Shepherd Wealth & Retirement - April 2018

WE A L T H Your 3 FINANCIAL VALUES And How Emotion Plays Into Them to Live By ®


APRIL 2018

T he emotional reaction to money is something that simply cannot be ignored. While we would love to have computers manage everything in an emotionless mathematical process that never causes problems, it’s not reality. In the real world, you’re either building your life to be free from worries about money or you’re creating a lifetime of hard, painful, and frustrating moments. This is where we come in. We work on solving these problems and creating a path for you toward financial freedom. The best way to understand how is by explaining three components of your financial future. 1. HOW YOU ARE PAID The first part of your personal financial interaction starts with your career. You show up to work, do your job, and get paid for the goods or services you supply. Your mindset toward how the world pays you money is the biggest aspect of your financial future. Carol Dweck is an expert in the field of human psychology and interaction. In her book, “Mindset,” Dweck establishes a key concept that permeates how people deal with money. She explains two types of approaches everyone takes for certain tasks that have a monumental impact on how you accomplish specific outcomes: a fixed mindset or a growth mindset.

In a fixed mindset, your attitude toward life is static. This outlook establishes limitations to what can be done with providing value and getting paid in your career. People with a fixed mindset feel they have hit their limitations. They can’t advance past their “lot” in life. In a growth mindset, your attitude toward your monetary future is one of constant growth and learning to overcome limitations. With a growth mindset, you become more intentional with what you want to do with your career, and this establishes opportunity to grow and move up. 2. HOW YOU INTERACT WITH MONEY This is perhaps the most important component of building a future that is free of financial burdens. In order to avoid the hard, painful, and frustrating times, it’s pivotal to establish proper habitual behavior with your money. I was recently asked what foundational principle most entrepreneurs overlook. The biggest determiner of whether you are rich or poor is whether you save money first and only spend what’s left. If you have that mindset and habit, everything gets easier. You can either look like a millionaire or actually start becoming a millionaire when you are younger. When you really break it down, working to become a millionaire comes down to a concept called “deferred gratification.” Do you want to

spend your life looking the part right now, or do you want to spend your life living the part later? If it’s the latter, then it’s important to learn proper habits and prioritize saving. 3. HOW YOU INVEST So, how do these concepts tie in with retirement? Well, I’ve visited with plenty of people who have great money habits. They saved and built a great nest egg, but they approach their savings either one way or the other. Some view investing their savings as a great way to grow their future livelihood. Others view it more like gambling. This is why understanding how financial markets work is paramount. In our book, The Forever Millionaire, we discussed moving average crossovers and how you can strive to mitigate losses, but this is also where the emotional aspect of money comes into play. People react differently when things hit the fan. Often, the pain of losses will cause people to avoid investing again. Even worse, they’ll try to alleviate the hurt quickly by changing direction at the wrong time. How you react to the emotional aspect of money is what separates a good saver and a good investor from the average. Having a growth mindset, being willing to learn from setbacks, having good habits, and striving to be more intentional in your actions pays off in the long run. -Dave Shepherd

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