It’s a common misconception that wealth equates to a number in a bank account. After all, high net worth individuals rarely keep a large amount in cash. If they did, their money wouldn’t be working for them!
It can be argued that wealth does not have a straightforward definition. Is it having a million dollars? Is it owning a home? Is it having so many cash-flowing assets that you no longer have to work a job? Is it the ability to spend money freely without guilt or the fear of becoming broke?
If you ask 5 different people to define “wealth” or “being rich” you’d most likely get 5 different answers. You probably have your own definition as well, maybe even one that changes over time.
The common thread when it comes to wealth, however, is the idea of abundance. And many believe that having an abundance mindset is one of the first steps to building wealth.
Abundance vs. Scarcity
Abundance is defined as a “very large quantity of something.” In a nutshell, an abundant or “wealthy mindset” is having the view that there are plenty of resources in the world for all. This view gets internalized and shows up in beliefs you have for yourself. With an abundant mindset, you believe that there’s enough pie to go around for everyone and you’re capable of having plenty of slices for yourself.
On the contrary, scarcity is defined as a shortage or not having “enough.” A scarcity mindset is the belief that there isn’t enough to go around. If you have a scarcity mindset, you may have a constant perception or feeling that no matter what, you’ll never have enough.
So what determines our mindset and why does it matter?
Your Relationship With Money
To understand our attitudes and beliefs about money, we have to understand our history with it.
We all have complex relationships with money. These relationships are often influenced by the financial circumstances we are born into. They’re further shaped by what we learn from our parents, caretakers, educators, and the media. And of course, our own personal experiences ultimately affect our individual relationships with money.
It’s important to note that there isn’t a simple formula that explains why we are the way we are with money. Having wealthy parents does not always translate to a positive relationship with money. Nor does coming from a low-income household always lead to frugal behaviors. What’s important is to build self-awareness around our relationship with money and understand how that relationship impacts our money mindset.
If we have good relationships with money and look at money in a positive light, we’re more likely to have an abundance–or wealthy–mindset. If we don’t have good relationships with money, we are likely to view the world with a scarcity mindset.
Why Does A Wealthy Mindset Matter?
All this talk about our relationships with money and our personal beliefs about money–how does this translate into actual money or wealth?
It’s quite simple. Our views and beliefs affect every decision we make about money, big or small. Most outcomes in our lives come as the result of many small choices and decisions.
Having a negative relationship with money can often lead to fear, inaction, avoidance, or other behaviors that prevent growth or opportunities. It can lead to limited knowledge on finances or being closed off to new ideas. Whereas having a positive relationship with money can motivate us to pursue new jobs or promotions, start businesses, buy real estate or simply start investing.
While we can’t control the circumstances we were born into or how institutions in society are structured, we do have agency over our day-to-day decisions.
3 Ways to Think Like A Wealthy Person
As Albert Einstein said, “insanity is doing the same thing over and over and expecting a different result.” If building wealth is a goal of yours and you don’t have a clear path there, it’s worth asking yourself what you could be doing differently. Is there a shift you can make in your mindset to unblock that path?
Below are 3 examples of a wealthy mindset that you can start exploring.
1. Think bigger
People with a scarcity mindset often have limiting beliefs. Limiting beliefs are false beliefs that prevent us from growth. For example, some people think it’s impossible for them to make more money so they give up on trying. This mindset can lead people to have one income source, to stay at the same job, and to never work on their personal or professional development. Limiting beliefs are closely tied to our money scripts–or our personal narratives about money.
To shift into a wealthy mindset, people must believe it’s possible to make more money than their current annual salary or pay. Even if it’s a long path to get to more money, or they’ve never seen it done, simply believing there is a path goes a long way. Since people with a wealthy mindset know possibilities are endless, they’re constantly thinking of new ways to make money, thinking of ways to invest, and thinking of how to make their money grow. Being open to abundance can attract abundance.
2. Think long-term
Thinking short-term is another characteristic of a scarcity mindset. People who think short-term are typically only focused on right now, and how to get by. This is understandable if a person’s current financial situation is extremely tight. With rising prices and low wages, there’s a greater likelihood of living paycheck to paycheck.
While it’s okay to acknowledge the reality of current financial struggles, people who want to build wealth must start to also acknowledge their long-term financial health. Becoming wealthy requires some planning and strategic decision-making. Even if a path towards wealth seems non-existent, someone with a wealthy mindset will create their own path. It starts with small mindset shifts and intentional decisions.
For example, should you stay in your job or industry or can you start building skills that will help you land a better-paying job? Should you buy the newest phone when it comes out, or can you save that money for real estate that will eventually provide you passive income? While a shift in mindset won’t change your finances overnight, it does make a difference.
Furthermore, since people with a wealthy mindset think about the future, they are more likely to invest. Using some money now for future returns is an important piece of building long-term wealth. Stocks, bonds, mutual funds, ETFs, 401(k)s, real estate, businesses, etc. are just a few of the many tools that wealthy people utilize to build wealth for the long term.
3. Trade value–not time–for money
People with a scarcity mindset typically believe they are worth whatever their hourly rate or annual salary is. It’s difficult for them to see beyond the number they currently make. And if they do see beyond that #, it’s usually no more than 3-15% more (or whatever your company might offer with an annual raise or a big promotion). A scarcity mindset is often correlated with trading time for money. Since time is finite, this puts a cap to how much money someone believes they can make.
Wealthy people, on the other hand, think in terms of trading value for money. Value doesn’t have a time stamp. Therefore, rich people work to increase their value with a goal to earn more in less time as opposed to earning more by working for more time. For people starting from scratch, earning money by trading time is unavoidable. But the key is deciding how to utilize some of that earned money towards creating value. Building a business, pursuing personal or professional skills, and investing money all share the goal of increasing value and earning potential.
What’s On Your Mind?
Now that you have an idea of what a wealthy mindset looks like, do you have one? And if you don’t, can you think of steps you can take towards making these shifts?
It may not be easy to believe in abundance if you’ve never experienced it, but in order to experience it, you have to attract it!
