Three Ways To Think About Money
How Your Money Mindset Will Very Likely Influence Your Financial Outcomes
Chief Executive Officer, Founder
Todd Sixt is the CEO of Strait & Sound. He is a successful and seasoned leader of financial service teams. His focus is to ensure Strait & Sound’s clients are provided with a first-class experience and that the work delivered by our people is unsurpassed in the financial services industry. At his core, he believes in excellence. Todd is deeply committed to helping clients achieve complete financial independence.
Has it ever occurred to you that money has a mindset? Or maybe better said, the way you look at money—your mindset—could really influence what happens with your money. My goal, when working with clients, is to help them achieve complete financial independence so they never have to worry about money again. But I have to be honest about something. A person’s money mindset is probably the number one factor that will determine their financial outcomes.
A money mindset is much bigger than how you think about money, the goals you’ve set or even the disciplines you’ve adopted to grow your wealth. A money mindset is how you feel about money and how your life experiences, both positive and negative, have shaped those feelings. After serving hundreds of affluent families for more than 20 years, I’ve come to recognize three distinct money mindsets. I’ll bet you’ll see something of yourself in what I’m about to describe and probably something of your loved ones. Let’s explore how money mindsets influence financial outcomes.
Three Money Mindsets
Here are the three money mindsets I most commonly encounter: scarcity, abundance and realism. First, I’ll describe these mindsets in greater detail. Second, I’ll describe how people often end up with these mindsets, based on the stories clients have told me over the years. Finally, I’ll outline some risks associated with these money mindsets so you can consider how not to let your default money mindset get in the way of your goals.
The scarcity money mindset has to do with how someone feels about their wealth. No matter how much money they have, no matter what the numbers tell them, they just don’t feel like it’s enough. Don’t get me wrong. They know they’re not poor. They don’t have to worry about where their next meal will come from, where they’ll sleep tonight or even if they’ll run out of money soon. The real challenge for someone with a scarcity mindset is that they can always think of scenarios where they go broke.
Usually, in my experience, someone with a scarcity mindset had something pretty traumatic happen to them when they were young, often as a child. The interesting thing is that it doesn’t seem to matter if they were born into a family with little or no money. It’s the event, the moment when things went wrong, that shapes them. Somewhere deep inside, they still feel the sting of that moment and they’ve never quite been able to shake it.
The abundance money mindset is almost the opposite. This mindset is about believing there will be more than enough, even when the numbers don’t support that sentiment. I often find that people who demonstrate an abundance money mindset didn’t experience trauma in their childhood. They often grew up middle-class. They probably went to a good school and got a good job coming out of college. Abundance has just seemed to follow them. They don’t really overspend and their financial disciplines are good enough. But they’re default position on most things in life seems to be—it will all work out in the end, somehow.
Often, people with an abundance mindset are high income earners. It’s not as if life has been easy for them. But they’ve pretty much always made good money, for as far back as they can remember. By personality type, they’re usually glass-half-full kind of people. They’re buoyant and tend to bounce back from adversity quickly. They don’t fear the future because, for the most part, they don’t think about it a lot. They tend to believe that tomorrow and the day after that and for all the days ahead, life will be pretty good.
Those with a realistic money mindset are neither influenced by scarcity nor abundance. They tend to believe what the numbers tell them, even though they really can’t predict the future. They work with someone like me to create a financial plan, adopt some financial disciplines and then watch, carefully and at defined intervals, how things are going. They recognize that their wealth could go up or down. They are prepared, if need be, to adjust a number of things, like how long they continue to work before retiring, how much money they need to save every year and how much risk they need to take.
There is a sobriety to the way they think about money. They want to take control of their situation by making moves that increase the likelihood of achieving their goals. They don’t really worry about money, but they also don’t take their eyes off their money. They pay attention to the details and can pretty much tell you, at any given moment, where they are on their journey to complete financial independence.