Imagine a world where there was a recipe you could follow to get rich. What ingredients do you think would feature in it? A high-paying job? A diversified investment portfolio? Disciplined saving?
Each of those elements can undoubtedly play a role in the bid for financial success. But something else is even more fundamental. Something taught in elementary schools across the country is equally essential to wealth-building.
It's what Stanford psychologist Dr. Carol Dweck calls a growth mindset. While you'll never be able to think your way to a million bucks, your beliefs about what it takes to succeed, combined with how you approach problems, can profoundly impact your bank balance.
What Is a Growth Mindset?
A few decades ago, Dr. Dweck's research on how people think of learning led her to a conclusion that's now seeped into the popular consciousness around success and school curriculum. Dweck found that people fall into two camps regarding our underlying beliefs about learning and knowledge – a fixed or a growth mindset.
What Is the Difference Between Growth and Fixed Mindsets?
With a fixed mindset, you believe your talents, skills, abilities, intelligence, and character are set in stone. As a result, if you can't do something, there's little point in trying. In essence, you're resigned to your fate.
A growth mindset believes the opposite. You believe everything from your intelligence and capabilities to your overall lot in life is subject to change. With time and effort, anything's possible. For example, failure's an opportunity to learn and grow, rather than a sign you can't do it.
Embracing the Growth Mindset in 4 Steps
So how do you develop a growth mindset around money if you've spent forever thinking your skills and abilities stay fixed throughout life? Here are four strategies to get started.
1. The Power of Yet
“I can't invest; I don't know how.” “I'll never get out of this mountain of credit card debt.” “Budgeting doesn't make sense to me.” “I don't understand how to save money each month.”
A simple and powerful way to shift your perspective is to put “yet” at the end of each sentence. So, for example, if you've thrown in the money towel because you're “just not good with money,” tell yourself you're “just not good with money yet.” Likewise, it's not that you don't know how to invest; you don't know how to invest yet.
The power of ‘yet' leaves open the door to positive change and reframes feelings around money.
2. Replace the Word Failing With Learning
Failure's a dirty word when you have a fixed mindset. However, not only is failure a natural part of life, but it's also part of the learning process. Nobody who succeeds in life does so without their share of failure. Why? Because it teaches you what you need to do differently the next time.
So, don't say, “I'm failing at this.” Instead, say, “I'm learning.” It'll shift your perspective on making mistakes and motivate you to keep trying.
3. Acknowledge Your Weaknesses
It's always tempting to hide from what needs improvement. However, no good ever comes from burying our heads in the sand. Instead, acknowledging, confronting, and embracing our financial challenges is key to overcoming them.
The first step to turning things around is acknowledging there's a problem. So, for example, if you recognize that you need a tool that invests your money on auto-pilot instead of remembering to do it, that's pretty easy to set up and get started.
4. Remember Your Brain Is Like Plastic
Never forget that our brains can change throughout life too. A growing body of research shows they're amazingly malleable. It's a trait that allows us to recover from brain injuries, grow new brain cells, and learn new skills.
That is called neuroplasticity, and it's a compelling argument against the idea that our skills and abilities are fixed. On the contrary, your brain can and will change for the better.
5 Ways To Use the Growth Mindset To Grow Your Money
Here are five suggestions for using the growth mindset to bolster your bank balances.
1. Action Over Avoidance
Conduct an audit of your current finances and consider what you could be doing differently. Whether you've been struggling to pay off your credit card debt, save for retirement, or cannot summon the courage to ask for a raise, a growth mindset should make it easier to acknowledge the problem and take the first steps to address it.
2. Celebrate the Struggle
Building wealth doesn't happen overnight. You must be committed, resilient, and patient while working toward the goal. Use your growth mindset to reframe matters. Remember: you don't have financial freedom yet. Not only is the potential for success exciting, but you're also happy to embrace the challenge, build the necessary skills, and tackle whatever obstacles arise.
3. Continue Learning
A growth mindset goes hand in hand with the willingness to learn. So, let those thoughts of failure fall away and set your mind to learning, adapting, and mastering better financial habits instead. Whether that's how to budget effectively, streamline your savings process, use debt wisely, or invest in real estate, you'll soon have the skills to elevate your net worth.
4. Seek Support
People with a growth mindset always look for new tools and tactics to help them reach their ambitions more efficiently. That's why you shouldn't hesitate to hire professionals for help. With support from financial advisors, you'll access essential information to put yourself into a stronger financial position, avoid mistakes and learn more about personal finance.
5. Take Risks
All failures are learning opportunities for people with a growth mindset, so taking financial risks becomes less daunting. Whether you start a business, side hustle, or implement a riskier investment strategy, you'll feel confident trying something new.
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