There are a few
Recently I’ve been noticing how different people seem to think about money. It’s really interesting.
Here are some rough categories. Do you know anyone that fits them?
Scarcity
This could also be called the ‘miser mindset’. Money is something to be held onto and not spent. People with a scarcity mindset approach to money focus on the price of things and try to reduce their spending. Quality or cost performance don’t really matter as much as absolute price. Scarcity mindset people tend to keep money in cash or cash-like instruments and don’t ‘get’ investing -putting money to work.
Blissful ignorance
People with this mindset don’t really think about money. It comes, it goes, and there is not much thought put into how to get more or how to spend it more effectively. Investments are mysterious, saving is something that other people do.
These would be people living paycheck to paycheck, who run out of money at the end of the month or overspend on credit.
Wariness
The wariness mindset makes people scared of money. They find it distasteful or frightening, and are nervous about losing it. ‘Safe’ options like keeping it at home or in a bank account seem more attractive than investing.
Disgust
This one is fairly rare. A disgust mindset is based on the perception that money is evil, and people that have money have done distasteful things to get it. There is a purity in poverty and ‘honest work’. Income from work or interest from bank accounts is okay, but other forms of income (dividends, capital gains, rents, peer-to-peer lending) are not.
I can sympathize with the disgust mindset, but believe it is a debilitating one, as it prevents you from gaining control over money.
Obsession
If you find yourself thinking about money every day, you are probably obsessed. I am. I think this could be a phase on the path to mastering your finances. Ideally it’s a phase that you will transcend.
A healthy obsession will see you voraciously learn and look for information and advice. An unhealthy one will see you looking at your accounts and spreadsheets all the time.
Mastery
This is the goal I guess. The mastery mindset is where you are comfortable with money, know how you want to use it and how to manage it, but don’t spend a lot of time thinking about it. You have plans and systems in place, and if something changes you know what to do. You understand principles and concepts, and have an effortless understanding of how money fits into your life.
Your money allows you to get on with your life.
So I guess I am in the money obsession mindset at the moment. How about you? Have you noticed any other mindsets we could add to the list?
Abundance mentality. Pretty much the direct opposite of the scarcity mentality you’ve described above.
A mentality that money is all around and can be obtained by anyone at anytime if you just open yourself to new chances and opportunities.
Great point! I think I am partly in this mindset…
The world has a lot of proverbs dedicated to money and they add to some personalities from the article. “pennywise and pound foolish” speaks to me about my Japanese friends who concentrate on their small finances, but let opportunities slip by. “a penny saved is a penny earned” also focuses on saving instead of investing. Great for youth, but not for capitalists. There’s something about the obsession part that i like and something i don’t like. Obsession is key to success, but focusing on money is not the right way to succeed. People are the key to success and success can be measured in many ways. By focusing on people and helping them solve problems we can achieve success. Money always comes when we take care of people. After getting some money we have to rely on our education as we decide what to do with it. Your brief article mentioned some of the different mindsets, but there are probably more. I wonder how people form their mindsets and how easily can they be changed? I like playing Monopoly and Cashflow. It’s easy to see a person’s mindset in a game. As I teach about playing for fun, I can see them change from a Saver into an Investor. Life is a game too, I think. It’s much more enjoyable to live than to survive.
Really nice points. I’ve seen people’s mindsets change, but only when they wanted to 🙂
I believe personal finance rests on the three legs of earning, spending thoughtfully, and investing. You can get along with two of them, but three is much more stable.
I’ve definitely jumped from “disgusted” to “obsessed” mindsets over the past few years.
In my case, I can clearly see today that the “disgust” was more of a “blame the others” attitude and was not very constructive. I didn’t know how to handle my money, and as such, the narrative of “people who make lots of money through investments are actually people who do not pay their fair share to the society, I don’t want anything to do with it” is actually just an excuse for how lazy some of us can be with our own money.
I would not say that the “obsessed” state is much better though 😉
I definitely annoy some of my friends these days, talking about how to handle their money and stuff. As you mentioned,I’d love to reach a state where I know about my money and how to handle it, without thinking about it constantly.
Hi!
I just found this site and it is an amazing set of resources I’m not sure I would have found on my own. I really appreciate all your work.
As someone who is looking to stay in Japan long term and save money for the future (quite a niche to blog about) this is invaluable.
Now I would like to propose a hybrid mindset: a cross between wariness/ obsession/ abundance. Maybe call it conservative? That’s where I am.
A few years ago I was unhealthily obsessed about saving (not necessarily investing) and looking back on it, it almost ruined my relationship with my girlfriend (now wife) talking about prices all the time.
However after life threatening tango with cancer I have a very new prospective on life and spending. One can not pin down time. Saving to the point of diminished quality of life (for you and family) over decades in preparation for a glorious time in the future is not the way I want to spend my brief existence. It could all be over in a breath.
Now I am an investing amateur and it gives me confidence in my financial situation. Spending money/ finding a cheaper options post-purchase still pains me but I have learned to move on and that the best/healthiest thing you can do is learn from the experience. I also practice abundance (as Jason suggested). I too am always optimistic about ways to earn money. I don’t think I am going to become a millionaire but I like to think there are always opportunities available for growth.
Sorry to get ephemeral. I don’t usually post in comment sections but the genuine quality of this blog gave me the urge to share.
Thanks, Russ! Appreciate the kind words 🙂
It’s a really fine line between keeping your eyes on the goal and enjoying the journey, eh?
I think the transition between saving and investing is an important one: a saver can only grow their savings by not spending, but an investor can see their investments grow and throw off income. It’s a more positive mental state in some ways…
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