How to build a positive wealth mindset on your road to financial independence.

Welcome to Finance and Fury. Positive wealth mindset, or a growth mindset for your finances To start with – lets imagine that you’ve hit the lotto jackpot! Say you win $20m – it is a lot of money – enough for any person to reasonably retire on So, now that you may be able to be considered FI - what are you doing with your time? Where are you living? And how are you living your life? This might be pretty hard to actually think about for some people - it depends on much time you’ve actually spent thinking about it before If you had $20m of financial resources at your disposal - how would you spend your time? and what would you do? and would all your problems be solved? For a lot of people – these aren’t the focus when it comes to fantasising about winning the lotto – it is on how this $20m would be spent The same goes for FI in general – the focus can be solely on the target of what we need to retire – and not on the rest of the picture – what we will be doing – This is where having a mindset not only to focus on personal growth but also financial growth is very important Going back to the lotto winner - With $20m – if you invested the full balance – you could reasonably generate around $1m of passive income p.a. (assuming 5%) – after taxes – may be closer to $524k of income (not assuming any trust structures are implemented) Does this now mean that this individual is now financially independent? FI is a two-sided problem to tackle First - it doesn’t really matter how much money you have, it more so matters how you much you need to have - what would you do with your independence? And how much would that cost? This first focus is about defining what independence actually is. And that’s an issue to really tackle because if you are just aiming for that million-dollars-a-year of income, and it’s only going to cost you $80,000 then financial independence is almost something that may never be achieved - if you think it’s a million dollars a year This brings in the second part - how much you actually have – or believe that you can have – back to the economic problem – finite resources for the potential of unlimited wants These unlimited wants can get in our way – and cloud our mindset when it comes to FI and wealth Very easy these days with social media and the internet – can see how the top 1% of the 1% live Money provides ability to have independence but creating a picture of what your independence looks like is the best place to start – which is all about having the right mindset in place A trap that a lot of people can fall into when winning the lotto is not being in a wealth mindset when they win the money – think of it as a money maturity – if you have been able to accumulate $3m over time, then getting another $3m lump sum likely means you have the right mindset and knowledge to deal with these additional funds Examples of people who win the lotto - you get a lot of money meeting all your goals for financial independence – if you win $20m you’ve likely got all the FI - but that’s a lot of responsibility in your hands in one day. unless you’ve got the habits formed around money and really fully prepared for receiving that level of responsibility, it can actually go pretty wrong without a plan. It’s actually almost impossible to prepare for - so last minute - to get such a large level of funds and to actually change your mindset and be ready to reach that financial independence If you are going from being broke to now having $20m at your disposal – this can create a very uncomfortable feeling – we are hedonic and revert back to our normal state of being – for someone without money – and if this is their mindset – then their subconscious thoughts can turn into actions to try and get rid of this money as soon as possible Our mindset can be our best friend - or our worst enemy I’m sure many people out there are familiar with the potential for our own self-limiting beliefs – we can be our own worst enemies Our tendencies for obsession or Rumination can get in the way of focusing on the positives or what we can achieve – Rumination is from our brains focusing on one bad factor and repeating this to ourselves - Has your head ever been filled with one single thought that just keep repeating? These tend not to be good things - tend to be sad or dark – regrets that we have – rumination is a cycle where we focus on the bad more than we do the good If this becomes engrained, this habit can be dangerous – the more we focus on the bad the more we continue to focus on the bad The issue is that we can’t just turn it off – and tell ourselves to stop thinking about the bad side of things – or what we might fail at or have failed at financially Ironic process theory - White bear or pink elephant - Trying to avoid thinking about it makes you want to think about it more. If you are constantly thinking about the bad financial decisions you have made – can lead to further self limiting beliefs – which translate into actions that turn our lives into a self fulfilling prophecy We think we cant do something, then we don’t do it, so we never achieve the thing that we thought we couldn’t do   However – our mindsets can be our best friend – There’s lots of research out there on an individual’s attitude and mindset to their achievements – Sports stars – spend time visualising about what they will achieve in their respective sports Carol Dweck coined the terms fixed mindset and growth mindset  Came from studying students' attitudes about failure - some students rebounded while other students seemed devastated by even the smallest setbacks When students believe they can get smarter, they understand that effort makes them stronger. Therefore they put in extra time and effort, and that leads to higher achievement. Looking at the wiring in the brain and studies in neuroscience – they show us that the brain very malleable The process of this malleability could probably be best called brain plasticity – that is, how the connectivity between neurons in our brains can change with experience and thoughts With practice - neural networks can grow new connections, strengthen existing ones, and build insulation that speeds transmission of impulses – think of walking – you probably don’t have to even think about walking, your brain just does it – but when you were an infant you needed to learn from scratch – people with spinal cord or brain injuries need to relearn this – comes from the repeated practice of walking – over time you don’t need to think about it There is a link between mindsets and achievement - if you believe your brain can grow - you behave differently – the same is for anything in your own life – If you don’t believe that you can lose weight – what actions will you take to lose weight? If you don’t believe that you can accumulate wealth and retire FI – then what actions will you take?   Begs the question – how can we change our mindsets? One way is to identify where you may have fixed mindset tendencies so that you can work to become more growth minded. Visualisation – having something to focus towards – Goals form part of this – but knowing exactly what you want your life to look like – and focusing on this – either with physical pictures or mental picture – regularly focusing on this – helps to cement an idea about what you are working towards – But you need to believe that it is achievable Affirmations – repeating to yourself – make it a daily habit – How to make yourself believe that you can be FI and accumulate wealth – which in turn can change your actions – Tell yourself this very thing – affirmations are powerful – opposite to ruminations – as opposed to focusing on negative – train yourself to focus on the positive – and what you want to achieve – if you are down – keep repeating to yourself you are happy and positive and believe it - need to regain control over your mindset which will determine your behaviours in responses to the event. The first question should be “what can be done to get the best outcome?”. Equation: Event + Response = Outcome It is important to change your responses if your current ones aren’t getting you the outcomes you are after. If you continue the same behaviour (responses) then you get the same results. This is the process of learning through failure You can’t control the event, but you can control your response which leads to a better outcome. taking 100% responsibility makes life simpler. If you accept that you have 100% responsibility, therefore control you can become the master of your own success - the world doesn’t owe you anything, you have to create it! Give up complaining! We are all guilty of complaining, either voicing complaints to others or mumbling them to ourselves. The truth is that we complain about events that we know can yield a better outcome than our current situation. We don’t complain about things that just exist. For instance, we don’t complain about gravity being gravity. To give up complaining, change is needed in your response. We normally don’t though as changing a response can be uncomfortable. People may judge you but who cares? It will take effort but it is worth it! Complaining is pointless in most situations as we normally complain to the wrong people anyway. You will complain about your partner to your friends, about your boss to other employees. We never talk to the person we have the issues with – also is similar to rumination – focusing on the negative Instead of complaining – focus on a positive affirmation The main thing is to first – believe that you can do it – does sound corny, but it is the cornerstone to building a positive wealth mindset – In summary – You can be your own best friend or worst enemy – what you think about and focus on can become a reality So why not focus on what you want to achieve and tell yourself you can achieve it Then let your actions do the talking through forming positive actions and habits to get you towards your goals Thank you for listening to today's episode. 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