Building Wealth by Looking at the “Little” Picture
A case for using financial psychology in wealth building.
Each year my behavioral finance students have a case study on https://playspent.org/. An interactive financial decision simulator of a hypothetical worker over 30 days.
The learner experiences the plight of an individual in a challenging socio-economic environment.
The exercise opens the eyes to the experience of millions.
The exercise yields three consistent results;
Run out of money.
You are likely to fail if you try to navigate the variables of each day’s needs and wants without a plan. Most first-time users make quick decisions that exhaust funds by the second week.
Multiple attempts.
Interestingly, many students know this is supposed to simulate real life for a month. However, that doesn’t stop students from taking the simulation multiple times. They are trying to figure out the right combinations for success; Some take it up to three times.
Act out of character.
The multiple attempts show them acting out of character; they know it’s fake, that in reality, they wouldn’t make that decision. They don’t care because they want to win the simulation. For some, it either validates or invalidates the belief they can be adults.
In my experience as a financial service professional, academic, and financial therapist, I have seen the simulation play out in real life for many people.
Most money problems are mindset problems.
Many think money will fix all problems; an abundance of money means you have no problems or can hire people to fix them.
Untrue.
Awareness, information, action, and consistency can address most problems and cost nothing.
We can see the impact of behavioral science in the simulation.
Your mindset guides your action.
Mindset problems require you to look at your beliefs, create goals that align with the belief, and use money as a conduit to achieve your goals.
Mindset problems are non-monetary and stem from three areas;
- Uncertainty. Many are highly skeptical of a prosperous future and are instead seizing the day, regardless of whether financially prudent.
- The uncertainty also means individuals are constantly in “Flow.” No time to think and reflect. People are moving; From one job to another, or from one place to another. I know people have always wanted a sense of flow, technology has just enabled it.
- There are influencers in various industries who validate this “Belief.” The accessibility to so many people can create a false perception of what you want.
Harsh Reality
People don’t want to be wealthy. They simply never want to be poor.
Why?
If cannot state the number of assets needed to make you wealthy, but you know you want to have more the zero, I might be talking to you.
Ultimately, we create goals intending to avoid something as opposed to aspiring toward something.
A New Blueprint
Wealth building will have to include financial psychology to meet the needs of future generations.
Wealth building for generations to come will use a different blueprint.
One includes an awareness that society has failed you and has no plans to correct this error and that you have more innovation and access to empower yourself with multiple wealth-building options.
You don’t have to find a firm or financial planner; you can build or create equity and your financial plans.
But the mindset has to change.
We can focus on changing the mindset from avoidance to aspiration.
Instead of seeing making and spending money as a necessary evil to avoid poverty, we choose to survive and seek alternatives to create value.
Switch from a state of flow to doing.
To maintain the new behaviors, we must remain in a constant state of doing.
-When we gain knowledge and confidence from new, we must acknowledge a stronger foundation to decide than we had in the past.
-We should do more, not less.
-For each new piece of information attained, we must do something new or take another step.
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George Blount coaches individuals to navigate and react to economic change and financial stress in their lives. Organize your financial life, nurture your money mindset, and learn what to know about money concepts. Learn more at https://georgeblount.com/
