One’s mindset is perhaps the greatest predictor to success. It’s obvious to most that goals are much more difficult to achieve if focus and determination are lacking, which is why it’s not often that people just stumble onto success. In most cases, you don’t hear stories about multimillionaires or CEO’s who didn’t work hard to get where they are today. One of my favorite quotes demonstrating the importance of mindset comes from Yogi Berra, the famous New York Yankee, who once said:
“Baseball is 90% mental, the other half physical.”
Bottom line, if your head isn’t in the game, you aren’t going to win. The same logic applies to money. If you don’t put thought into your investments, spending habits, and earning potential, then you will struggle to find success in personal finance.
Take, for example, the $21,000 I’ve received in merit based raises over the past three years. Yes, I received those raises, in part, because I simply asked for them. If you look a little deeper, though, I also received them because my head was in the “game.” I knew what I needed to do in order to achieve my income goals. I worked toward those goals and it payed off. I could have easily just coasted by, earned my $43,000 salary (plus 2% raises ever year) and been happy. After all, that’s a reasonable salary for a 20-something year old. My focus and determination, though, was on raising my income, and I now make $67,500 per year.
Even after receiving excellent merit based raises, which increased my income from $43,000 to $67,500 within five years, I could have been happy. That could have been enough. It would be for most people. However, I also had been working on my side hustle, which I grew from $0 to over $15,000 per year in a three year time frame. I was able to do this because I was focused on my income and earning potential. Opportunities came my way, and I took advantage. I knew that if I could earn that first $3,000, I could turn it into $6,000 (and then $9,000, $12,000…etc.).
It’s all about mindset. Mindset makes the difference between reaching your financial goals and struggling to get by. In my experience, there are a few things everyone can work toward to get into the right mindset.
How to Get into the Right Mindset
It’s difficult to get your mind in the right place without first knowing what you hope to accomplish in the future. So, it’s essential that you have a financial plan in place. Personally, I spend a lot of time thinking about my financial goals. In doing so, I map out my plan in 5 year increments (then adjust annually, as needed). I know that I want to retire at 40, so If i work myself backward from that date (11/06/27), I can begin to map out what I need to reach my goals.
Creating A Financial Plan
I created my first financial plan 5 years ago (2012), when I became really interested in personal finance. I started with a few goals in mind:
What I wanted to accomplish between 2012 – 2016
- Fund my emergency fund (3 to 6 months of expenses)
- Become debt free
- $100,000 in retirement investments
- Invest for the short/mid term (e.g., Vanguard)
Once you outline goals, it’s easy to begin working toward them in in short spurts. Instead of saying I have to pay off $40,000 in debt, I figured I needed to pay off $12,500 in year 1, $12,500 in year 2, …etc. By creating mini-goals (that also aligned with the “big picture), I was able to stay focused and maintain the right mindset. Instead of thinking about my end goal of $100,000 in retirement investments, I just needed to fund $20,000 per year. That’s simple. That’s two fully funded Roth IRA’s, my 403B contributions, and a little extra. So, I worked each year to do just that, knowing I was working toward something larger.
So, think about where you want to be in five years. Then, take it one step at a time. What do you need to do in year 1 to be on pace to reach those goals ? Then, what do you need to do in years 2, 3, 4, 5 ?Read More →