Don’t be broke: 5 wealth mindsets for a Rich Life
If you’re broke, things that people consider minor purchases can be a massive undertaking for you:
- Going out for meals and to bars
- Paying utility bills or rent
- Filling up your car with gas
- Heading to the movies
- Going on vacations
Luckily, there is hope. In fact, building wealth can be easy, and dare I say it, fun, with just a few systems.
However, all those systems won’t matter if you don’t change your mindset.
The power of mindset
You know why? Because that’s not going to do anything, since it’s nothing you haven’t heard a million times before.
Instead, I want to take a look at the hardest part of building a Rich Life: Changing your mindset.
And that starts with addressing “Invisible Scripts” — the unspoken “truths” we tell ourselves that are so deeply ingrained in our psyche and culture that we don’t even realize they’re there.
- “After high school, I have to go to college”
- “After college, I have to find a job at a company”
- “After I find a job, I have to get married”
- “After I get married, I have to have 2.5 kids and buy a house with a white picket fence”
Sound familiar? If you give it some thought, I bet you can come up with some Invisible Scripts you’ve been following too.
“I was born poor so I’m always going to be poor.”
“A person like me could never earn six figures a year.”
“My parents never went to college and they turned out fine. Why should I go?”
I get it. This might be hard to hear — especially if you’re working multiple jobs and are struggling to make ends meet to keep up with your bills and rent. However, I want you to reframe: It’s actually liberating once you recognize your Invisible Scripts and realize you don’t have to follow them.
Don’t be broke — do these 5 things instead
Here are the five mindset shifts that you can employ today that’ll help you get on your way to a Rich Life.
- Focus on what you can control
- Adopt a growth mentality
- Spend consciously
- Focus on the Big Wins
- Earn more money
Let’s jump in.
Mindset #1: Focus on what you can control
You should always focus on what you can control and ignore all the rest.
When I was born, it became abundantly clear I would never play in the NBA. Fine.
On the other hand, it was clear I would dominate the shit out of my classmates in spelling bees. Also fine.
Then there were gray areas, like starting a business, controlling my personal finances, becoming more fit, and learning to be better in dating. I had to learn those skills and work really, really hard. And guess what? I became successful at those things.
Focusing on what you can control while ignoring what you can’t is what separates the successful people from everyone else.
For example, an unsuccessful person blames their financial problems on things out of their control, like the economy, politicians, and the hiring market.
Instead of giving up at the first sign of failure and finding comfort in complaining, a successful person rises up to the occasion. They’re not content with being a passenger in life. They want to be the captain of their own destiny.
Here are a few good articles that’ll help you focus on the things that you can control to build wealth:
- The Ultimate Guide to Getting a Raise and Boosting Your Salary
- How to automate your personal finances
- Investing for beginners
- How we’re manipulated to rant about stuff
Mindset #2: Adopt a growth mindset
Do you have a growth mindset or a scarcity mindset? This question is important because it’s what separates the successful from the unsuccessful.
A scarcity mindset is believing that there’s a finite amount you can earn. It’s thinking that you only have so much money and you don’t want anyone else to touch it.
On the other side of that coin is a growth mindset. That’s the concept of believing that there’s no limit to how much you can earn, grow, and challenge yourself.
Seriously. There’s no limit to this.
Let’s take a look at an example …
Popular personal finance “advice” includes a lot of cutting back to save. That means cutting back on lattes, cutting back on eating out, and cutting back on all the other things that make life worth living (I’m only half joking here).
While cutting certain things out to save is important (more on that in a bit), there’s a limit to how much you can save. Say you’re working a job that gives you $30,000 / year. That means each month you earn about $2,500 in take-home pay.
After rent, you might have $2,000 left. After utilities, you have $1,800. After groceries, you have $1,600 left.
That $1,600 is all that’s left for the month — and all that’s left for you to save. That’s your ceiling. Do you think you’re going to save that entire $1,600? If you’re like the vast majority of people, the answer is a resounding no.
However, say you negotiate a single $5,000 raise at that job. When properly invested and diversified over 20 years, that can turn into a LOT of money. In fact, if you invested that $5,000 over 20 years earning 6% interest, you can grow your money to more than $16,000.
The best part: That money grows even BIGGER the more you invest.
Instead of worrying about what you already have, tell yourself: “I can grow more, I can learn more, and I can create more value for myself and others.”
For more on developing a growth mindset, check out my resources below:
Mindset #3: Let go of spending guilt
POP QUIZ: Do you know how much you have available to spend this month?
Even better question: Do you know how much you spent in the past month?
If you don’t, that’s okay — we’re going to change that. Because being conscious of how much you have to spend is crucial to building wealth. It allows you to spend your money on the things you love, guilt-free.
There’s a difference between people who consciously spend on things they love — even if they’re expensive — and people who simply buy whatever they want and deal with the consequences later.
In fact, it’s entirely okay to spend lavishly on expensive things, as long as you do so consciously and invest/save at the same time. To make sure you’re really being conscious about your spending, you need to spend on the things you love — while ignoring everything else.
To do that, I’m going to tell you the story of two friends of mine. At first glance, they couldn’t seem more different, but if you look closely, you’ll see that they’re both spending on what they truly love and living a Rich Life because of it.
Conscious Spending case study #1: She spends $5,000 / year on shoes
I have a friend who LOVES shoes.
Not just any shoes either. I’m talking about high-end footwear that costs at least $300 a pair.
Oh, and she buys about 15 pairs each year.
I can hear some of you screaming now, “WTF THAT’S ABSURD! WHAT A WASTE OF MONEY!”
On the surface, that does seem like a lot. But what you don’t know is she makes a healthy six-figure salary, has a roommate, and eats for free because of work.
Her 401k and other investment accounts are fully funded. She’s also saving her money for all of her savings goals like vacations.
On top of that, she’s ruthless about cutting out the things she doesn’t care about. That means avoiding new tech gadgets, gym memberships, or eating out. She also lives in a tiny room in a small apartment because she doesn’t care about having a fancy place.
After planning for her long-term and short-term goals, she has money left over on the thing she does care about: Her shoes.
Conscious Spending case study #2: The nonprofit worker
You don’t have to be making six figures to live a Rich Life.
I had a friend who worked at a nonprofit in San Francisco. She was making about $40,000 / year — but was saving $6,000 / year …
… IN SAN FRANCISCO.
How does she do it? Simple: She’s conscious of her spending.
She cooks at home, shares rent in a small apartment, and is reimbursed for her driving by her office.
When she’s invited out to eat, she checks to see if she can afford it. If not, she politely declines. But when she does go out, she never feels guilty about spending because she knows she can afford it. Yet it’s not enough to save money on just rent and food. She also chooses to save aggressively, maxing out her Roth IRA and putting aside extra money for traveling. Each month, that money is the first to be automatically transferred out.
Talking to her, you would never know that she saves more than most Americans. But in reality, she’s chosen to put her investing and saving priorities first.
To help you be more conscious with your spending, here are a few of my best articles on the topic:
- How to use the Envelope System to save and spend
- How to save cash
- Conscious spending: How my friend spends $21,000/year on going out
Mindset #4: The Big Wins are more important
There are just a few Big Wins in life where — if you simply get them right — you almost never have to worry about the small things. If you can focus on these seven Big Wins, rather than 50 little things, you can have an insurmountable edge in life.
Here are the seven wins I suggest you tackle ASAP:
- Automate your finances
- Start investing early
- Improve your credit score
- Land your Dream Job
- Negotiate a raise
- Make money on the side (more on this later)
- Negotiate your rent
These wins will help you infinitely more than the minutiae of cutting out $2 on a latte ever will.
Don’t believe me? Let’s break down exactly how much a $2 latte will actually save you.
If you save $2/day by making coffee at home, you’ll save about $62/month. At the end of the year, that’ll equal to around $700/year. Not bad … right?
Probably not. $2/day isn’t a significant enough amount that you’ll actually “see” the savings at the end of the month. And unless you’re physically putting aside $2 every single day, you’re probably not going to invest it.
Let’s say instead you decide to negotiate your rent, like some of my readers have. You could end up saving hundreds of dollars per month. Here’s a story from one of my readers, who did just that:
“My lease renewal was coming up and the rates around where I live were going up at a phenomenal rate too … I wanted to stay at a lower apartment fee or the same. Initially, the leasing office turned down my request.
However, when I mentioned that I’d be willing to sign a lease for 12 months — they went ahead and reduced my rent by $200 a month. The year has barely started and thanks to you I was able to save $2400 for this year!”
That’s just one Big Win too. Once you nail all the others, you’ll start to see the foundations of your Rich Life start to take shape in a very big way.
Mindset #5: Earning more on the side is better than trying to save more
Remember what I said in the section about the growth mindset: There’s a limit to how much you can save — but there’s no limit to how much you can earn.
And while you can earn more by negotiating a raise or securing a higher paying job, I don’t think there’s a better way to earn more money than by starting a side hustle.
These are businesses and money-making operations you have on the side along with your normal 9-to-5 job. And they’re fantastic because they’re:
- Easily scalable, which means you can earn as much or as little as you want
- Flexible, which means you can work on them in tandem with another job
- Good ways to do what you love, which means you’ll get to combine your passion AND making money
There are a TON of different ways you can earn money via a side hustle too. Here’s my article on 42 ways to make money via a side hustle for more. But the best way is for you to leverage a skill you already have.
We all have knowledge and talents that we can easily leverage for a side hustle. Think about it. Do you:
- Know a language? People will pay you to tutor them in foreign languages.
- Write amazing content? I can’t think of a single business out there who wouldn’t pay top dollar for a great copywriter.
- Develop computer programs and apps just for fun? You can leverage those skills to help other businesses develop websites and apps.
To help you even more, be sure to check out my Ultimate Guide to Making Money.
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