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Focusing on everything we lack, or lugging around a "scarcity mindset," is possibly the easiest way to wreck your finances.
You'll be so focused on what you can't do, you'll miss out on key opportunities, says Toby Johnston, CPA and CFP with Mohler, Nixon and Williams in San Francisco, Calif.
"When you think the pie is already set, it's already limited, so competing against the next guy to get a bigger piece of the pie seems pointless," he says.
What money mindsets are holding you back? Read on to find out and learn how you can change them.
You're stuck in the here and now
Someone stuck in this mindset may think they only have enough to make ends meet, says Johnston. In other words, they're living day-to-day, with nary an eye toward the future.
"They don't really put forth the effort, so they never get beyond thinking, 'Hey, if I made a little effort to cut back, I'd have something left over to invest,'" he says.
You're on the paycheck-to-paycheck treadmill
Much like living day-to-day keeps you trapped in a scarcity mindset, spending your paycheck at the beginning of the month only to be left counting down the days until you receive the next check is no way to increase your net worth, or total assets minus liabilities (debt).
Here's a tip: Memorize the only equation you'll ever need to master you finances — Wealth equals what you earn minus what you spend. Live by it.
Read on for more wrong mindsets.
You keep upgrading your lifestyle in proportion to your pay raise
Whether they received a salary hike or not, Johnston says he deals with many clients who find themselves living the paycheck-to-paycheck nightmare, despite their immense and growing wealth.
"I think people in general have a tendency to increase our standard of living as our income increases. But if we spend exactly in proportion with our income rising, then we'll still wind up with the status quo," he says.
This means taking out a loan for a home you can't truly afford or getting caught up in the high stakes casino of Wall Street before thinking twice about what that might mean for your assets. Do your portfolio a favor and stop keeping up with the Kardashians.
You never take risks
Professional Gen Yers are missing the boat on investing for retirement due to an overwhelming fear of mucking it up.
But you can't let fear rule money decisions, says Johnston. Taking risks, like investing, is imperative to stretching your dollars further, and the mistakes you learn along the way will make you more confident to face life's unforeseen challenges. You'll feel compelled to take action and may even get richer along the way.
Of course, it's easier to take risks when your basic needs are being met. "Some people might not take on risk because they have nothing to lose," adds Johnston. Get a budget going to ensure this doesn't happen.
You have an either/or mentality
When you believe there is "plenty to go around for everyone," says Johnston, "one person's success doesn't take away from the success of someone else." But having an either/or mindset keeps you from wanting to try, and this inability to take risks will keep you locked in the status quo.
Remember: The unfamiliar scary beats the familiar scary, so if you're looking to expand your skills or try a new budgeting strategy, go for it! You stand to gain wisdom from your failures or more possibly, success.
You'd prefer to stay stupid rather than learn something new
An unwillingness to learn about or understand your finances means you won't have a clue when you get that foreclosure notice or your credit score tanks and you're denied a home loan. And as far as day-to-day spending goes, there's no way you'll get a grip on where your money is going, let alone know where to start reining in bad habits.
Professionally speaking, says Johnston, not picking up new skills or having a plan for how they'll be used is one of the worst things you can do for your career.
"A lot of people are not strategic about acquiring professional credentials, they just get whatever degree they can to graduate college," he says.
Don't go into college blindly and certainly don't be afraid to learn something new that will help you long-term.
You don't see the big picture
Truly wealthy people know there's more to the game than securing a fat paycheck. It's about net worth, that notion we mentioned earlier, whether your savings are flush or not.
Johnston agrees: "It's what you're worth, not what you earn," he says. "No matter how much money you're making, if you're spending it all, you're not increasing your wealth."
The same goes for latte-lovers who believe penny-pinching will keep their wallets afloat. Sure, toting your lunch to work might help, but only if you've curtailed your online shopping and paid off your credit card debt.
You're your own worst enemy
For entrepreneurs especially, it's a huge strike not to be your own best advocate in the career world. If you're less-than-confident in your skill set, chances are prospective employers will be too.
What's more, when dealing with money matters, an unwillingness to advocate on your behalf can make you the prime target of predatory lenders, shady used car dealers and other unsavory characters. You have to be willing to put up a fight, make a stink, and follow-up aggressively to take charge of your finances. No one will do it for you.
— Jill Krasny
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