“If you know the enemy and know yourself, you need not fear the result of a hundred battles.” Sun Tsu
In America, we have a spending problem. Inherently, we desire to drive the latest luxury vehicle, wear the most elegant fashions and go on the most extravagant vacations, whether or not we can afford them. On top of this, the entertainment media and lifestyle advertisers actively encourage the conspicuous spending and consumption which compounds the financial woes of American society.
Schwab Wealth Survey
According to a Charles Schwab 2019 Modern Wealth Survey, “more than a third of Americans admit their spending habits have been influenced by images and experiences shared by their friends on social media and confess they spend more than they can afford to avoid missing out on the fun.” The survey examined how a 1,000 Americans think about saving, spending, investing and wealth.
Survey respondents tended to place the blame on social media platforms and not people, “ranking social media as the biggest “bad” influence when it comes to how they manage their money, while they put friends and family at the top of “good” influences.”
According to the survey, “three in five Americans pay more attention to how their friends spend compared to how they save, with an equal number saying they’re at a loss to understand how their friends are able to afford the expensive vacations and trendy restaurant meals they portray on social media.”
Furthermore, the survey finds that “the pressure to spend as a result of social media envy and the desire to not be left out of friends’ experiences is particularly acute among Generation Z and millennials.
Financial Mindsets
These financial mindsets are derailing the financial lives and future on millions of Americans wanting to keep up.
“The keys to financial security and success are simple to achieve by every American. The keys involve preparing a simple financial game plan, developing the correct financial mindset and implementing positive financial habits and behaviors…period.
“A ship without a rudder can certainly make its way across the water, but it has no control of where the water will take it–so grab your rudder and take initiative of your financial destiny.” Nancy LaPointe
Creating a game plan is a critical initial step in taking control of your financial future. A simple financial plan allows you to get control of your financial future.
Financial Planning
“Everyday, you must believe and have faith in your ability to achieve financial security by following a few simple key financial concepts.”
Money is rarely about money. Money is all about your habits, your thoughts and your behaviors. Your habits, thoughts and behaviors about money determine your current and future financial destiny…how you spend, save, invest and accumulate wealth.
Financial mindset is a predetermined set of beliefs about money, spending, saving and investing. We all have them. Even if you can’t verbalize what your mindset, it’s still present both consciously and unconsciously. Some common money beliefs are ‘life’s all about what you own‘, ‘retirement is far away‘, and/or ‘my financial problems are _______’s fault‘.
It’s important to take time to identify what your financial mindset is. Because your financial mindset will either help you succeed financially or it will hold you back. And it’s not enough to just label old financial mindsets as false, you have to replace them with a new positive mindset.
Here are four common financial mindsets with the best replacement options:
1. Your life is about what spend and own vs Your life is about purpose, goals and priorities
Americans are consumers and driven by the “fear of missing out” and ‘keeping up with the Jones’. We’re easily caught up with what’s new, next, and just beyond our price range. But this cycle of constantly upgrading is hurting our financial life. Cutting your dependence on things is vital. Learning to live a life of purpose and setting financial goals and priorities that realizes it’s okay to own an older model vehicle and phone. Doing so will make your financial life a lot less complicated.
2. Saving money is for people who have extra vs Understand the importance of an emergency fund
Financial success boils down to spending less than you earn. It’s really simple. But people often spend every penny they make which doesn’t leave room for error in the future. Emergencies happen and this is how debt happens, so it’s important to tune your mindset to a saving mindset. Living below your means and saving a portion of your income not only lessens your dependence on your income but it also prevents you from going into debt in the future. Your first goal is $1,000. From there, work up to three months worth of expenses.
3. I can afford the payment vs I don’t want to incur debt repayments
Being able to afford the payment doesn’t mean you should afford the item. Making the phrase “I don’t want to incur debt repayments” an every day part of your life will prevent unplanned spending. It will also foster a mindset of spending less.
4. Someone/Something is to blame vs Accepting responsibility for financial life
You and only you are responsible for your financial life. All the decisions, big and little, you’ve made along the way are what have led you to your financial predicament. The less time you waste blaming others, the faster you’ll be able to move on to financial security.
References:
https://www.aboutschwab.com/modernwealth2019