It’s time to talk mindsets. You can have one of two different mindsets. You can either have a growth mindset or a broke mindset.
I’ll give you an example of a broke mindset. And, more importantly, how not to think.
So a while back I published this short where I shared that I took my family of 6 to all-inclusive resort in the Dominican Republic. Guess how much I paid? Nothing.
How was I able to swing a free trip for my entire family? I used our credit card reward points.
The very first comment that I received was something on the lines of, “the annual fee of $50 pays for itself I guess.”
Seriously? What’s there to guess? So what if I dropped $50 for the annual fee. It’s well worth it to get a $15,000 vacation for that. I mean, just do the math. $15000 vs $50.
That, my friends, is a broke mindset; one that leads to limiting beliefs. And, I don’t want any of you to be broke. So, let’s go over some ways to break from a broke mindset.
What’s a Broke Mindset?
The first thing we need to do is define what a “mindset” is.
Basically, it’s a set of beliefs or thinking that determines how we behave, think, and feel. Let’s dig in to that more specifically. It’s how you think about finances.
When you have a broke mindset, it affects your way of thinking about money. In this case, you think negatively about finances if you have a broke mindset.
Your bank account is always empty. You don’t have any savings. Also, you’re probably surrounded by broke people as well. And, your idea of happiness is to win the lottery or have more money.
Rich people, on the other hand, share one constant trait: a growth mindset. It’s really nothing more than self-growth and perseverance until you reach your goal.
In short, the difference between a broke mindset and a growth mindset is the outlook. When you have a broke mindset, it’s negative. But, it’s more positive when you embrace a growth mindset.
How Do You Know if You Have a Broke Mindset?
So, which mindset do you possess? Sometimes it’s obvious. But, if here’s some telltale signs that you have a broke mindset.
- Thinking broke all the time. Is your mind always focused on how broke you are? Do you say things like, “I have no chance to be rich” or “I can’t manage money.” Think this way enough and it becomes true.
- Spending exceeds earning. Are you spending most of your money as soon as you get it. Are you in debt trying to keep up with the Joneses? Both are signs of a broke mindset.
- Wants come before needs. Having a broke mentality means you don’t know what’s important. Since you blew your last paycheck on unnecessary stuff, you might have to make late payments for basics like rent.
- You aren’t saving or investing. Those with a broke mindset also complain about not earning enough to save or invest. You can still set aside a portion of your income to put into your savings account or to invest, even with a modest income.
- You value quantity over quality. People with a broke mentality usually buy cheap things. They believe it is a waste of money to purchase expensive items. Sadly, cheap is often expensive in the end.
- It’s hard for you to think outside the box. Your financial situation may become stagnant if you make excuses and never think of alternatives.
- You think in terms of scarcity. Money is seen as a finite resource that you have to hoard so no one else can get it. Despite your best efforts, you feel as if there will never be enough. You also focus on what don’t have.
Ways to Repair Your Broke Mindest
I know that admitting that you have a broke mindset isn’t easy. But, that’s the only way you’re going to shift into a growth mindset. After that, you can try the following to help repair your broke mindset.
Live each and every single day with a purpose.
Every day you have to wake up knowing what you’re going to do. Or, even better, ask, “How are you going to conquer your day?”
The rich don’t just roll out of bed at nine o’clock and then think, “hmm what am I gonna do today? What am I gonna focus on today? What business am I going to work on?”
They already know exactly what they plan to accomplish that day. In fact, that planning begins the night before or the week before, not the morning of. And, in some cases the month or quarter before.
There is no mystery as to what rich people are up to. They know what is on their schedule. They know what their goals are for the week, for the month, for the quarter, and for the year. And that is so crucial if you want to stop being broke and start being rich.
In order to achieve your goals, you need to wake up every day with a purpose
Focus on what you can work with.
“We waste so much time focusing on what is withheld from us,” writes James Clear.
In particular, it occurs “after we slip up and get off track from our goals,” he states. “Anytime we don’t do the things we want to do — start a business, eat healthily, go to the gym — we come up with excuses,” such as I don’t have enough money or I’m not sure what to do.”
The solution, according to Clear, is to change your mindset by thinking, “I can work with this.”
“Because you can,” he promises you. “The truth is that most of us start in the same place — no money, no resources, no contacts, no experience — but some people (the winners) choose to get started anyway.”
Even though it’s not easy, “your life will be better if you choose to feel uncomfortable and make progress, rather than complain and make excuses,” he claims. “Shift your focus from what is withheld from you to what is available to you.”
“It’s rare that your circumstances prevent you from making any progress. You might not like where you have to start. Your progress might be slow and unsexy,” Clear concludes. “But you can work with this.”
Live within your means.
Living within your means does not mean sacrificing life experiences or being a “cheapskate”. Instead, it “simply means that you’re spending less or equal than you’re making each month,” explains Deanna Ritchie in a previous Due article. “As a result, you aren’t putting yourself into debt by living off of plastic. And more importantly, this will help you create a more stable financial future.”
“Of course, living within your means requires discipline and a little sacrifice,” adds Denna. “However, if you stick with it, you’ll reap the following rewards, in addition to avoiding debt:”
- There is less anxiety and stress.
- Your health and success improve as a result of it.
- Your credit score won’t be the focus of your attention.
- Having the ability to build wealth.
- There will be more freedom for you.
- Your finances will be secure.
Is it possible to live within your means without denying yourself? Absolutely. Here are a couple of ideas;
- Use the 50/30/20 rule to create a budget. Basically, you spend 50% of your take-home income on food and housing, 30% on wants, and 20% on savings.
- By automating your savings, you can save before you spend. Put a percentage of your paycheck directly into a savings or retirement account.
- Get rid of frivolous expenses, like gym memberships you no longer use.
- Stop keeping up the Joneses. Perhaps they are putting on the appearance of being wealthy. It is possible, however, that they are seriously in debt.
- Delay gratification. If you plan to buy groceries, clothing, electronics, or travel, you might want to wait for a sale or discount.
- Restructure your debt. Make it easier for you to repay your debts. You may be able to negotiate a better interest rate with lenders or consolidate your debts.
Get over you fear of investing.
When live within your means something funny happens. You end up with some extra money. It might not be much. But, it’s something.
Rather then blowing this surplus, pay off a credit card bill or build an emergency fund. After that? Invest it. Investing your money is the key to growing it and building wealth.
I know that investing can give some of you a panic attack. But, there are plenty of low-risk investment options out there. Some of my favorite include;
- High-yield savings account. These are federally insured savings accounts that have higher interest rates than the national average.
- Short-term bonds. A short-term bond fund invests in securities that mature within one to three years. They can include commercial papers, certificates of deposit, and government securities.
- TIPs. This a type of U.S. Treasury bond that protects investors against inflation.
- Dividend-paying stocks. By investing in dividend stocks, you can earn another income source and build wealth gradually.
- Preferred stocks. These offer shareholder protection and priority to dividends.
- Annuities. After maxing out other retirement accounts, buying an annuity provides a guaranteed lifetime income.
- P2P lending. I’ve used Lending Club in the past and I’ve made 5 and 7 percent.
- Online real estate. With these platforms you can invest in commercial or residential property.
Also, you can use robo-advisors to automate investments, such as Betterment, M1 Finance, or Wealthfront.
Keep goals in plain sight.
“Write them down on a piece of paper that you see daily as reminders or on a post-it note wrapped around your credit card,” says personal finance expert Andrea Woroch. “You can even make a financial vision board where you paste pictures of your dream home you want to buy or on your dream trip with your family.”
“These visuals will help you stick to your goals and positive money management will ultimately lead to a long-lasting change in your money mindset.”
Stop hanging out with Buttpews.
What’s a “Buttpew?” Well, I also call them anti-wealth hackers. These are the people who are broke, make excuses and whin about everything. They also drag their feet when making decisions. And, for them, the glass is always half-empty.
In order to reach your goal of breaking free from a broke mindset, you need to stop wasting your team with these types of people.
Read more books.
Would you be surprised to learn that the rich prefer to be educated over entertained? Well, that’s what Thomas C. Corley, who studied the daily habits of 177 self-made millionaires for five years, in his book Change Your Habits, Change Your Life has found. As Corley, points out, 88% of rich people “devote thirty minutes or more each day to self-education or self-improvement reading” and that “most did not read for entertainment.”
“The rich read to acquire or maintain knowledge,” he adds. What are they reading exactly? Among the books that the rich read, says Corley, are biographies of successful people, history books, and self-help books.
While reading is strongly advised, you can also listen to podcasts or watch financial news or YouTube videos. In my opinion, it’s not really the medium. The fact that you’re improving your financial literacy is a surefire way to develop a growth mindset.
Take advantage of debt strategically.
There are a lot of financial experts who say you should avoid debt like the plague. But, debt isn’t always a bad thing.
As an example, good credit is necessary if you plan to buy a car or home. To accomplish this goal, a credit card can be applied for and used responsibly. You can also use debt for your education, property acquisition, or business starts and/or growth.
An example of debt not being used strategically? Don’t max out your credit card on VIP tickets to a music festival if you can’t pay off the balance.
As long as you’re using debt wisely, and paying off the balance, don’t be afraid of it. Besides. You might just get a free trip to the Dominican Republic out of it.
Appreciate what you have.
No matter how broke you think you are, be grateful for everything you have. You won’t get anywhere by stressing about things you don’t have. However, taking care of what you have now will lead to more in the future.
Imagine having a mess of finances, yet you want a fresh pair of Jordans. As soon as your income tax refund comes in, you’ll be able to buy these sneakers. But, as a result, you are neither appreciating nor satisfied with what you already have. It’s because of this that you’re in financial trouble.