Posted by There’s so much more to it than how much money you have in the bank at any one time: you have to be disciplined. Your money mindset is key to your success – so here are some of my top tips to see you right.
Comparison is the thief of joy
Don’t be driven to compete with other people and what they have (or appear to), or how they’re spending their cash.
When I was a student, I came to London to visit some friends for a weekend. They’d gotten good jobs in banking and were earning big money, whilst I was still back in Ireland studying architecture. Because they were earning so much money, and had expense accounts, they would think nothing of dropping £1000 on a night out.
I remember coming back wondering how I could ever compete with that.
The reality is, I didn’t have to. Don’t feel like you need to keep up with your mates if they’ve got more money than you and it’s making you feel like crap – putting yourself in debt to save face isn’t going to improve the situation!
Be clear on your goals
In 2008, before the Crash, 136 helicopters were registered in Ireland. Two years later, around three-quarters of those helicopters had been repossessed, because the people that had bought them didn’t have the money to actually pay for them. They just wanted to look like bigshots flying around in a helicopter, on borrowed money.
If your goal is to one day own a helicopter and look flash, then have at it. But if not, then get your own mind set on what your goals are and what your future is. I mean, if drinking a thousand euros or pounds worth of alcohol or buying a helicopter is appealing to you, then go ahead and do it! But make sure that you’re not comparing yourself with somebody who has completely different values in life and trying to emulate them – your two interpretations of success could be poles apart.
What matters is defining success on your own terms. Ask yourself what truly brings you satisfaction and financial security in the long run, not what makes you look successful to others.
Play the long game
Very few people are thinking about 10, 20 or even 40 years from now. It’s easy to think that when you’re a bit older, you’ll start putting money aside, because right now you want to have fun. And that’s one of the big problems with financial wisdom: most people want instant gratification.
If the bank has given them a loan and they want to put it into their lifestyle, they haven’t actually made that money. They’ve just got access to it. Understand that money is like a snowball: if you keep rolling it, it keeps getting bigger, but as soon as you stop rolling that snowball, it just sits there at the same static amount. And then it starts to melt and shrink away.
It’s the very same way with money, retirement and the ability to grow investments. If you’re building a nest egg but start chipping away at it early, you’ll end up with very little to show for it when you’re older.
Really think about saving now, because at some point in the future, you’ll be asking yourself why you didn’t start saving a couple of years ago. They always say that the best time to buy a property or to start saving for your retirement is yesterday. And when’s the next best time? Right now.
Plan for the worst
There’s an old saying in carpentry – “Measure twice, cut once”, and that’s something you should do when it comes to your money. Never forget that your portfolio is completely connected to the wider economy and that elements beyond your control can all have an impact on your money.
When you buy a property you may assume certain figures and interest rates, but these are never static. Always build in a contingency to give yourself a buffer: when you’re working out a budget, make small adjustments (eg 2, 5 or 7%) to see how they play out on the overall metrics of your deal. You could find that all it takes is for a relatively small rise in interest rates and you’re completely over-extended.
Of course, you can plan and plan but external events occur outside your control and catch you unawares. Continuity bias might make you assume that when everything is going great it’s going to stay that way: things that could change your personal circumstances or the global market overnight are rarely signposted, after all!
But it’s always a good idea to make a plan in the event of something bad happening – if one deal goes wrong, will it pull down your entire portfolio? Have you tied your borrowing into other assets? Don’t paint yourself into a corner, leave yourself a little wiggle room. It may seem like I’m catastrophising now but this single piece of advice may just prove invaluable to you in the future.
Don’t let your emotions get involved
If you’re selling a property, you might find yourself getting emotionally locked in on a price – for whatever reason, there’s a number in your head and you want to stick to it! So if you then receive a lower offer, it can feel like an insult.
I‘ve been in this situation before and it took a lot of reflection to work out whether I was actually receiving a fair offer but just wasn’t seeing it that way. If that happens to you, take a moment to consider whether you’re analysing the situation correctly or if you’re letting your emotions get in the way.
Remember that the property market is a cycle: think about the wheel of a bike going round and round. If you’re in it for the long haul, you’ve got to understand that the cycle is constantly going, and over the course of your career, prices will fluctuate – they’ll go up, and then they’ll inevitably go back down. You’ve got to have the resilience to weather that cycle: don’t get hung up on prices. When a property price reaches its maximum, it doesn’t mean it’s going to stay there!
Cultivate a positive relationship with money
You can’t underestimate how important your money mindset is. Everyone has their own unique outlook when it comes to money and finances, and understanding this mindset is key in order to create a strong financial future.
Do you see money as something that’s hard to come by? Do you feel guilty about wanting more of it? These limiting beliefs can sabotage your financial growth without you even realising it, so it’s important that you become aware of your thoughts and feelings around money – take note of them, learn from them, and actively work on transforming any negative beliefs into positive ones.
When it comes to investment, taking the time to develop a positive money mindset first is invaluable. By doing so, you’ll be able to achieve success with your financial goals by taking confident actions and steps towards the life you want!
Remember, wealth building isn’t just about the numbers—it’s about the mindset that drives your decisions every single day – take a look through the podcast back catalogue if you’re looking for some pointers on how to build the optimum mindset!