Limiting Beliefs about Money

1. 1. Observer

   Kathryn – nice topic and a nice list.

   Let me challenge you on one thing. The “things you know” are actually a limiting belief for you on money as well. The combination of 1 and 4 in particular is going to bias you to build wealth slowly and steadily and with lower risks than entrepreneurs who take everything they have, bet on a big idea, and then make it work by force of will and personal commitment.

   That is not a bad thing. I share your beliefs. I think people who don’t share them run a much greater risk of financial ruin. But we both need to realize these beliefs are limiting us from financial success as tech entrepreneurs or real estate developers. They limit us from trying to be the next self-made billionnaire – or losing our shirts trying.

   Nov 12th, 2009 @ 9:27 am

2. 2. Paul

   Kathryn,

   You should consider writing for Yahoo Canada as a financial commentator. Laura Rowley is good, but often bogged down in distinctly American issues.

   Nov 12th, 2009 @ 9:50 am

3. 3. brian

   Living below my means is what I need to focus on. I received many raises over my last 10 years of work. I wish I banked these and continued to live a lifestyle of my first or second salary.

   Nov 12th, 2009 @ 12:53 pm

4. 4. Jason

   The biggest limiting belief I have about money is “Buying things will make me happy” The end result is money spent for little or no reward and if there is a reward it’s usually very short lived. I also agree with Observer the ideas behind how you believe wealth is made can also become limiting factors as well. However that said I’m just not wired right to bet on the big idea. I think it’s also important to work with what you are good at doing. If saving 10% of your income is easy then making sure you do that is the way to go. If you are wired to drive after that big idea then great go for it.

   regards,

   Jason

   Nov 12th, 2009 @ 1:01 pm

5. 5. Cori

   Kathryn….first let me say, I really enjoy your posts and topics…you create some interesting dialogues. Secondly, I agree with Observer…..the things you ‘know’ are beliefs you have chosen….and you could chose to believe something entirely different if you wanted to. There are two books that I would recommend on this topic….first is ‘The Power of Now’ by Eckert Tolle and the second is ‘Busting Loose from The Money Game’ by Robert Scheinfeld. They both present a very different way of looking at life, beliefs and money.

   Nov 12th, 2009 @ 1:13 pm

6. 6. Ashley

   In response to number 2, I used to feel the same way. However, I’ve found the more I talk about money, with my friends and loved ones, the more free I feel. It takes a large burden off of your shoulders to not wonder where others are coming from in regards to money. It also helps everyone to be more considerate of other peoples circumstances.

   Nov 12th, 2009 @ 1:17 pm

7. 7. Craig

   I like your reasoning for the myths that are out there. I agree I don’t mind talking finances with someone who I feel comfortable with and there are not a limited amount of resources, both parties can do well.

   Nov 12th, 2009 @ 2:05 pm

8. 8. Four Pillars

   Forget Yahoo – Kathryn should be writing for the Globe & Mail.

   Nov 12th, 2009 @ 2:22 pm

9. 9. Will @ Cheap Date Ideas!

   Hey kathryn,

   I think you’re bang on with respect to limiting beliefs – our beliefs really do change our worldview and how we perceive the world. It applies everything, money, our health, our status – anything and everything. It can either hold us back or propel us forward.

   We can choose our beliefs, just as we can choose to take on a scarcity or abundance mindset.

   Thanks for writing this article!

   Cheers,

   Will :)

   Nov 12th, 2009 @ 2:51 pm

10. 10. Kathryn

    Observer: You are absolutely correct. ‘Things I know for Sure’ may be things I’m more convinced about but they are still limiting beliefs. I hadn’t thought of them that way before but it’s true.

    As for more writing gigs, I’m absolutely open to opportunities and am grateful to FT for giving me the opportunity to write here.

    Nov 12th, 2009 @ 3:20 pm

11. 11. Krista

    Regarding #3: Unfortunately, there are a limited number of resouces in the world. It’s a fact, not a belief. Just having money (because it’s often floating on a bank’s computer server) doesn’t necessarily rob someone else of a resource, but if you convert the cash to stuff, then yes – there’s less stuff left for others.

    I don’t think you should talk yourself out of this one. In fact, I think too few people realize this, and it’s wonderful that you do.

    Nov 12th, 2009 @ 3:53 pm

12. 12. Canadian Freedom

    Kathryn – I also enjoyed your post.

    I agree with Observer as well and I think it is commendable that you are open minded enough to reexamine your beliefs.

    Personally, I think that we all have our own comfort zone when it comes to our financial game. If the average person followed your advice listed in the first 4 points they would do better than most people.

    Then again, instead of point #4, some people may want to enhance cash flow by taking advantage of good debt (debt used for investment purposes) to step up their journey. One point here though. You absolutely must know what you are doing when using leverage or you can lose a lot of sleep and money.

    Nov 12th, 2009 @ 3:53 pm

13. 13. zud

    i enjoyed this post –

    one of my limiting beliefs that my parents and cultural background instilled in me is that money equates personal self worth/esteem. the more money you make, the more successful you are. this has been a serious serious struggle for me going thru university, my 20’s and now into my early 30’s. given that i am not wealthy, i don’t earn alot but still convincing myself that i’m a worthwhile person, that success is not measured in the job you have or the salary you earn.

    for me this ties into the “talking about money”. majority of my social circle are of the same background with parents that immigrated here and that taught us the same values. i find we are all walking this delicate balance of what to disclose and what not to disclose about our personal financial situations. i recently had a friend disclose how much of their mortgage they paid off in a short amount of time which obviously speaks indirectly to their salaries (it’s not 100% savings and being frugal). am i happy they are well off or am i resentful they are making me feel inadequate.

    i see a very distinctly different view on money and talking about money based on cultural upbringing or background. i would like to see a post on this in the future!

    Nov 12th, 2009 @ 4:08 pm

14. 14. Maiku

    Hi Kathryn,

    Great post. I have thought about this before but I liked your mention of #3 in particular. This one has always got me as well since I my parents impressed upon me at a young age that we were borderline poverty (I’m not sure it was entirely true but I can understand the reasoning behind saying it like that). So I grew up with a semi-dislike for the well off (I wanted to be like them but disliked them for having everything easier).

    So now that I am older I have tried a couple of times to start up businesses but I have never actually implemented. The reason is that I try to come up with ideas that will help everyone (like educational software etc.) but then scold myself for not being able to offer it for free (so that people like my younger self would have the same opportunities as others). That one thought is really a show stopper!

    So yes, I can attest to the power of “negative” thoughts about money. Do you have suggestions on changing one’s beliefs?

    Nov 12th, 2009 @ 6:37 pm

15. 15. Kathryn

    zud: Great points. I’m interested in the topic of ethnicity and money management. My background and training is in cultural studies and anthropology. With a love of personal finance the topics go well together. The reason I have shied against it is a) because the topic is huge and would make for a great dissertation and b) I’m unsure how to approach it sensitively without stereotypes and value judgements.

    Maiku: There is a great book by Jack Canfield called The Success Principles. His approach to changing ones limiting beliefs is one of the best I’ve heard. It comes down to:

    1) Recognize your limiting belief.
    2) Challenge it by reversing it and making fun of it.
    3) Create a new written / spoken belief that states what you want to believe.

    It’s full of some great examples. If you’re looking it up it’s principal 56 of 64.

    Nov 12th, 2009 @ 7:35 pm

16. 16. saveing.ca

    on the topic of money management and cultural issues, Ramit Sethi’s book ‘i will teach you to be rich’ has many hilarious stories! check it out

    Nov 12th, 2009 @ 8:23 pm

17. 17. TheRat

    I have a hard time setting a fixed ‘pay yourself first’ percentage because I find my situation changes from week to week, but I do find it a good strategy to incorporate because it makes you ask yourself if you’re saving on a regular basis.
    Nice thread.

    Nov 12th, 2009 @ 9:34 pm

18. 18. Dave

    Another limiting belief about money is that it is hard to make. The “pain” thinking of all the work and effort you have to put in to create wealth can seem stronger than the “pleasure” you would gain from having it.

    It is always the conclusion from this showdown that will motivate someone to take action or not.

    Big fan of NLP and how it relates to money management.

    Nov 13th, 2009 @ 1:34 am

19. 19. Dana

    Your posts are always well-written, thought provoking and relevant. Your writing rawks!

    Regarding limiting belief #3, I struggle with this one a lot. The better we do financially, the guiltier I feel about the uneven distribution of wealth and resources in the world.

    It is purely by chance that I was born into a society which has abundant opportunities for me to realize my potential and ambitions. So many people are born into circumstances that limit their ability to prosper.

    I often wonder if one person’s gains come at another person’s loss.

    Nov 13th, 2009 @ 6:08 pm

20. 20. credit girl

    I really enjoyed this article and I agree with you 100% about living below your means and trying to always pay in cash. With credit cards and debit cards, it is easy to lose track of how much you’re spending because it’s just so much easier to swipe the card. Ever since I’ve cutting my extra expenses and limiting myself like eating out less, I’ve noticed that I am able to save so much more. Great article!

    Nov 13th, 2009 @ 7:22 pm

21. 21. Mark in Nepean

    Good post!

    I have similar “truths” for my financial beliefs:

    1) Live within your means
    2) Pay yourself
    3) Reduce debt

    Do items 1, 2 and 3, in any order, and you’ll be fine.

    You can always change/alter the scale of these 3 truths to fit your means, ie., pay down more debt than you pay yourself; live lower and reduce more debt; but in the end – believe and live all 3 truths and you’ll be fine….

    Cheers!

    Nov 14th, 2009 @ 12:56 pm

22. 22. Sam Li

    First of good post Kathryn.
    That is so truth that people are very uncomfortable t talk about money. But it’s all about stigmas, right… People don’t like to talk about things where they fail. Would you be proud of your financial achievements why would you hesitate to talk about it?

    Nov 14th, 2009 @ 3:51 pm

23. 23. holger

    Great Post! Thank you!
    It shows how success in achieving your goals is ultimately dependent on the right values / beliefs at the core and how making your values and beliefs transparent can unveil why you’re falling short of your goals at certain points.
    I have had the same experience and keep a close watch on these limiting beliefs.

    Nov 14th, 2009 @ 4:31 pm

24. 24. kenyantykoon

    i agree with “the things i know for sure”. All except one. My bone of contention lies in the one that says that debt hinders cash flow. What if the said debt is a business loan or a debt that is for some investment that after a given period will do wonders to increase you cash flow and thus you financial well being? I think what you should have said is debts taken for luxuries and other liabilities hinders your cashflow

    Nov 15th, 2009 @ 9:23 am

25. 25. Kathryn

    kanyaantykoon: I didn’t say debt was bad. I said debt hinders cash flow. Even if it’s good debt for an investment loan or for a business, it still hinders cash flow. But you have a point. Some debt is worthwhile debt while debt for “luxuries and liabilities” isn’t.

    Each person will have their own truths and limiting beliefs.

    Thanks for sharing many of yours here. I’m surprised at how many others related to #3. I thought I was alone on this one.

    Nov 15th, 2009 @ 7:22 pm

26. 26. Canadian Freedom

    Kathryn. Further to kanyaantykoon’s point. Sometimes you can create immediate cash flow by using debt as leverage. The banks do this all the time when they take deposits and lend them out (making money on the spread). As an investor, we can do the same with investments such as rental property.

    Again though, while this approach can enhance cash flow you need to know what you are doing to be successful at it.

    Nov 16th, 2009 @ 8:23 pm

27. 27. Gates VP

    @Kathryn: I’m surprised we made it this far with no one mentioning Killing Sacred Cows. (BTW, the book is a good thought experiment, I felt that it bordered on obvious, but obviously not)

    Some simple examples of limiting beliefs:
    @Krista: Unfortunately, there are a limited number of resouces in the world.

    This comment is obviously dependent on how you define “limited” and “resources”. Sure there is some finite amount of sunlight (for example), but we’re definitely not using all of it. Yes there’s a limited amount of silicon in the world, but we’re getting a lot more mileage out of that silicon today than previously.Is there a limit to the number of books we could write or blog posts we could make? Probably, but for all intents and purposes it’s pretty much unlimited right now.

    Your concept of “limited resources” assumes that all of the value we generate comes from the hoarding of resources. In reality most of the value we create comes from the harnessing of resources.

    @Kathryn: “Debt hinders cash flow”

    By its very definition debt actually increases cash flow.

    In fact, debt forms the basis of wealth growth for the vast majority of the world’s wealthy. Basically every wealthy person you’ve ever heard of has as some point taken on debt to increase their cash flow and to make more money. Taking on debt is the basis of the entire stock market. Debt pays for infrastructure and government projects, hospitals, roads, schools are all debt spending.

    The problem here is that you’re equating “debt” with “money spent on capital losses”. The problem here is not “debt”, the problem is “debt spent on non-generating resources”.

    @Kathryn: “The miracle of compound interest makes mathematical sense.”

    Really? If Jesus had invested 1.00 in year 1 at a measly compounding rate of 3% he would have $47,255,178,755,828,605,388,683,227 which is more than the total current GDP of the world.

    But toy examples aside:…
    Saving 10-15% of your income invested for long term growth slowing and incrementally over your working years may be the boring path to financial success but it works.

    Are you sure about that? Does the math really support your statement?

    Let’s ignore inflation and measure everything in “work-years” (WY). If you save 10% of your income over 40 years, you will have saved 4 WY. That’s not going to get you from 65 to 95.

    So you’ll obviously need interest to make this happen. Let’s assume that you make 3% interest above inflation, every year like clock-work. You still only have 7.7 WY. And 3% interest above inflation is very good. The US actually has bonds that are protected against inflation (TIPS). Since their 2003 inception, the 20-year bond has never yielded 3%.

    So not only does 3% only get you 7.7 WY of savings after 40 years. We already need to invest outside of government bonds just to make that number. So we’re already outside the realm of “boring”.

    Now don’t get me wrong, I have money in RRSPs (and 401k). And I think that it would be prudent for everyone under 70 to look at saving 10-15%. But I maintain no illusions that my 10% is going to get the “Freedom 55″ retirement plan. In fact, I love what I do and am planning, at best, a “retirement” involving less work hours.

    To rephrase that for clarity: I’m saving 10-15% of my income with no intention intention of stopping work. Working until you die is not the common definition for “financial success”… so we may need to at least temper your above qualifications.

    @Kathryn: “2. Spend less than you make.”

    I’ve taken to phrasing this as earn more than you spend. It’s a whole “cart-horse” thing, but it’s empowering instead of restrictive.

    @Kathryn: “3. Paying yourself first and automatically makes saving nearly effortless.

    What exactly is “pay yourself first”? Are we talking about saving for personal goals (“I want a new tennis racquet”) or security goals (emergency fund) or investment goals (money for university) or paying your bills or all of these?

    As a person who’s pushed the “automatic” button too far or tried to save too much, i can also argue with the “effortless” portion of that comment. If you’ve never saved money, and then start automatically saving money, you are going to wreck your existing lifestyle. If you already don’t have a large enough income, then automatic savings and “paying yourself first” are going to leave you with month at the end of your money.

    Don’t get me wrong, I use automatic methods of saving. But “automatic” is a tool not a truth. And unless you’re already “wasting” lots of money, “paying yourself first” is rarely “effortless”.

    ——

    So there’s my little rant,

    I think I’ve laid out arguments against even the “things I know”. And I’m definitely open to hearing counters and objections.

    In fact, when it comes to the 10-15% savings rule I’m ready to have an all-out spreadsheet / modelling war :)

    Nov 18th, 2009 @ 8:08 am

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