The Mindset of Broke People....

We have discussed the traits of the wealthy many times in the past, but here we discuss the traits and mindset of those that are broke.

This topic came about from an article I read that looked at the insights and wisdom of one of the world's greatest investors - Charlie Munger.

In the article he states seven traits that poor and broke people have that keeps them poor and broke.

1. Envy is Expensive. Spending money on frivilous things in order to try to keep up with friends, family or people within your social circle is downright foolish. Trying to "keep up with the Jones', who are trying to keep up with the Smiths, who are trying to keep up with the Browns etc is a fools game and nobody wins. Everyone's dissatisfaction of their financial position and possessions relative to others leads to reckless and stupid spending behaviours. Their focus is on "looking like they are doing well" which leads to envy-fueled spending

2. A lack of financial focus. You need focus and dedication to your wealth creation plan. Broke people are broke and stay broke because they have no plan, or if they do, they do not have the focus and patience to stick to it. A lack of focus and plan makes for impulsive (and often stupid) decisions. A lack of focus and plan also allows the mind to wander and look at "get rich quick schemes" that don't work. Broke people fail to understand that true wealth creation takes time.

3. Arrogance is Expensive. Broke people think they know everything. Broke people don't like asking questions and trying to learn as they do not want to appear ignorant. Broke people fail to take advantage of knowledge and experience of those around them by asking them for advice or guidance. As I have stated in the past, those that know that my wife and I lead a very comfortable life, have never asked us for any help or guidance - hence their situation never changes. Broke people fail to look for help and do not realise that nobody creates wealth on their own - the wealthy NEVER stop learning while broke people never start.

4. Failure to Put in the Work. Broke people fail to put in the hard work of learning, patience, focus, dedication to a plan with slow & steady growth. Broke people are broke and stay broke because they spend their years looking for a "get rich quick" scheme. They fail to understand that 20 years of focus and dedication to a wealth plan is all it takes. Broke people look back over the last 20 years to find they're still in the same financial position today as thy were back then. They fail to put in the effort to educate themselves with regard taxation, inflation and investing.

5. They are bad at understanding odds. Broke people think a path to wealth is to win the lottery. They fail to realise that the odds of winning are 1 in 45,300,000 for Oz lotto and 1 in 292,200,000 in Powerball. These same people also will invest in "riskier" investments where they hope to get big returns, failing to understand that big returns are only offered on riskier investments.

6. They follow the Herd. Broke people stay broke because they fail to think for themselves. They follow whatever the masses do, failing to realise that the masses have no clue - otherwise they would be rich. Broke people will follow the latest investment "fads" - NFT's, digital currencies, share trading etc. They fail to understand what true investing is. Broke people fail to think independently about their financial choices.

7. They spend time with the wrong people. The company you keep can have a significant impact on your financial success. Broke people fail to surround themselves with trustworthy, reliable, and financially savvy individuals that can help them make better decisions and learn from their experiences. Broke people choose to associate with negative influences that drag them down and lead them to poor financial choices. They believe the false prophets of wealth creation, the people that make huge claims about their achievements. Broke people are desperately looking for a solution to their lack of money, and as such are the "easy prey" for these false prophets of wealth creation, who will target broke people in order to then sell "solutions" to solve their broke situation. Surround yourself with positive influences - those that will lift you up rather than those that drag you down or burden your life.

8. They fail to see what is in front of them. The average salary in Australia is $90,000 per year. in a 40 year working life, an individual will earn $3.6M assuming NO pay rises. If one takes pay rises into account, the amount earned over a working lifetime would be closer to $7M or $8.0M. The question is, what will these people that earn that sort of money do with it? Will they spend it or invest it? If human nature remains the same (and there is no reason to think it would change), then people will spend it. They want to enjoy the limited money NOW, rather than enjoy the unlimited money later. They give up what they want most (financial freedom, freedom from work) for what they want now (big TV, boat, holidays, new vehicle etc).

9. They justify being Broke with statements like "you don't need to be wealthy to be happy", "money isn't everything", etc. Though both statements are true, personally, I'd prefer to be wealthy and unhappy, rather than, broke and unhappy! The statement "money isn't everything" is great.... until you or a family member need surgery you cannot afford, When that happens, money becomes of the utmost importance!!! Broke people justify their being broke and remaining broke by making dumb statements like these. Don't be stupid, money is what pays your bills and everyone else's bills - money is important.

10. They allow themselves to be beaten by life, and fail to learn life's lessons. Back in the lesson "Common Mistakes that are made in the Pursuit of Wealth Creation", points 9 through 12 explain this topic in detail. The link at the bottom of this page, will take you to the relevant lesson. Please reread the points.

Wealth creation is BOTH easy and difficult.

It is difficult because it takes focus and discipline.

It is easy because the things one needs to do to become wealthy are already inside us.

It is difficult to create wealth because either we don't believe we can, or, don't believe we truly deserve it.

It is easy to create wealth because all we need to do is to adopt the wealth mindset.

The choices are yours.