Imagine a world where there is a recipe you can follow to get rich. What ingredients do you think it will contain? High paying job? Diversified investment portfolio? Disciplined economy?
No arguments! Each of these elements can certainly play a role in the pursuit of financial success. But something even more fundamental: what you might not expect to be as important as it is is your thinking.
Or, to be more precise, having what psychologist Dr. Carol Dweck calls a growth mindset.
While you can never figure out your way to a million dollars, your beliefs about what it takes to be successful, combined with how you approach problems and understand the world, can greatly affect your bank balance.
We’re going to break down how the two are connected by defining what a growth mindset is, outlining its importance in personal finance, and offering some tips for harnessing its money-making potential. Let’s dive in!
An Introduction to Growth Thinking
Why are some of us crippled by failure while others take it in stride? Why do so many people struggle with minor setbacks while others bounce back quickly from the most difficult trials? And why do some people settle for mediocrity when others can’t accept anything less than perfection?
Decades ago, Dr. Dweck and her colleagues answered these questions. This research led her to a conclusion that has now permeated the mass consciousness, into the public school curriculum, and has become the basis for the public understanding of success. Dweck found that people fall into 1 of 2 camps with regard to their underlying beliefs about learning and knowledge.
We either have a fixed mindset or a growth mindset.
What is the difference between growth and fixed mindset?
With the fixed mindset, you believe that your talents, skills, abilities, intelligence, and character are fixed. You think that they do not change throughout your life, and therefore perceive talent (that is, what you were born with) as the key to achievement. As a result, if you cannot do something, there is no point in trying. In fact, you are resigned to your fate.
With a growth mindset, the opposite is true. You believe that everything from your intelligence and abilities to your overall destiny in life can change. With time and effort, everything is possible; it’s up to you to make it happen. Also, failure is an opportunity to learn and grow, not a sure sign that you are not up to the task.
Why is mindset important for developing positive habits? One fairy tale
On May 6, 1954, Roger Bannister ran the mile in 3 minutes 59.4 seconds.
He broke a record that had stood since time immemorial and accomplished a feat that modern experts consider impossible. It was believed that the human body could not move fast enough to run a mile in less than 4 minutes until Bannister showed up and proved everyone wrong.
But this is not the most remarkable part of this story. Even more remarkable, more than 1,000 runners have completed the 4-minute mile since then (one of them did so just 46 days after Bannister). Now even high school students are doing it.
Lesson? First, everything is impossible until someone does it. And second, you have to believe that something is possible for it to happen. As Shiv Kera once said, “If you can see the invisible, you can achieve the impossible.”
Bannister saw the invisible. And once other people realized that a mile under 4 minutes was an option, they could see (and do) it too. Think about it when it comes to fixed mindset, not growth. Could Bannister break this record without believing it was possible?
Probably no.
The same applies to any positive habit, whether you want to quit smoking, switch to a healthier diet, or gain weight with money. To see any point in trying, you must first believe that the result is achievable. You must think that your efforts will bear fruit, that the sacrifices are worth it, and that dedication and hard work will get you where you want to go. In other words, you need a growth mindset.
Implementing a Growth Mindset in 4 Steps
The question arises: how to develop a growth mindset in relation to money, if you have thought all your life that your skills and abilities will remain unchanged for life? When you dodge problems because a) you’re afraid of failure and b) trying seems pointless? Here are four strategies to get you started.
1. Strength still
“I can’t invest; I do not know how”. “I don’t know how to get out of debt.” “Budgeting doesn’t make sense to me.” “I don’t understand how to save money every month.”
Do any of these thoughts sound familiar? An easy and powerful way to change your point of view is to put “bye” at the end of every sentence. For example, if you’ve given up money because you “just don’t know how to handle money,” tell yourself that you “just don’t know how to handle money yet.” Similarly, it’s not that you don’t know how to invest; you don’t know how to invest yet.
Suddenly there is hope! Strength still leaves the door open for positive change and rethinks the attitude towards money.
2. Replace the word “failure” with “learning”.
Failure is a dirty word when you have a fixed mindset. However, failure is not only a natural part of life, but also (in terms of the growth mindset) the cornerstone of progress. As Dweck says, “In one world, effort is bad. This, like failure, means that you are not smart or talented. If you were, you wouldn’t have to make the effort. In another world, effort is what makes you smart or talented.”
No one who succeeds in life does it without their share of failure. Why? Because it teaches you what you need to do differently next time! No failure, no lesson. So don’t say, “I can’t do it.” Instead, say, “I’m learning.” This will change your perspective on making mistakes and motivate you to keep trying.
3. Recognize and accept your weaknesses
It is always tempting to hide from our failures and imperfections. However, nothing good will come from the fact that we hide our heads in the sand. Instead, recognizing, confronting, and accepting our problems and weaknesses is the key to overcoming them.
Remember, no one is perfect! If your current financial situation leaves much to be desired, then you are certainly not alone. However, as with a recovering addict, the first step to making a difference is to admit there is a problem. If you understand that you need a tool that invests your money on autopilot instead of keeping it in mind, it’s pretty easy to set up and get started.
4. Remember that your brain is plastic.
Never forget that our brain can also change throughout life. A rapidly growing body of research shows that they are remarkably malleable—a trait that allows us to recover from brain injuries, grow new brain cells, shape and strengthen neurological pathways, and acquire new skills.
This is called neuroplasticity and it is a strong argument against the idea that our skills and abilities are fixed! On the contrary, your brain can and will change for the better (which gives additional confidence in the strength yet).
5 ways to use the growth mindset to multiply your money
This is all well and good. But how can you use a growth mindset to strengthen your bank balance? Here are five suggestions to help you get started.
1. Action instead of avoidance
Do an audit of your current finances and consider what you could be doing differently. Whether you’re trying to pay off your credit card debt, save up for your retirement, or can’t muster the courage to ask for a raise, a growth mindset will help you acknowledge the problem and take the first steps towards solving it. .
2. Celebrate the fight
Wealth creation does not happen overnight. You must be purposeful, persistent and patient as you work towards your goal! Use your growth mindset to rethink the situation. Remember: you don’t have financial freedom yet. Not only is the potential for success exciting, but you are also happy to take on the challenge, develop the necessary skills, and overcome any obstacles that come your way.
3. Keep learning
A growth mindset goes hand in hand with a desire to learn. So, let those thoughts of failure fall away and instead focus on learning, adapting, and mastering better financial habits. Whether it’s effective budgeting, streamlining your savings process, managing debt wisely, or investing in real estate, you’ll soon have the skills you need to grow your net worth.
4. Seek support
People with a growth mindset are always looking for new tools and tactics to help them realize their ambitions more effectively. Therefore, do not hesitate to seek help from professionals. With the support of accountants, tax advisors and financial advisors, you will have access to important information that will help you strengthen your financial position and avoid costly mistakes.
5. Take risks
All failures are learning opportunities for people with a growth mindset, so financial risks become less daunting. Whether you forgo a 9 to 5 job to pursue a business idea, or pursue a riskier investment strategy, you’ll pave the way for more cash rewards in the process.
This post originally appeared on Savoteur.