How your beliefs around money impact your net worth
Your beliefs around money could come at the cost of your net worth, or worse, your time.
The words following “I am” are some of the most powerful in the English language. They represent a direct interpretation of your perception of yourself.
“I am so bad at ….”
“I am not the person who…”
I’ll admit, I’ve unconsciously said things like this in the past and have doubted my ability to achieve certain objectives.
As Jim Kwik describes:
“Your brain is a supercomputer, and your self talk is the program it runs.”
By using negative self-talk you’re constantly practicing your demise.
You’re putting in the reps counter intuitive to your goals and objectives. This is the equivalent of telling yourself you’re going to fail an exam before you take the test.
The person who believes he can, or believes he can’t, is both right.
Full disclosure, I’m not from the bandwagon of affirmations and singing Kumbaya by the fireplace. Though, I am aware of what a negative perception of yourself can do to you.
How you perceive your abilities or inabilities applies not just to physical or mental tasks but also to your behavior around money.
Growing up, you may have heard some of the following phrases:
“A penny saved is a penny earned”
“We’re too poor to buy cheap”
“Money doesn’t grow on trees”
“You must spend money to make money”
“The best things in life are free”
“More money, more problems”
“You give a poor man a fish and you feed him for a day. You teach him to fish, and you feed him for life.”
These phrases through repetition build up conviction that then turn into beliefs. Beliefs affect how you see and interact with the world.
It’s common for these phrases to be passed down from generation to generation. This is what Psychologists Dr. Brad Klontz and Ted Klontz coined a Money Script in their seminal 2011 research paper in the Journal of Financial Therapy.
Dr. Kotlz discovered correlation between our actions and beliefs around money:
Money Avoidance
Perception:
Money is bad
Feels undeserving of wealth
Rich people get rich by taking advantage of others
Money Worship
Perception:
Money is power
More money will make me happy
Money solves all my problems
Money Status
Perception:
Self-worth=net worth
I will not buy something unless it is new
If something is not considered the best it is not worth buying.
Money Vigilance
Perception:
Alert and concerned about money
Aware of potential dangers of money
Hides money under mattress
In the same way drinking too much water can kill you, a steadfast conviction in one of these Money Scripts may offer a collapse of either your wealth or time.
Money vigilance comes at the cost of your wealth by not keeping up with inflation. You’re guaranteed to lose money being hyper vigilant.
Money avoidance says money corrupts. Money status says your self worth is your net worth. Both beliefs come at the cost of your wealth - just on opposite extremes.
If you feel shame and believe you’re undeserving of wealth, and find yourself giving money away or spending it, consider the following thought exercises:
How much wealth or time saved did you generate for others?
How long did the wealth creation take you (or others)?
What sacrifices were made to build wealth?
Wealth doesn’t magically appear. No one is superior or special, there are just those who are willing to sacrifice what others will not in order to achieve their desired level of financial status.
Further, money doesn’t guarantee happiness. There are plenty of people who have money and are miserable.
Those who worship money miss one key idea:
Money only solves money problems, then you are left with problems money can’t solve.
Money isn’t going to solve your relationship, your health, or family dynamics. That’s up to you.
If you believe the top 1% isn’t deserving of their wealth, you’re wasting your time.
There’re two schools of thought here:
The person got wealthy by stepping on the shoulders of the people below them. They took advantage of others and deceived them to achieve their wealth. In this scenario you have no choice to be angry and frustrated that this individual did this.
The person worked 80-90 hours per week and reinvested in themselves to provide so much value to others they were monetarily rewarded for their value creation. In this case, you have no choice but to respect what this person has created.
This is a play on the dichotomy of control. Energy spent on things we can’t control is wasted. Whether this individual achieved his wealth through option one or option two has zero impact on how you live your life.
Is option two more ethical than option one? Absolutely.
Does option one make you mad? Yes.
But is option one worth your anger? No.
In the words of Chammath Palihapitiya:
Having money doesn’t make you superior in the same way that not having money doesn’t make you inferior.
Money is just a tool to amplify more of who you are.
Warren Buffet is 91 years old and worth over $100 billion dollars. If he had 5 years left to live would you trade places with him?
No.
Why?
Time is the one asset we can’t make more of.
Time is worth more than money when money is in the absence of time.
We make decisions constantly without even realizing that they are influenced by the psychology of money.
Weigh down Usain Bolt’s ankles enough and I can beat him in a 100 meter dash.
Similarly, adopting maladaptive Money Scripts could weigh down your ability to build wealth.
How are your beliefs around money holding you back from financial independence?