The Psychology of Money and Wealth

The results of my research for my guest lecture to the class: The Psychology of Money and Wealth.

Money and WealthI was researching material for this lecture and came across this question. What stops people from succeeding financially, and having ongoing prosperity in their life? The answer is something I have addressed many times on this blog. The answer is believing that it is not possible to succeed financially, or even be prosperous in other areas of your life. A persons attitude about money is the number one hindrance to acquiring wealth and prosperity.

Your attitude affects your behavior, and your behavior determines your ability to succeed. Some attitudes about money that affect behavior include:

  • You have to work hard to make money.
  • I will never be rich.
  • Having money isn’t spiritual.
  • Life is one giant struggle.
  • Money is hard to manage.
  • You need money to make money.
  • It’s too late to start thinking about building wealth.
  • I don’t have what it takes to become wealthy.

Do you believe some or all of these self-limiting attitudes?

If you do, then maybe you should swish this around for a minute or two:

“Wealth is not what a person has. It is a state of mind.” –  thewealthymind.com

These attitudes about money and wealth start at an early age, and most often come from the most influential people in our lives—our parents and family. Those initial “imprints” coupled with FEAR cause us to accept that we are financially treading water. Fear paralyzes us into submission by tricking us into believing that we cannot possibly achieve what we believe is unachievable. Here’s a  famous quote by someone who perhaps understood perfectly well how fear affected the human psyche.

“The only thing we have to fear, is fear itself.” – Franklin D. Roosevelt 1933

Stop being afraid and just believe in yourself.

I’ve said it before. What you believe is what you achieve. If you don’t believe it, you certainly can never achieve it. Once you face your fear you will be amazed at how very little you had to worry about in the first place. (Like me with public speaking for example—something I used to fear A LOT!) That’s not to say that you will not encounter difficulty or even some degree of failure, but failure in and of itself—is not, and should not be seen as necessarily bad. It’s how we learn how to be successful. I’ve also said that,  “Successful people fail far more often than unsuccessful people.” Successful people fail but eventually succeed, while unsuccessful people fail by not trying at all.

You could go around all day and claim that you have never failed, but what if you instead said, “Hey everybody look at me, I have never tried”? Sounds a little different when you say it like that doesn’t it? Then there are the people who try, fail, and then give up—perhaps because they feel that someone only gets one chance at success in life.

Imagine for a second, what things would be like today, if anyone who had ever tried anything stopped after only one try. No iPods. No PS3’s. No iPhones. No plasma televisions. The list would go on and on wouldn’t it?

There is something else that affects your attitude when it comes to money. Can you guess what it is?

Prepare yourself. You might not expect this coming from me. Okay, I’ll just say it—it’s DEBT! There I said it. Now look what you’ve made me do. I feel so dirty. 😉

cool shopping barbie

Seriously though, debt puts us in a state of mind that says we can not have anything without borrowing to get it. If we continue to live like that—we are doomed! Take a look around.

This mindset was formed as a child every time we witnessed our parents swipe their “beloved” plastic friend which made them oh so warm inside. Or what about the times we heard from their very mouths the phrase, “I’ll just use my credit card”?

Dave Ramsey points out in his Financial Peace University course—the “cool Shoppin’ Barbie” comes fully equipped with a “cool” MasteredCard. When you swipe your cool credit card Barbie says “Credit Approved”. You see—the credit card companies have a plan, and it’s not to fill your hat closet full of hats.

The warning on the box reads, “WARNING: Choking Hazard” when it should read: WARNING: Quicksand Ahead!

We never seem to outgrow that “kid in the candy store” mentality that tells us we must have it, and must have it now or else. Or else what you ask? Well, the child would pitch a temper tantrum, while the adult would also pitch a temper tantrum just plops out the credit card, all while convincing themselves that they deserve whatever it is they are buying at the time—regardless of how it affects them financially. I know because I used to be that guy. That guy was broke, stressed, unhappy, and that guy was duped!

How do you become an adult financially?

Change the attitude–>that affects your behavior–>that causes the financial disaster–>that kills your hope!

How do you do that? Do you want to know how I did it? I GOT OUT OF DEBT!

You can do it too! Enjoy financial independence with me, it’s completely worth the effort.

About Brad Chaffee

18 Responses to “The Psychology of Money and Wealth”

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  1. Good stuff Brad! If we don’t believe in ourselves WHO WILL??

    Sometimes though, I think we’re all very rational. We don’t want to be rich, b/c it’s hard work right? Hence, the “reward” for not being rich, is to just chill, which is quite enjoyable to many!

    Self-belief has to be present in everything we do. When I play tennis tournaments, it’s paramount that I KNOW I will crush my opponent. It’s when my mind is weak that I start faltering. I hustle harder, run harder, hit the ball deeper, place the ball better. Got to believe.

  2. Excellent! You are right on target with this. Success with money, however you measure it, is all about attitude. As Dave Ramsey says, it is 80% behavior and 20% head knowledge. Once you get your mind around the truth about debt, then things will start to turn around for your financially. I know because I’ve been there, done that. Being debt-free is the best way to live!

  3. KelsaLynn says:

    I love this post. Absolutely love it! It puts into words what I want to say to my sister as I grab her and give her a good shake!

    To answer some of your questions- I’m happy to realize for the most part that I do not believe any of those self-limitating comments…well, except for one. “You have to work hard to make money.” Yup, I tend to focus way too much on work and the money-side of work…definitely something I’m already aware of, but not from the aspect that it’s limiting me financially. Good thought to ponder- thank you!

    As for the “money is hard to manage” comment, while I don’t think, I do think it is hard for a number of people. I’m an accountant, so I’m a numbers gal, a lot of people aren’t. And for another large number of ppl, even if it’s not “hard” it does take substantial effort to properly manage and control where your money goes. I would never describe money management as hard but I understand why it would be for some.

    PS: You should burn that barbie! Put it on video! =]
    PSS: I plan to retweet this article when I get home tonight- no Twitter or Facebook access at work.

  4. NotConvinced says:

    One thing that Dave Ramsey doesn’t seem to grasp is that the use of credit cards does not equal debt. I watched my parents use credit cards, and I use credit cards religiously. So do my siblings. Are any of us in debt? No. We use the credit cards for convenience, security, and to get $$ back. A note on security: the security comes in 2 forms. One is that if my credit card is stolen, I’m not out a penny, unlike cash. The other is it gives me the security of power. Several times I’ve bought appliances that didn’t work when I got them home. The stores tried to give me a hassle about a return. Guess what? I had ALL the power as I informed them they could either take the applicance back or not, but either way I had no intention of paying for it.

    So for those who are convinced that credit cards are evil, think again. There are many, many advantages to using a credit card.

    • Brad Chaffee says:

      “NotConvinced” – It’s not that Dave Ramsey doesn’t grasp that some people can actually use credit cards safely, he just shares with others struggling financially a different way—his way.

      For you using a credit card gives you security, however for most people it gives them debt. I’m okay with the fact that I do not receive “your” idea of convenience, security, and $$ back—for me it is worth the sacrifice of those so-called benefits.

      You use credit cards as a tool, and good for you for being able to do so I guess, but I do not see why you are so concerned with the fact that some people—including myself, choose not to do so. It sounds like you do not need any help financially—good for you. I’m glad you have been able to build wealth by using a credit card and getting cash back. I think you first need to come to terms with the fact that everyone has the freedom to choose, and then consider the fact that maybe I do not want or need the same benefits that you claim to receive.

      You seem pretty adamant about pushing credit cards…hey do you work for a credit card company or something? BTW, I have friends that choose to use credit cards responsibly and I do not judge them for it, but one of the things that I think you are forgetting/ignoring is that 7 out of 10 people live paycheck to paycheck, have lots of debt, and need help getting out of the financial mess that they have made for themselves. This website is for them. It should comfort you to know that my blog is not the only place to get advice on personal finance, there are others.

      I personally do not know anyone who has become wealthy off of receiving cash back from credit card companies, furthermore I do not know anyone who has been severely stressed out because they cannot return something they purchased using cash. This post was not about using credit cards or not, as much as it was about the behavior that causes people to do the things they do with money—which is a point I think you sadly missed.

      I’m not loosing any sleep tonight are you?

  5. Ron says:

    Though there ARE some advantages to using credit cards, there are also some advantages to jumping out of airplanes, exploring the Marianas Trench, eating Fugu, and sailing a yacht off the coast of Somalia. The difference is in preparation. Children aren’t prepared for understanding the risks and dangers of credit cards, only the advantages (“FREE” MONEY!!). Just like you wouldn’t consume Fugu, or skydive, or take that Somalian cruise through the Strait of Yemen without good preparation, you shouldn’t willy-nilly scatter a credit mentality amongst entire generations of children without outlining their risks (once the kids are old enough to understand them).

    Face it. The primary reason people use credit is — they don’t have the money for something they want right now. But someone else does, and they’re more than willing to make sure you pay for your impatience.

    • Brad Chaffee says:

      Very well said Ron. We have to be able to behave with money before we can decide to use or not use credit in our lives, which was kind of the point of the post. Thanks for stopping by Ron and leaving your thoughts.

      Kelsa Lynn – Maybe Mattel should come out with a “responsible shopping Barbie” and then I wouldn’t have any beef with it. LOL Those credit card companies know what they are doing.

      FS – Belief in ones self is crucial, otherwise what’s the point right? 🙂

      Jeff – Amen brother! Debt Free is the best way to live! 😀

  6. NotConvinced says:

    Brad, not sure where the comment about losing sleep is coming from, but wanted to respond to your post. First off, no I don’t work for a credit card company or bank. 🙂

    I’m not concerned with people who choose not to use credit cards – if that’s what works best for them, then great! What concerns me is someone (Dave Ramsey) running around acting like credit cards are the devil, and that all that use them will end up deep in debt and end up getting ‘bitten’ in the end. It’s not a one-size-fits-all subject. I’ve been using credit cards for 30+ years, and thus far, have not paid a single dime in fees, interest, or any type charge to a credit card company. I’m still waiting for that bite.

    I hear you echoing Dave Ramsey’s quip about ‘credit card rebates not making anyone rich’. That is absolutely true. Not eating in restaurants hasn’t made anyone rich either. Or cancelling cable, cell phone service, etc, or eating ‘rice and beans, beans and rice’. But it’s all the little things that add up to hanging on to your money. In my case, I’ve made about $20k back in credit card dividends. Did that $20k turn me from a financially struggling person to a millionaire? Of course not. But I’m not one to turn my nose up at $20k for buying things I would’ve bought anyway.

    Brad, if you re-read your article, you will see that it addresses the use of credit cards quite heavily. While I don’t disagree entirely with what you’re saying, and certainly appreciate your feedback to my comment, I don’t think the advice is good for all, and that’s what I was pointing out. There are plenty of people who use credit cards in their day-to-day lives quite successfully. But those aren’t the people who contact Dave Ramsey for advice.

    • Brad Chaffee says:

      That last comment was not meant to sound harsh, I apologize if it did. I just wanted to point out that we both have different ways of doing things and neither of us are losing any sleep over the other. 😉

      As far as the credit card stuff I was mainly trying to make the point that credit cards use, bad behavior (financially speaking), and the wrong attitude are a bad combination. I can see how it may have sounded, but my point of view about credit cards usually comes out effortlessly. I only brought it up towards the end of the post when I decided to address the debt issue that many people are facing right now.

      I hope you did not misunderstand my response as anything but respectful, I was simply responding to your comments and thought I would clear up some things, by making the point that most of the people I am speaking to need to leave credit cards alone, even if only until they get their financial lives in order. 🙂

      Make no mistake though, the credit card companies are not in the business of giving you free money, they are in the business of making money. They do not have any program or incentive that doesn’t make them TONS of money. Not sure I would call them evil per say, but I do believe they know and realize what they are doing when they market to young children with a gimmick such as “cool shopping Barbie”. They know full well what they are doing and as I pointed out earlier, maybe if they came out with a “responsible shopping Barbie”, I wouldn’t be as upset about it.

      I hope there are no hard feelings, that was not my intention. Thanks for your thoughtful comment and response.

  7. Great post, so much of what we can achieve really comes down to our attitudes and belief about money and how those beliefs affect our actions.

    Time for us all to take responsibility, act wisely and prosper!

  8. Amen, Brad! Attitude is vitally important to how we approach all aspects of our lives whether it be our career, our family, our spiritual lives, our marriage, our health, our sense of worth…and certainly our finances.

    As someone who has been deeply in debt and is now debt-free, I can confirm your thoughts in how they apply to my own life and that of my family. Consciously or not, debt weighs us down and kills our hope. When you are debt-free, you have options and you can see a clearer path toward achieving your dreams.

    I believe that setting the goal of debt freedom and getting there by teaming with your spouse and family is an extremely important first step toward achieving excellence in all areas of your life.

  9. Betty says:

    Great inspirational article with alot of good stuff. We’ve been trying to get a strong hold on our finances so picked up a very good book called “The Debt-Free Millionaire” by Anthony Manganiello. We’re not there yet but hope to be in the long haul. The book really helped us to get organized and took us through a step-by-step process to set up a financial plan. We are sleeping better already!

  10. J. Money says:

    Hah! I think NotConvinced is my new friend 😉 Love my credit cards for the same reason as you know my good sir. BUT I will hand it to you – you sure know how to get that passion flowing!!! Freakin’ love it. And that Barbie?! WTF?!

    WARNING: Quicksand Ahead!

    Haha…I was dying at that. Call ya soon my brotha, lots of good stuff to talk about!

  11. My parents seemed to always have credit card debt (let alone car payments and other loans)so I thought being in debt was a normal state. FPU inspired me to want to be ABNORMAL!

    Isn’t it sad to think parents buy that Barbie for their kids?

  12. Mikki says:

    Good stuff Brad, I can’t believe you found the cool shopping barbie. Reminded me of the good ole dave days lol.

    I personally wouldn’t want to fool around with credit cards again, I got BIT A BUNCH and lost a LOT a lot of money.

    I was over on financial and fabulous reading how she couldn’t do with out hers, now she makes over 6 figures and is debt free, am i mad at her at the end of the day nah but do i believe she is misinformed on that aspect yes, is it going to ruin her for keeping her cards ? no. But again for those it has obviously hurt, this post is for them.

    Good job!

  13. Betty says:

    Here is a better link to the book I mentioned above. “The Debt-Free Millionaire” by Anthony Manganiello. http://www.therealcashflowceo.com/Books___Products_2XAV.html

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