Are You Setting Yourself Up For Failure?

Total up the value of all the assets you own – your house, your car, your savings and any other investments you have. Then subtract your liabilities – your credit card debt, your mortgage and any bills payable.

The number you will get is your net worth.

Has your net worth changed much over the years? For most people, the answer is no. They find themselves stuck at a certain level of wealth and struggle to move beyond it.

All of us, even wealthy people, have a financial thermostat that keeps us at a certain net worth.

If you’re confused about what thermostats have to do with your financial situation, watch this video and I explain.

WHAT IS A FINANCIAL THERMOSTAT?

Everyone has a financial thermostat. It’s our personal comfort zone of wealth. If you’ve found that your net worth has remained fairly steady over the years, then that number is your financial thermostat.

What happens when you lose some of your money and your net worth drops? You work harder. You work longer hours, or take on a second job. You cut down on your spending. Once your net worth returns to its original level, you relax again and fall back to your old habits.

What happens when your income increases and your net worth surpasses your comfort zone? You find ways to spend your money away again. You buy things you don’t need. Or, you find a way to bring down your income. You quit your job, or you hire too many staff and throttle your margins.

Before you know it, your net worth returns to that comfort zone.

YOUR WEIGHT THERMOSTAT

Just like the thermostat keeps the temperature in a room steady, or your financial thermostat keeps your net worth steady, the same principle applies to other areas in your life.

Most people, for example, maintain a steady weight. If they put on too much weight for their liking, the internal thermostat will kick in. They’ll cut down on junk food and find more time for exercise.

All of us behave like this. We just have different comfort zones. For some, it’s a healthy weight. For others, unfortunately, it’s overweight.

For those people, the thermostat kicks in when they try to lose weight. They might start an exercise regime or a diet plan but then quit. Their inner voice tells them they deserve to get dessert.

CHANGING YOUR THERMOSTAT

Overcoming those subconscious behaviors and that self-sabotaging inner voice is the same when it comes to your finances as with your weight. You’ll only change your long term weight, or your long term net worth, if you change your comfort zone.

Many people lose weight only to put it on again. Similarly, many people receive financial windfalls only to lose them again.

A study of 35,000 lottery winners in Florida found that 1,900 of them filed for bankruptcy within five years. No doubt, plenty more of them ended up returning to their original level of wealth.

external resource: http://eml.berkeley.edu/~cle/laborlunch/hoekstra.pdf

If you have inner beliefs about money that need to be changed, you need to change those beliefs and adjust your financial thermostat before your business starts making you big money. Otherwise, you’ll find ways to lose it again.

The MOBE Platinum Mastermind is where the most experienced mentors share their wealth mindset and investing strategies with fellow members. To learn more about the Platinum Mastermind, click HERE.

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