Psychology Of Investing

You’ve probably heard the age-old question: Is your glass half full or half-empty? But have you ever applied this idea to your finances? The truth is, how you think about money directly affects your financial decision-making. This has nothing to do with your actual account balances but with your mindset. When you think about money, are you rich or poor? Psychologists refer to these emotions and beliefs we hold about money as “money scripts.”^[1]

Two Types Of Thinking

Let’s look at how each way of thinking plays a role in your financial life in reality.

Poor Thinking

The vast majority of investors who think their financial glass is half empty tend to have more of a negative attitude toward those who are well off. For example, look back to the December 2017 Tax Cuts and Jobs Act. If you read opinion pieces or blog posts about the topic, you’ll see that people with a poor mindset felt that this was just another cut to benefit the rich or even the president himself. This type of thinking focuses on the rich, increases self-pity, and lends to leaning toward negative thinking instead of positive thinking. Poor financial thinkers often believe the rich should give back to the poor and are attached to the idea of getting paid for their time spent working.

Rich Thinking

On the other hand, if you have a rich financial mindset, you tend to have more of positive self-worth and don’t care what those with poor financial thoughts think of you. Rich thinkers don’t worry about getting paid for their time, but would rather get paid for results and outcomes. They often have an entrepreneurial spirit, are not satisfied with the status quo, and try to find ways to improve and become something more. Because they focus on the positives, they seek out big opportunities and plow through obstacles instead of giving up when challenges arise.

Your Financial Mindset Affects Your Actions

Learning to control your thinking is the key to changing your mindset and developing healthier money habits. An important resource to utilize on your journey of taking control of your finances is your financial professional. At Point Wealth Management, we want to help you break through mental barriers to success and make smart, informed decisions about your money. We do this by helping you develop a true understanding of who you are as a person, establishing why money is important to you and your family, and identifying your financial challenges. We believe that knowledge is power and is the foundation for wise decision-making. If you are ready to break free of your money scripts and make sound decisions that will help you pursue your goals and avoid costly mistakes, call 715-870-2450 or schedule a call and meet me virtually for a no-strings-attached meeting.