Money is A Mind Game

How you handle money, not how much money you have determines your financial situation. If you spend everything that comes in, no matter the increase, you will always end up with nothing. There are three sets of people when it comes to spending your income

a) Those who spend less than they earn. These are savers – they keep something aside no matter how little their income. They make do with what is left after saving. For this group of people, more money means more savings, and ultimately more investments, and more returns or profit.

b) Those who spend within their income. These are consumers – they consume everything that comes in and sticks within their income. A week or two after payday, all the money is gone. They save nothing. They are looking for more money. When this money shows up in terms of pay increases, bonuses, etc, they spend those too. They have a scorched earth policy – scrape everything that comes in. Take no prisoners.

c) Those who spend above their income. These are super consumers. Their salary is never enough. They spend above their income. They always need an extra. If they do not have enough money to pay for an item, they use their credit cards or borrow from friends, family (and someone added – fools). Money is not safe with this group. As a matter of fact, more money makes their spending habits worse, generating a mountain of debts. Someone in this group was asked – “What would you do with a million dollars?” – my answer: apply it to my debts as far as it would go. Maybe if there is anything left, spend some more and generate fresh debts.

Money is a mind game. It all comes down to your mentality, mindset, and philosophy (call it what you will) with respect to money. If you look at your income as seed, capital, or seed capital, you will save and invest before spending. If you look at your income as harvest or profit, you will consume it. What you consume cannot multiply no matter how long and hard you pray. It takes delayed gratification to give your seed time to get to harvest, to give your investment time to bring returns.

When your harvest, profit, or returns come in, you can choose to reinvest it or consume it. If you cannot wait much longer – now is the time to reach for that Blackberry, iPhone, iPad, i-whatever, new large-screen TV, Louis Vuitton handbag, game box, your dream car, and other luxuries you have been dreaming about – powered by profits, not capital. If a businessman consumes his working capital, he is going out of business.

If a farmer consumes his seed, he will watch next year’s harvest from the sidelines. If an employee consumes all his salary, he will be broke, always pray for payday, and ends up with no capital to start his business or generate an additional stream of income. It is not rocket science. It is a mind game. As you think, you do. If you think right, you will do the right things and ultimately get the right results.