Issue 4: How to Embrace a Mindset of Financial Freedom

Issue 4: How to Embrace a Mindset of Financial Freedom
January 01, 2020



How to Embrace a Mindset of Financial Freedom

I read an article recently that shocked me. It talked about how medical and technological advances should be increasing the average lifespan of people, yet American life expectancy is actually going down. The causes? Drug abuse, suicide, and an unhealthy lifestyle. Data shows people are unhappy and soothing it with quick fixes that don't provide lasting joy.

The mindset many of us currently adhere to leaves us unfulfilled during our working years as well as in retirement. We're stuck because we put limits on our lives based on money and allow it to be the driving factor for our decisions, as well as the excuse for our unhappiness.

We've been conditioned to believe our lives should be a linear equation of A+B=C. Here's an example:

  • A. We earn a degree and land a good job with benefits.
  • B. We put 10% of our money away for retirement.
  • C. We retire at 65 funded by savings and social security.

If this linear equation was the key to financial freedom, all retirees would be exuding joy, and financial worry would be a long-forgotten emotion. Unfortunately, life is not linear, and according to a recent USA Today article, the anxiety level of retirees is greater than it was when they were working.

The Solution: Mindset

In Carol Dweck's best-selling book Mindset: The New Psychology of Success, she outlines two mindsets to navigate life: a fixed mindset and a growth mindset.

A fixed mindset prevents happiness.

A fixed mindset has a lot of rules that must be followed in order for happiness to be experienced. A job title, a bank account balance, the right friends, the right spouse, the right body, the right looks, and so forth. A fixed mindset is always looking for what's wrong or what's missing, focused on reaching the mirage of financial security.

A fixed mindset puts limits on what you can achieve, how happy you can be, and how much your life is worth. It's why many of the richest and most successful people struggle with depression, substance abuse, and suicide. They subscribe to a mindset that leaves them feeling unhappy in spite of all they've accumulated.

Are you stuck in 1929?

Prior to 1929, America was the epitome of a growth mindset. The Industrial Revolution was a time of possibility, innovation, and living the American Dream. The Great Depression ushered in an era of deep-seated fear, of which the impact can still be felt today. People weren't just afraid they wouldn't be able to feed their children or keep a roof over their heads, they were afraid they wouldn't survive. A chasm formed between wanting as much certainty as possible and enjoying the real meaning of life.

One of the primary originators of the idea of retirement was The Great Depression. That is when the US Social Security program was conceived. Those who made it through The Great Depression emerged with a money mindset that prioritized financial security over financial freedom, with the ultimate goal of not having to work past a certain age. The "indulgent" experiences of vacations and meaningful family time were deferred until a later date in the future; a sacrifice for the carrot of retirement.

Embracing a Growth Mindset

Most Americans live better than kings did 100 years ago. Healthcare, communication, transportation, nourishment, access to limitless information, and the vast forms of entertainment couldn't be fathomed by our great grandparents. 2020 is a miracle compared to how the world operated just a few decades ago, and our opportunities for experiences reach nearly as far as our imaginations.

When you value your life by experiences instead of money, you'll find you're worth quite a lot more than you thought. This is a growth mindset. However, a growth mindset does not happen overnight. It requires an ongoing purging of conventional wisdom.

Financial freedom isn't possible without a growth mindset. If you prioritize work and money, you won't walk away from your retirement party with the ability to enjoy vacations and family time-because you won't know how. You've never allowed fulfillment to be defined by anything other than money, and there will likely never be enough.

Keeping Up with The Joneses

Growth isn't about accumulating more in your life, it's about enriching your life with experiences and relationships you value.

If you can't be happy with what you have now, you won't be happy with more. Think of the idea of keeping up with the Joneses: constantly striving to acquire an equal or greater amount of stuff in the pursuit of happiness.

Keeping up with the Joneses is preventing you from seeing your true worth. It's also assuming that what the Joneses value, you should value also. It's a concept that completely discredits your unique goals and needs, and assumes that what makes someone else happy should also make you happy.

If you're looking for financial freedom, you must make a choice between the linear expectations you've been conditioned to believe and reality. You have to embrace a growth mindset and align your finances accordingly. You'll experience better outcomes through changing your mindset rather than trying to change everything else around you.

What is Financial Freedom?

Financial freedom is having your life, your profession, and your finances all working toward the same goal. It can be achieved by utilizing The Perpetual Wealth Strategy. I experience great joy in working with Paradigm Life clients, reshaping ideas of retirement and financial freedom for thousands of people. I also speak to it on a regular basis in my podcast, The Wealth Standard.

Financial freedom is different for everyone, which is why you have to be clear about the outcome you desire. If you're not clear about your goals, you'll give that control to someone else who might not be working toward the same target, be it a financial advisor, the market, your boss, etc. Because goals continually shift, It's important to have an annual review with your Wealth Strategist and continually work together to shape your strategy.

The most important piece of your wealth strategy is knowing why you have it. Make a list of the top 10 things you're grateful for and look at the behaviors that helped you achieve them, then make a financial plan that supports you in achieving more of them in the future.

One of the tools I use in my own life as a metric to ensure my goals are aligning with a growth mindset is The 7 Whys. When making your 2020 financial resolutions, ask yourself "why" seven times to help get to the root of what is really important to you.

The 7 Whys

Goal: Buy a nicer house

  1. Why would a nicer house make me happier? Because it would be in a better neighborhood.
  2. Why do I want to live in a better neighborhood? Because my kids can go to better schools.
  3. Why do my kids need to go to better schools? So they can get the best education.
  4. Why do they need the best education? So they can get into college.
  5. Why do they need to get into college? So they can get good jobs.
  6. Why do they need good jobs? So they can afford a better quality of life.
  7. Why do they need to afford a better quality of life? So they're happy.

In this example, I want a nicer house because I'm ultimately trying to give my children happier lives. What other things could bring happiness to their lives? Is there a better way? When you get to the bottom of your whys and what your money is actually paying for, you can change your mindset and begin to view money for the tool that it is. Options open up, and financial freedom becomes attainable.

2 Steps to Financial Independence

First, let me distinguish financial freedom from financial independence from my perspective.

Financial Freedom - When money is no longer the primary reason for doing or not doing anything.

Financial Independence - When cash flow from your investments combined with personal income from part-time meaningful work supports a fulfilling lifestyle.

When it comes down to it, most people want the same things: love, family, and experiences.

If someone has plenty of money and they continue to provide value for others, that should be a clue they have a growth mindset. It's why billionaires like Bill Gates still work, in spite of having enough money to retire 1,000 times over. He gains fulfillment from finding new ways to solve global challenges. He finds joy in the experience of helping people. People who have plenty of money and continue to work are living proof that a good life is a function of having a purpose and valuing experiences, not how much is in their bank accounts.

When you assess what is truly of value to you and what you need to do to get there, you'll start to see money differently. The goal is not retirement at 65, it's to obtain financial independence as soon as possible.

Here's how I recommend obtaining financial independence:

    1. Grow Your Human Capital Statement

    I'm not talking about assets on a bank statement. I'm talking about your Human Capital Statement (read more about your Human Capital Statement with this free download), where your assets are your unique talents that make a difference in other's lives and help you feel valued. Find 10-20 hours/week where you can optimize these talents simply because they bring you joy.

    2. Obtain Passive Income

    Once you have established your financial foundation through a Wealth Maximization Account, invest in assets you are knowledgeable of, produce cash flow, and support your lifestyle.

Growth in these two areas is vital to living with a growth mindset and a vital step towards financial freedom. Those who have not successfully changed their mindset to focus on growth are keenly aware of the pain and sense of failure that can come from unaccomplished goals. If growth is stifled, death occurs-mentally, spiritually, and physically.

When you structure your finances to prioritize your experiences, you'll find the deepest satisfaction you can gain in your lifetime and true financial freedom. Money will no longer be the driving factor for your decisions or the excuse for your unhappiness. What you really want doesn't have to be put off until age 65, it's available right now.