Success is psychological. Whether your goal is to become rich, lose 20 pounds or learn another language, your mindset is your strongest weapon. You are your own greatest asset — and your own worst enemy.
So today I’d like to share four truths you must learn about yourself before you can become rich. (Caution: These are harsh truths, and I’m feeling a little sassy right now. Don’t take it personally.)
#4: You Don’t ‘Deserve’ Anything
Remember those ads on television that say “You work hard — you deserve a little luxury?” That line works for selling cars, gourmet coffee, spa treatments — whatever. Advertisers love to convince people that they “deserve” something, often by reminding people how hard they work.
Well, guess what. Billions of people work hard. Janitors work hard. Cattle-ranchers work hard. Sheep farmers in Zimbabwe work hard. You’re not special just because you work hard. And you don’t ‘deserve’ a massage, a pedicure or an Audi just because you work hard.
#3: You Might Follow the Crowd
“Other people buy at the peak of the bubble and then sell in a panic when stocks crash,” I hear you say. “But not me! I’m special! I’m contrarian, and I have the foresight and guts to stick this out.”
Hmmm. I hope you’re right. I really do. I want the best for you. But let’s allow history to be the judge, because here’s what’s likely to happen to your untested hypothesis:
First, you’ll see loads of people plowing back into the stock market. The Dow Jones was under 6000 a decade ago, and now it’s closing in on 30,000! The economy has been in a recovery for a long time. It must be a “safe” time to get back in.
So you get back in. For a few months, things are going great. The economy is humming along. Stocks are rising.
And then there’s a cataclysmic crash. The Dow sinks to Depression-era levels. You lose half your investment.
At this point, you’re not going to admit that you’re panicking. You’re going to convince yourself that it’s time to “re-think your strategy.”
Here’s a hint: whenever someone is “re-thinking their strategy” at the bottom of the market, he or she is probably panicking. If someone is using uber-fancy words — if they’re “strategically re-assessing in light of an altered economic paradigm” — they’re freakin’ scared out of their wits.
#2: You’re More Motivated By Loss Than Gain
Two years ago you loaned money to your friend — $2000, interest-free. If you hadn’t done so, you would certainly have invested it in the stock market and doubled your money.
But you’re not concerned about the extra $2000 potential dollars that you lost as a result of opportunity cost. You’re only concerned with getting your initial $2000 back. Why? Because the gain is theoretical, but the initial cash is actual.
We’re hardwired to be more upset about losing what we have than failing to gain what we don’t have. If you lose half your money in the stock market, you become upset. But if you miss out on the recovery — failing to double your money — you hardly notice.
I can hear your objections already. “But some people lose their life savings! And doubling your money is fraught with risk! You can’t really compare the two!”
Okay, fine. Try this example: If a thief or con artist rips you off by $3000, you’ll be mad. But if you forgo the opportunity to invest in a CD that would have earned you a guaranteed $3000 profit after inflation, you won’t be nearly as upset.
(CDs these days barely keep pace with inflation, but that’s another story altogether.)
#1: You’re More Motivated By the Present Than the Past or Future
While you were at the airport, someone stole your suitcase. Inside that suitcase were a few new, unopened items you planned on returning to the store for a full refund. You lost $200 refund dollars.
But you’re not upset about your loss of past dollars. You’re more upset about the $80 you have to spend buying a new suitcase. Why?
Because even though we’re motivated by loss, we’re even more motivated by immediate outlay. We hate losing money in the present more than we hate losing money we spent in the past.
That’s why we’ll clip a coupon, or buy a Groupon, that saves $10, but we won’t drive to the store to return a $10 item that we never opened and no longer need.
About the Author: Paula Pant is the proprietor of the Afford Anything blog and podcast.
Photo Credit: stock photo
Shawanda @ You Have More Than You Think says
“That’s why we’ll clip a coupon, or buy a Groupon, that saves $10, but we won’t drive to the store to return a $10 item that we never opened and no longer need.”
I think it has more to do with laziness than anything else.
However, I do marvel at how people refuse to make small, almost effortless, moves to reduce their expenses. It could be as simple as calling a service provider and cancelling a subscription they no longer use. In those cases, I think people aren’t lazy as mush as they are avoiding their problems.
Paula @ Afford Anything says
@Shawanda — Great point. Laziness is a huge factor in how we spend our money. Rather than try to fight laziness through sheer determination, I think it’s better to design our lives in such a way that we get ‘laziness’ to work FOR us. That’s why ‘automating’ savings is such a good idea. 🙂 It’s the lazy way to save.
great article. i agree laziness has so much to do with it. i finally had to stop buying clothes because i was realizing that my donations to goodwill were full of clothes will tags still on it just because i was too lazy to return it, then forgot, etc and so on.
Paula @ Afford Anything says
@tracee — LOL. I’m the grateful recipient of that!
Two nights ago, my roommate Codi brought me a HUGE cardboard box filled with shoes and two enormous trash bags stuffed with clothes. Many of these shoes/clothes she only wore once.
“I’m giving this to Goodwill,” she told me, “but you should pick through it first.”
Now I have an entire new wardrobe for free!!
everyday tips says
Oh my gosh, do I hate to lose. Opportunity cost is a huge motivator for me. Then I find out that I am so burned out because I don’t want to ‘miss out’. Not sure if that is good or bad. Probably bad… 🙂
One of my biggest pet peeve is point number one where people feel they deserve things. I don’t think my grandparents felt they deserved a dinner out or a new outfit because they fulfilled basic responsibilities like so many people shirk today.
Paula @ Afford Anything says
@everyday tips — I’m glad opportunity cost is a big motivator; most people don’t even think about opportunity costs. As for being burned out … just focus on the “big” wins, the most critical wins, and let the rest fall to the wayside. It’s easy to get burned out if you’re doing too much, so it’s best to only do the most important things.
YFS @ YourFinancesSimplified says
#4 is number 1 for me. When you realize you are not entitled to anything you begin to win the game. Just because you make xyz income doesn’t mean you are entitle to a certain house, car or restaurants. Focus on your goals!
Paula @ Afford Anything says
@YFS — This is a HUGE idea for people to wrap their heads around. So many people are taught that the big house / fancy car / etc. is their “reward” for hard work. And we’re also taught that showing off these toys is our way of telling the world, “look at me, I’m successful.”
But the MOST successful people are the ones who don’t have to show off their toys or wear their success on their sleeve. And they’re the ones who enjoy the game itself, not the reward that comes from it.
Congrats for recognizing this! It’s a super-important idea.
I think the notion of knowing that you don’t “deserve” anything is huge. This idea is insurance that you don’t try to reward yourself with unnecessary things but continue to set your sites on your goals. Staying focused leads to success.
Great article Paula. I’d love to hear your thoughts on your opening sentence. The “appearance” of success is in fact, psychological. The paradigms that we accept as we walk through life are not always congruent with natural law. I have yet to meet an individual on their deathbed pine to spend their last moments in an office or at a shopping mall. When our mortal coil no longer has the ability to serve its superego I think it resorts again to its primary programming. If you lie to a pathological liar they are often still offended because there is a universal law with regard to honesty. I believe there is a universal conclusion to be contemplated. There is a map to success that pre-dates our rationalizations.
Dora DeLellis says
I am baffled that people will purchase an expensive item with big payments, then use a coupon to save $2.
They already cut their feet off by binding themselves to an overpriced purchase and then try to save a few cents here and there.
Len Penzo says
Yes, Dora. I feel the same way. That is one of life’s bigger mysteries.