5 Ways Your Growth Mindset Makes You MoneyMay 5, 2021 May 5, 2021 /
Your mindset can be characterized as a growth mindset or a fixed mindset.
If you are currently in debt and wondering how you’ll ever be able to retire,much less achieve financial independence and retire early (FIRE), there’s good news.
A growth mindset can help the dream of quitting your job and living life on your terms become reality.
What is mindset?
Your overall mindset is made up of your beliefs. These beliefs guide how you view and understand the world. They influence how you view yourself and how you perceive your role in the world. It is your paradigm. It’s what you believe to be true. It influences how you interpret everything you experience. It shapes the story you tell yourself about yourself.
When it comes to your beliefs about who you are and what you are capable of, you likely find you default to one of two mindsets. You either have a fixed mindset or a growth mindset.
What is a fixed mindset?
If you have a fixed mindset, you believe what you are is determined early in life. You believe who you are is predetermined and unchangeable.
This perception is established in childhood. It is based on what a child is told by parents, teachers, or by major life events and experiences.
People with a fixed mindset believe in absolutes like:
- I’m just bad at math.
- I’m not athletic.
- I’m a bad dancer.
- My family doesn’t have money so I won’t ever have any.
- I’m not the entrepreneur type.
These types of beliefs stop you in your tracks. They prevent you from taking that next step. It is the perspective of a defeatist, a person who expects and worse, accepts failure as a default.
A person with a fixed mindset doesn’t acknowledge that skills can be learned. For example, “I’m a bad dancer” ignores the fact that the best dancers among us have taken classes, trained with mentors, and practiced thousands of hours. Of course that person is better at dancing than the person who believes they can’t improve and therefore doesn’t try.
A fixed mindset can prevent you from building wealth.
What is a growth mindset?
If you have a growth mindset, you believe that you can learn and change, regardless of natural talents.
This perception results in an adult who believes that while they may be “bad” at something, they can become good at it through study and practice.
People with a growth mindset believe in possibilities like:
- I’ve never had the chance to learn the tango, but I’ll give it a try.
- I can learn anything if I put my mind to it.
- I can change my habits.
- I may not ever be the world’s best at this, but I can certainly improve if I take a class or two.
- I wonder how other people have solved this problem?
These types of beliefs give you a sense of possibility. They optimistically challenge you to take that next step. It is the perspective of a visionary, a person who plans for and thinks about the future with imagination and wisdom.
A person with a growth mindset is open to the possibility of becoming improved versions of themselves, they are not resigned to the life they currently have. They look for opportunities to enhance and better themselves.
How does mindset impact our ability to build wealth?
For those who are not natural savers and investors, having a growth mindset is the primary key to starting the journey to becoming educated about finances and changing our default behavior. If you believe change is possible, you’ll be much more likely to start and much less likely to give up at the first bump in the road.
Example of a fixed money mindset
Susan is a perfect example of a person with a fixed mindset. She came to me because she was concerned about her credit score. She accumulated significant credit card debt and felt very guilty about it. Debt and guilt often go together. She never bothered to save for emergencies. When in school, she was never a good math student. And because managing money involves math, she believed she could never rid herself of her debt burden.
I was able to help Susan see that while math does have a role, we can make significant gains by focusing on redefining the money behaviors we find pleasurable and rewarding. Luckily, she was able to transition from her fixed mindset and see that change was possible for her.
Example of a growth money mindset
Tom is a perfect example of a person with a growth mindset. Tom was confident in his ability to learn anything. Initially, he knew little about investing. He read voraciously, listened to podcasts, sought out mentors, and hired a coach. At times he struggled but he always believed change was possible. His wealth building advanced quickly.
Tom believes in himself and his ability to learn and do new things and is now considering starting his own business as a side hustle to earn extra money and retire early. There is much to learn and experience when starting a business but he is ready for that journey. With his great attitude and enthusiasm he will have more success because he believes it is possible.
5 ways to build wealth with a growth mindset
- Change your spending behavior
- Learn about investing
- Improve negotiation skills
- Start a business
- Invest in real estate
1. Change your spending behavior
If you are a natural spender, you probably have several habits to break in order to live on less than you make. This is a key behavior change that enables wealth building.
Spenders usually learn that shopping is pleasurable from a parent or older sibling. They may have fond memories of Saturdays at the mall as quality time with Mom. Or they may have picked up Dad’s belief that the perfect fishing equipment or golf club was the key to success in their hobbies.
Sometimes spending is a form of rebellion. We usually repeat our parents’ behaviors or we decide to be different and do the opposite. So, if your parents were unable to purchase and provide you with the nicer things, you may buy designer goods to signal your success and to enjoy the moment.
Regardless of why you are a spender, if you have a growth mindset you will believe it is possible to stop that behavior and to derive pleasure from being able to pay your bills in full and on time. You can adopt the belief that having savings for an emergency and watching your investment account grow is a worthwhile endeavor.
2. Learn about investing
If you are a natural saver, a growth mindset can help build wealth. Saving money is a good way to be prepared for emergencies without having to fall back on credit cards and their super high interest rates. But savings will only get you so far on your journey toward financial independence.
Savers are good at protecting their money, so it can seem risky to take money that they have loved and cared for and put it at risk in the stock market. With a growth mindset, a natural saver can learn about concepts that will help them to realize there are many types of risk. While investing cash exposes those funds to market risk (the market going up and down), it eliminates the risk of inflation erasing buying power of money not invested appropriately.
3. Improve negotiation skills
You are doing many things right. You are living below your means, paying off high interest rate debt, building your emergency fund, and investing in the market to grow your money. Now you wonder how the average employee can accelerate their wealth building.
For most people, a next step after learning how to budget their money well, is earning more money. One way to earn more money is to negotiate your salary, and potentially other benefits, with your employer.
Someone with a fixed mindset might think “oh, I’m not the kind of person who would argue over money” and be afraid to negotiate their salary. But the truth is, most employers make an offer below what they are willing to pay you, because they assume you will negotiate.
If you take the first offer, you are leaving that money on the table not just for this year, but forever into the future, as raises are generally a percentage of your current salary.
One of the keys to taking risks and changing your behavior is a willingness to be uncomfortable. We have to override that primitive part of the brain that wants to move away from pain, toward pleasure, and take the easy path.
The more willing you are to experience discomfort, the bigger the opportunity for personal growth and reward.
4. Start a business
If you are looking to accelerate your journey to financial independence and need more financial fuel than your employer can offer, starting a business is a great way to bring in extra cash. Since you aren’t accustomed to living off the money your new business provides, the proceeds can go straight toward your money goals of paying off debt or investing for financial freedom.
Starting a business has a huge learning curve. That curve begins by first selecting a business idea worth pursuing. For your chosen business to succeed, you have to have the belief that you can figure it out, whatever “it” is.
You have to be willing to find what you can offer that the market will purchase. How do you persuade a potential client to overcome their own fears and do business with you? Learning things you have no interest in like filling out forms for the government, and having conversations with lawyers and accountants will become a necessity.
A growth mindset is absolutely critical in dealing with technical issues and employee problems and the thousands of other unanticipated challenges.
If you believe in yourself and persevere in building your business, it can become the rocket fuel that funds all your other wealth building activities. There’s a reason most financial advisors and financial planners are looking for entrepreneurs as their ideal clients. They know that once the business owner gets their enterprise going, they have a dependable machine creating profits that can be invested for years to come.
5. Invest in real estate
If you decide to pursue investing in real estate as a way to expedite your financial independence. Real estate has so many facets like commercial, single-family, multi-family, REITS, etc. A growth mindset in this arena is vital to success.
A growth mindset will lead to you building knowledge about your real estate investing options. You’ll discover and consume podcasts. You’ll read the most popular and useful books. You may even reach out to local real estate groups. You know what they say, “All real estate is local” afterall. Who better to learn from than those in your area of interest.
Being a real estate investor with a growth mindset, you’ll discover and gain confidence in how to analyze potential profitable properties, determine expected return on investments, incorporate money saving tax strategies, and more.
All of this begins with the belief that you can rather than you can’t.
How do I develop a growth mindset?
If you determine your default mindset has the characteristics of a fixed mindset rather than a growth mindset, keep the following three points in mind. You’ll see opportunities to challenge your current way of thinking and begin experiencing growth.
- Awareness. Awareness of when you are thinking with a fixed mindset is the most important aspect of developing a growth mindset. Consider enlisting the help of a coach. Causal coaches are trained to help clients uncover the root cause of their challenges. They help you distinguish between the objective truth and what you think is the truth to find opportunities for change.
- Decision. Once you see a need for change, a decision to implement the change is vital. A decision is just a choice made in an instant, but until that line in the sand is drawn, time can be wasted over and over again, never truly moving forward.
- Discomfort. Doing something different, making a change, taking a risk, and putting yourself out there is awkward and uncomfortable. If you feel some discomfort, that doesn’t mean anything has gone wrong. It just means you are trying something new.
Use your growth mindset from this day forward!
Over the next few days, take note of how you are reacting to the world around you. Consider that you may harbor some money scripts that represent a fixed mindset. Challenge yourself to consider optimistic and productive ways to respond instead.
For example, if you see a free Facebook webinar offering information that may help you achieve a challenging goal, commit to attending and participating in the discussion.
Perhaps you’ve been ignoring your debt, wishing it will just disappear. Take some time to research types of debt paydown methods and put together a solid plan. Take an immediate action like setting up automatic payments for your planned debt paydown.
Personal and financial changes do not happen overnight. The journey to financial independence can be a long one. If you feel you aren’t getting the results you should be, consider reaching out to a financial independence coach. They can help you get the most out of your growth mindset.
You aren’t doomed to repeat the limiting behaviors of your family. Who you are tomorrow doesn’t have to be the person you are today.
Use your growth mindset to change your behaviors from those that will keep you broke to those that will build wealth. Along the way, you may learn about something far more important than financial freedom – the freedom to define who you are, to grow and change, and to blow your own mind. Good luck!
By Lisa Duke of Lisa Duke Coaching
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