Category Archives: Attitude

Financial Mindset

Posted on by

“It’s difficult to master the psychology and emotions behind earning, spending, debt, saving, investing, and building wealth.”

Personal finance is simple. Fundamentally, you only need to know one thing: To build wealth and achieve financial freedom, you must spend less than you earn. Yet, it seems challenging for most people to get ahead financially.

Financial success is more about mindset and behavior than it is about math, according to J.D. Roth, author of Get Rich Slowly. Financial success isn’t determined by how smart you are with numbers, but how well you’re able to control your emotions and behaviors regarding savings and spending.

Financial Mindset

“Change your mindset and attitude, and you can change your life.”

You sometimes have to make sacrifices in order to improve your financial situation. For instance, if you are in debt, you need to sacrifice some expenses so you can pay more towards managing and eliminating your debt. It is these financial sacrifices that will require you to have the right financial mindsets so you can overcome the obstacles that derail people from managing and eliminating their debt.

According to an article published in USAToday.com, Americans do not have a financial literacy problem. Instead, Americans simply make the wrong financial decisions and have bad final habits which does not necessarily translate that they are unaware of the best practices of financial management. We know how to make the right choices about our personal finances. The problem, according to the article’s author Peter Dunn, is that Americans have a financial behavioral problem. It is bad financial behavior, decisions and habits that usually get them into money trouble. It is what put them in a financially untenable position.

A perfect example is that you should never spend more than what you are earning. It is logical after all. But does that mean you follow it. Some people still end up in debt because they spend more than what they are earning.

Other examples of beliefs about money and personal finance include:

  • Taking personal responsibility regarding your finances is everything.
  • You shouldn’t buy things you can’t afford.
  • You don’t have to make a ton of money to be financially successful.
  • You can give yourself and your family an amazing life, if you’re able to remain disciplined and think long term.
  • Borrowing money from or lending money to your family isn’t recommended.
  • Education can get you a better job, if you get the right education.
  • You should buy life insurance.
  • You have much more to do with being a financial success than you think.

Financial literacy gems such as “spend less than you make,” “you need to budget” and “save for the future” are impotent attempts to help. However, lacking the correct financial mindset can make following the simple financial gems quite challenging.

There are 5 destructive financial mindsets that are the norm in our society today but you should actually get rid of starting today, according to NationalDebtRelief.com.

1. Using debt to reach your dreams.

This can actually be quite confusing. A lot of people say that it is okay to be in debt as long as it will help you reach your dreams. There is some truth to that but you should probably put everything into the right perspective. Buying your own home and getting a higher education are some of the supposedly “good debts.” It is okay to borrow for these if you can reach your dreams because of that debt. Not so fast. It may be logical to use debt to reach these but here’s the key to really make it work – you should not abuse it. If you get a home loan, buy a house that will help pay for itself. That way, the debt will not be a burden for you. When it comes to student loans, make sure that you work while studying to help pay for your loans while in school. Do what you can to keep debt from being a burden so it will not hinder you from reaching your dreams.

2. Thinking you do not need an emergency fund.

The phrase, “you only live once (YOLO)”, should no longer be your mindset – especially when it comes to your finances. You always have to think about the immediate future. If you really want to enjoy this life, you need to be smart about it. Do not splurge everything on present things that you think will make you happy. It is okay to postpone your enjoyment so you can build up your emergency fund. You are not as invincible as you think even if you are still young.

3. Settling for a stressful job to pay off debt.

“The most important thing when paying off your debts is to pay off your debts.”

Among the financial mindsets that you need to erase is forcing yourself to stay in a stressful job just so you can pay off your debt. You are justifying the miserable experience that you are going through in your job because you need it to meet your financial obligations. This is the wrong mindset. You need to put yourself in a financial position where you will never be forced to stay in a job that you do not like. Live a more frugal life that does not require you to spend a lot so you can pursue a low paying job and still afford to pay your debts.

4. Delaying your retirement savings.

Some young adults think that their retirement savings can wait. Some of them think that they need to pay off their debts first before they can start thinking about the future. This is not the right mindset if you want to improve your finances. You have to save for retirement even when you are drowning in debt.

5. Failing to have a backup plan.

The last of the financial mindsets that you need to forget is not having a backup plan. Do not leave things to chance if it involves your finances. You have to make a plan and not just that, you need to have a backup plan. If you have an emergency savings fund, do not rely on that alone. What if one emergency happens after another? Where will you get the funds to pay for everything? Think about that before you act.

Takeaway

Remember, personal finance is simple…it’s your emotion, behavior and habits that are challenging. Bottom-line, it comes down to your financial mindset.  Smart money management is more about your mindset than it is about personal financial math of net worth, cash flow, saving and investing. The math of personal finance is simple and easy. It’s the psychology that’s tough and challenging. Essentially, the concepts to improving your finances and achieving financial freedom are simple but it is not easy to follow through with them.

References:

  1. https://business.time.com/2013/03/11/why-financial-literacy-fails/
  2. https://www.usatoday.com/story/money/personalfinance/2015/09/27/americans-financial-literacy-behavior/72260844/
  3. https://business.time.com/2011/09/22/debt-tsunamis-debt-snowballs-and-why-the-conventional-wisdom-about-defeating-debt-is-wrong/
  4. https://www.nationaldebtrelief.com/5-financial-mindsets-you-need-to-get-rid-of/
  5. https://www.getrichslowly.org
  6. https://obliviousinvestor.com
  7. https://petetheplanner.com/yes-you-are-an-investor-think-like-one/

The Man in the Arena — Daring Greatly

Quote

Posted on by

On April 23, 1910, Theodore Roosevelt gave what would become one of the most widely quoted speeches of his career. In Paris at the Sorbonne, Roosevelt delivered a speech called “Citizenship in a Republic,” which would come to be known as “The Man in the Arena.”


“It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat.”

Theodore Roosevelt, Twenty-Sixth POTUS

 

 

References:

  1. https://www.mentalfloss.com/article/63389/roosevelts-man-arena

Habits of the Wealthy Anyone Can Adopt

Posted on by

“The reason why someone is either rich or poor can be traced back to daily habits.” Tom Corley, author of “Rich Habits: The Daily Success Habits of Wealthy Individuals”

Replace bad habits and behaviors. 

Aristotle, the 4th Century B.C. Greek philosopher, was attributed as saying, “We are what we repeatedly do. Excellence then, is not an act, but a habit.”

It has been said that nature abhors a vacuum, and the same can be said about habits and behaviors; it’s hard to replace a bad habit or behavior with nothing.

Instead of ceasing a bad financial habit or behavior, investors need to replace them with positive and successful financial habits and behaviors.

Rather than liquidating an account, encourage a replacement behavior like rebalancing, tax-loss harvesting, making more incremental portfolio adjustments, or putting in “crash bids” for high-quality stocks that may be trading at a discount.

It’s easy for individuals to be disorganized, without vision, undirected and at the mercy of poor habits. Embracing good habits often takes ficus, effort and desire to improve. Here are eight rich habits:

Habit #1: Exercise.

Exercised an average of 30 minutes, four days a week.

Habit #2: Build relationships.

Keep a running list of positive influencers in your life and regularly connect with them.

Habit #3: Visualize your goals.

Look at your goals—each set with an expiration date and action plan—when you wakes up and before bed. Attack goals with intensity. Keep goals top of mind, and always in sight. This will yield big results.

Habit #4: Read. A lot.

Start reading two books a month—focusing on emotional well-being, leadership, personal finance, and health

Habit #5: Practice affirmations.

Positive mindset provides a huge influence on one’s quality of life. The more you like yourself, the higher your self-esteem and well-being. Practice daily affirmations related to the most important areas of your life, focusing on faith, family and professional career.

The key to successful affirmations is choosing a mantra that’s tied to a dream and a realistic goal that are specific, achievable and true: “I’m working 10 extra hours per week to make $100,000 by next year.”

Habit #6: Volunteer.

There are many reasons to volunteer; use the opportunity to expand your network of like-minded people. It is an opportunities to give back and to create relationships with high-level thinkers.

Habit #7: Confide in a mentor who’s been in your shoes.

The most successful people on earth value mentors who’ve walked in their shoes and made it to the other side.

Habit #8: Practice gratitude.

Meditate or focus for a few minutes each morning and evening on what your grateful: spouse, kids, job and friends, to name a few. This habit helps you pay more attention to what’s going great in your life, puts life in the correct perspective, and keeps you focused on always moving forward with the right attitude.

Henry David Thoreau once said, “The mass of men lead lives of quiet desperation.”

If you want to remain unrewarded, unfulfilled and ultimately unhappy, then continue to accept your habits which are not useful to fulfilling your aspirations, dreams and desires.

Bonus Habit:

“If you want to become really wealthy, you must have your money work for you. The amount you get paid for your personal effort is relatively small compared with the amount you can earn by having your money make money.” John D. Rockefeller

References:

  1. https://grow.acorns.com/7-daily-rich-habits-anyone-can-adopt/
  2. https://grow.acorns.com/money-mistakes-wealthy-people-dont-make/