Whether it’s chasing material comforts, financial independence, or the freedom that a “significant amount of money” can provide, the human desire for riches is like none other. But the road to wealth is bumpy and filled with misconceptions.
Perhaps the biggest misconception when it comes to wealth is that only people with millions of dollars in their bank accounts are “wealthy.”
Nothing could be further from the truth.
Ask any three people to define wealth and you’ll get three different numbers.
If you want to be wealthy, you'll need to think like the wealthy. Start by defining YOUR financial goals: how much money do you want to have in a year’s time? Five year's time?
Got a number? Good.
Now if you want to see a cent of that money, you'll need to develop a wealth mindset.
Why does a wealth mindset matter?
60 percent of Americans live paycheck to paycheck—and it only gets worse when we consider the rising levels of credit card debt.
These behaviors create vicious cyclones of debt from which it is difficult to escape.
It seems that the ability to attain wealth—the basics of the wealth mindset—is a lost art.
What is a Mindset?
A mindset is a lens through which you view the world. Like a pair of sunglasses, it can slightly alter what you see and how you think about it.
Mindsets are comprised of beliefs, perceptions, and attitudes that inform your thoughts and decisions.
Different mindsets are an important part of your toolkit for success. Like glasses, they can obscure your path or bring clarity to the road ahead. Cultivating a healthy wealth mindset will help you stick to your financial goals and find ways to increase your earning potential.
What is a wealth mindset?
If you dig deeper into the stories of wealthy people, you’ll notice a pattern:
Rarely will a wealthy person be able to boil down their success to a single miraculous moment. Instead, they’ll cite their mindset as the biggest reason for their prosperity.
A wealth mindset is a set of beliefs, habits, and behaviors that separates the wealthy from the rest. A wealth mindset will guide you to make the most of the money you have.
But it doesn’t come easy. A wealth mindset means spending less, making wise investments, and looking for ways to improve financial standing with minimal risk.
The good news is that with a little dedication, anyone can develop this mindset.
What is a Poor Mindset?
The antithesis of a wealth mindset is a poor mindset. Most who have this "poor mindset" don’t realize they have it.
A poor mindset is any of the following: thinking that earning money is wrong, that it can be done without effort, that you'll never climb out of the pit of debt, or that you just don’t have the special sauce it takes to increase your cashflow.
This mindset undermines your money goals and will actively drive wealth away from you unless you work to counteract it.
1. Set Goals, Be Patient, Persevere
Very few wealthy people became rich overnight. Building wealth is a slow process.
Facebook didn’t turn Mark Zuckerberg into a billionaire. Mark Zuckerberg created Facebook with his hard work and dedication, and then reaped the benefits of his labor.
Don’t pin your hopes of achieving wealth on risky “get rich quick” ventures.
The average wealthy person spends 10 times more time planning their finances than the average middle-class individual.
Set a goal for how much you are going to save each month. More importantly—make sure that the plan you create for yourself is reasonable and stick to it. The purpose of a budget is to allow you to examine your expenses and look for areas where you can cut or eliminate costs. This process might require you to make some difficult choices, like switching to cheaper versions of products or avoiding luxuries altogether.
If you’re terrible at saving and you aim to save 10 percent of your next paycheck, you have a higher chance of failing and give up on your quest to become wealthy.
Why not start at 1 percent?
Start small, nurture the habit, and scale up over time.
2. Invest for the future today
Most people think that money won’t make itself… Or will it? Compound interest is a process of growth that allows your invested money to grow exponentially over time.
Compound interest occurs when you earn interest on interest. Each year your money is invested, you’ll earn a percentage of interest on the total amount of money in the account, which includes the amount you made last year.
The longer you allow your account to grow, the more money you will make in return
In 1994, Bill Gates was worth 9.3 billion dollars. Fast forward to 2014 and the man was worth 81.6 billion dollars.
This nine-fold increase in wealth wasn’t fueled by Microsoft sales alone. It was powered by Bill Gates investments manager Michael Larson.
Investing money is a fundamental strategy amongst wealthy people—and you don’t have to do it alone. Learn how to invest or look for help. There are plenty of accomplished and trustworthy advisors out there.
The bottom line? Letting all of your savings sit idle in a bank account is a big mistake.
Candy bars used to be 5 cents a pop. Today, you’d be hard-pressed to buy a Snickers for less than a dollar.
The sustained increase in prices over time for goods and services is called inflation. It decreases the purchasing power of money as time goes on.
If your investment strategy is to leave your money in a savings account for years on end, your nest egg will be worth a lot less when you’re finally ready to use it.
Instead, weigh your investment options. Common methods of investing include 401ks and Roth IRAs.
A 401k is a retirement plan that you can invest in yourself or through your employer. Either you put money in it each month yourself, or a small portion of your paycheck is taken out each pay period and invested in the stock market. Employers can match your contributions, and your money will continue to grow until you decide to access it in your golden years. Because contributions are made on a pre-tax basis — the money you put in can reduce your taxable income for that year — you will pay income tax on it when you pull the money out.
Another option is a Roth IRA, funded by after-tax dollars. So, when you pull this money out, you don't have to pay any tax, but you cannot reduce your taxable income in the present.
A wealth mindset can help you seek out the best investments for your needs. After all, who doesn’t want to make money while they sleep?
3. Never stop hustling
Now that you have a foundation for growing your money, it’s time to invest in the most important thing:
If you want to foster a wealth mindset, you’ll need to minimize time-wasting activities like watching television or scrolling through social media. Globally, we spend over two hours on social media sites every day.
Instead of wasting that time scrolling, take care of your body. If you aren't already focusing on your mental and physical health, learn and practice "better health habits", such as eating healthy, sleeping right, and exercising the right way.
Here's another idea: practice your negotiation skills. Whether it’s negotiating your bills, your salary or a client contract, wealthy people always come out on top and are able to squeeze more dollars for themselves.
Earn cash on the side by creating a side hustle. By driving for a ride-sharing service, teaching courses online, or even officiating weddings, 44 million Americans earn an average of $25 per hour with a side hustle.
Find a niche you’re passionate about and it won’t even feel like work.
Learn new skills in areas you’re interested in too. You never know when a skill you learned today will become an opportunity later down the line.
4. Maintain a positive attitude
Maybe you’ve heard of the “law of attraction.”
The law of attraction states that like attracts like. In other words, our thoughts and actions attract similar thoughts and actions.
If you think positive thoughts, positive things will happen.
If you think about creating wealth, you will bring more wealth into your life.
You must foster positive thoughts of wealth and abundance. If you dwell on the negative, you’ll get discouraged and give up on your dreams.
Start by erasing negative thoughts from your mind. Replace them with thoughts like:
- “I will be rich.”
- “I am good enough.”
- “I can succeed.”
The road to wealth isn’t easy, but it won’t be any easier if you start creating potholes for yourself. You need to be completely sold on the idea of your success.
How Long Does it Take To Develop A Wealth Mindset?
The best part of developing a wealth mindset is that you can start immediately — by education, strategizing, and then action.
The key is to start small and tackle bite-sized goals first. Like compound interest, these small investments build up over time and further your progress toward your wealth goals.
Within months, weeks, or even days, your wealth goals will be on the fast track to success.
Make It Happen
There’s no simple formula to follow for wealth. Maybe you’ll have a brilliant idea and see it through. Maybe you’ll start a business with a great co-founder. Maybe, like most of us, you’ll work hard—but save smart and invest your way into riches.
At the end of the day, everyone has to take the route that’s right for them.
However, those who make it to the end will be the individuals who are able to develop and stick to the wealth mindset.
Cash Lambert is WealthFit's Managing Editor. He is the author of Waves of Healing: How Surfing Changes the Lives of Children with Autism.