resulting in shallow relationships and the need to win at all cost, driven by a deep rooted sense of insecurity.
Unconscious Belief: Money will make me matter.
3. Ramesh, an immigrant from Bangladesh and a qualified accountant works 15 hours a day. His unbalanced life is already causing him to have high cholesterol and blood pressure at the age of 42. Where Ramesh comes from, you only get respect if you have money and status. Ramesh should really delegate his financial management to a professional financial advisor, but he cannot get himself to pay for anyone's services. He would rather do it all himself and save money.
Unconscious Belief: Money is more important than time.
4. Paul, a young and hard working man who spends all the money he makes and lives paycheck to paycheck. Paul doesn't think money is that important and is occasionally heard telling his friends that 'money isn't everything'. Paul is all for experiences (not accumulations and possessions), as he has made a subconscious connection between wealth and materialism. This causes him to get rid of his money as fast as he can make it. He grew up in a family where he occasionally overheard the words ' Rich people cannot be trusted'.
Unconscious belief: It is noble to be poor.
I have plenty more examples of people who believe that money is the root cause of all evil, money doesn't make you happy, money is a mans domain and many more..
These money beliefs were formed at childhood and are still causing people to helplessly think, feel and act in certain ways. In most cases these unconscious behaviors are resulting in money failures.
Where they are resulting in money successes, they are resulting in failures in other key areas of life such as being healthy, having meaningful relationships or having fulfilling jobs/careers.
As a wealth advisor, I find myself coaching clients around emotions and behaviors because the right financial strategies are no longer enough without the right mindset.
For sustained financial success, left brained financial knowledge needs to be combined with right brained awareness and emotional control.
This is the ONLY way to produce successful financial and life outcomes in the long-term.
- Ron Malhotra
(The names in the above examples are fictitious but characters may be real)