As you are aging you will have thoughts about your finances. Hopefully these are only positive thoughts, because there is a relationship between a negative attitude and being poor. Yet, positive or negative, it’s good to have a grip on your finances.
This article has 2 perspectives. On the one hand to be actually poor or rich, in terms of money. And on the other hand to be rich or poor in your view of wealth. In other words poor mindset vs rich mindset.
We all have a different view on what wealth is. For some people it means having a lot of money, for others being content and happy is more important.
Table of contents
- 1 Inequality
- 2 What beliefs will your children inherit?
- 3 Are poor people themselves culpable of being poor?
- 4 Poor Mindset vs Rich Mindset
- 5 Flexible people
- 6 How to better yourself financially
- 7 Earmark your money
- 8 Are you in for a change?
An Oxfam report of 2018 says the world’s 26 richest people own as much as the poorest 50% of the global population. The main reasons they report are:
- Lining the pockets of the world’s billionaires;
- Wealth is under taxed;
- Underfunded public services, 258 million children are not allowed to go to school;
- People are denied a longer life, due to unaffordable healthcare;
- Inequality is sexist.
A global wealth tax has been called for by the French economist Thomas Piketty. Backed by my fellow countryman Rutger Bregman who shocked the World Economic Forum in Davos by saying: ‘Stop talking about philanthropy, start talking about taxes‘.
It is said that if the richest people would pay 1% of their wealth all the children who are now denied education could go to school.
What beliefs will your children inherit?
My parents came from poor families. They grew up in the time of the Depression and were adolescents during World War II. After the war, all their efforts were focused on rebuilding the country and making money.
Their aim was to let us have a good education, so we could live a better life than they had. As you can imagine I am forever grateful to them for this opportunity they gave me. But parents ingrain their beliefs in children, consciously or unconsciously.
And some beliefs of my father hindered me part of my life:
- Don’t get ideas above your station;
- Rich people are dishonest;
- Don’t take risks, saving is safer than investing.
It wasn’t until I attended a financial business seminar that I discovered how my father’s beliefs unconsciously influenced my actions. Even though I was convinced my views were completely different.
Are poor people themselves culpable of being poor?
Some poor people manage to create a better life for themselves. Because of this, others believe that it is the poor people’s own fault if they don’t achieve that as well. But not everyone sees or gets opportunities.
Many rich people would rather donate money to charity than pay taxes. In several countries this is tax-deductible, which makes it extra attractive.
Personally, I don’t understand this game of dodging or avoiding as much tax as possible. Do these people not want the streetlights to be on, that the police come when their house is burgled or that children can go to school?
Poor Mindset vs Rich Mindset
Stanford psychologist, Carol Dweck, relates in her insightful book, Mindset: The New Psychology of Success, there are two types of mindsets: a fixed mindset and a growth mindset. These mindsets are what we consider our personality.
A fixed or poor mindset is one where it’s assumed our character, creative ability and intelligence are fixed traits that cannot be changed. These people believe their basic abilities are what you are born with and they will only ever have a certain amount.
People with a poor mindset always want to appear intelligent since they don’t believe intelligence can be modified. They fear appearing dumb to others believing they will always look that way once others see them as being unintelligent.
Some common poor mindset thoughts include:
- Either I’m good at something, or I’m not;
- I can’t learn now; it’s too late;
- There’s no point in trying if I’m going to fail;
- That’s just the way I am;
- I always struggle with… ;
- I’m a procrastinator;
- I’m not creative;
- It’s hard for me to lose weight.
Growth or rich mindset, on the other hand, is the belief that abilities and intelligence can grow with time and experience. People with a rich mindset believe they can become smarter, that their efforts affect their success and with persistence they can learn.
Those with a growth mindset believe their basic ability is only the starting point for their true potential. The rich mindset creates a passion for learning rather than a constant need for approval.
Some common rich mindset thoughts include:
- Practice will always make me better at something;
- I can learn whatever I want or need to, exactly when I need to learn it;
- Failures are opportunities to learn, to reassess, and to do better next time;
- I can always do better at something if I want to, but it will take effort;
- Determination and effort are the measures of my outcomes;
- I enjoy learning and growing, and learning is a lifetime pursuit for me.
How to better yourself financially
Know your numbers
Feeling responsibility for your money means you know exactly what your numbers are. A lot of your numbers you can read from your bank accounts. Nowadays you can even look at them on your phone.
It’s a good thought to combine your bank-, savings- and investing accounts in one document. You can use a simple spreadsheet or a special bookkeeping program. Keep it simple. That way chances are high you will keep doing it.
Divide your income and expenses into a few categories and make an overview at the end of the year. Or at the end of each quarter. That way you have numbers to compare.
Earmark your money
Even when you are a pensioner earmark your money as soon as it arrives in your bank account. For instance:
- Usual expenses 70%
- Saving (short term) 5%
- Investing (long term) 5%
- Emergency fund 10%
- Pocket money 10%
The percentages can be whatever suits you best. When your income is low try to save at least 1% or 2%. The habit counts for more than the actual amount.
And if you want to add something to this list, for instance saving for a trip or putting money aside to replace the car in a few years, by all means do. It is YOUR list.
The number one tip is to avoid debt. Don’t buy on credit and either throw away your credit card or use it as little as possible. You don’t need a credit card if you have a debit card.
This is solid advice for both men and women. Often one of a couple takes care of the money. And if something unexpected happens, the other one is at a loss.
- When you are married, make sure both of you know the ins and outs of your money;
- If you don’t keep your books yourself, but have a bookkeeper, ascertain you understand what he or she is doing;
- Don’t leave the handling of your investment account to a broker without knowing about the decisions.
Are you in for a change?
There are key differences between a poor mindset and a rich mindset. Challenge is one of them. A person with a poor mindset will shy away from a challenge, often from fear of failure. They may go into hiding to avoid responsibilities.
The rich mindset person is excited by challenges. They find them engaging and a key in learning something valuable from the experiences. They master the challenge and move to greater accomplishments.
Another key difference is in how each faces mistakes and feedback. A person with a fixed mindset is embarrassed by making mistakes. They blame others or become defensive when criticized. The growth mindset person sees mistakes as a learning lesson. They are less likely to take criticism personally. They are open to criticism believing it helps improve their ability to do better next time.
If you find you have a poor mindset and you genuinely want to change, you can. It will take practice, determination, being more aware of your thoughts, and anticipating what reactions you’re likely to have to situations. With these efforts, you benefit by having a more open, rich mindset that can lead to success in every area of your life.
What is your view on wealth? Tell us in the comment box below.
How about having fun and being happy, while at the same time earning money?
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