There’s A Mindset You Need To Be Wealthy…And It’s Probably Not The One You Have Now
“The future is always ideal: The fridge is stocked, the weather clear, the train runs on schedule and meetings end on time. Today, well, stuff happens.” — Hara Estroff Marano (2005)
I’ve always been a saver. I come up with a goal, and I save until I reach it. I remember one of my first experiences with money as a kid; I saved up my allowance money to buy a Nintendo 64, an extra controller, and a racing game. I wanted to buy all three things at the same time because the system was useless without a game and the racing game was only fun if you could race against another person.
I had to save my allowance for a whole year to afford the purchase, which seemed like an impossible goal for an eight year old, but finally I gave the money to my mom and we went to the store to buy it. I even got to keep some of my money because the game had gone down in price!
This experience taught me the value of delayed gratification, the importance of a plan, and the power of money (my mom didn’t want me to get the game, but it was my money so she agreed to let me spend it on what I wanted).
As an adult I’ve used these skills time and time again from saving for a down payment on a house to delaying purchases as a value spender. But as goals become more long term and the rewards become more abstract and uncertain (for instance, saving to achieve financial independence) it becomes harder and harder to stay the course.
Most people discount the future because reaching for a far off goal takes a lot more concentration and effort than saving for something small. That’s why it’s easier to train for and run a 5K than it is to stay in shape your whole life. You’ll probably live longer if you stay healthy and run everyday, but it isn’t certain how much longer or if those years will be enjoyable or even what you’ll be doing then. The future just seems too far off for most people to take it seriously.
Our hardwired mindset of seeking short-term gratification poses serious challenges for our savings in the long run, not only as individuals but also as a nation. Americans’ average savings rate is hovering between zero and five percent, and millennials are spending about two percent more than they earn (making their savings rate negative 2%).
We’re becoming a nation that not only can’t pay its debt but one that also can’t invest in its future. It’s hardly an exaggeration to say that we are experiencing a national fiscal emergency, and it’s because of the way we think about money.
A wise friend once told me that he thinks about money differently than most people. When I pressed him about it, he gave me a surprising answer. “There are two kinds of people,” he said. “There are people who see money as a means to buy things and then there are people like me for whom money itself is the end goal.”
People who see money as a way to buy things tend to give away their money as quickly as possible so that they can have more stuff (spelled “c-r-a-p”). These people are literally converting intangible numbers in their bank account into tangible goods and services that they can hold, feel, and display.
“I hate losing money,” my friend continued. “Seeing money leave my account, regardless of the purchase, upsets me more than the joy I get from the thing I’m buying.”
This is a really valuable insight because my friend is able to mentally make the intangible numbers on his screen into a tangible reward. It’s not that he’s depriving himself by not buying things he doesn’t need, it’s that he genuinely gets greater pleasure from saving and investing than from spending and buying. That might be hard to accept, but it’s really not a superpower. Even though enjoying saving comes naturally to him, it’s a skill that anyone can learn..
The key to saving is making intangible ideas real and meaningful to you — to bring the far away future into the present. Many studies have shown that we tend to overspend when using a credit card instead of cash, and that’s because cash is tangible. We can see what we’re giving up when we hand over our little green bills, but that sense of loss is invisible when we swipe a card.
And this mental magic trick won’t just help you at the bank. My aforementioned friend is one of the most physically fit people I know, and I don’t think that’s an accident. I’m betting he can clearly visualize his intangible future self living longer, being happier, and frankly, looking hotter than most of us will. He can also see how the steps he takes today can make that future a reality.
So how can we emulate this mindset? We can learn to actively appreciate the future outcomes of our work by visualizing the reward. If your goal is to save up to pay off your student loans, every time you make a payment towards the loan close your eyes for a moment. Breathe. Think about how much closer you are to being debt-free. Imagine what it will feel like to be 100 percent in control of your money. Create a calendar of your payments and keep track of how the number drops over time.
If you are exercising and you want to make the habit permanent, take a moment after you finish your workout to imagine what it will feel like to be able to run without wheezing. Imagine people doing a double take when they see you walk down the street to admire you. Visualize living long into your old age with energy, strength, and flexibility.
Start small if you need to. You can begin by creating any goal, financial or otherwise, that you can accomplish in a week. Once you’ve achieved that goal, envision a new goal that takes two weeks or a month. Build yourself up slowly to bigger and bigger goals, but most importantly, with every goal you achieve, reflect on how good it feels to meet it, and how good it will feel to achieve the next goal. If you fail to meet a goal, reflect on what you could have done better, and how you can correct course to get there. Every failure is an opportunity to become better.
Remember that we’ve become a society that lives on the edge of a knife. We are deep in debt as a country, and many of us are personally in debt too. Worthless tangible stuff (crap) litters the floor around our feet, and more gets piled there every day. The scary future where we can no longer afford to buy the comforts we take for granted on borrowed money and time is intangible, so we discount it. But visualizing the future can help us understand the real cost (or reward) of our actions.
What steps will you take today to secure your future, financially and otherwise, before time is no longer on your side?
Nathan is the CEO of Monte Largo Financial Advisors LLC.