When it comes to achieving personal finance goals, 90% of the work is emotional.
From a logical perspective we know what to do. Spend less than we earn. Save for the future. Avoid debt; pay debt off if we have it. Figuring out how to do all of this is a bit more challenging, but it’s not impossible (and there’s a lot of advice out there and professionals available to help).
The challenges we face when striving for financial goals aren’t tactical, they’re emotional. And these challenges can be overcome – with a growth mindset.
The Difference Between a “Fixed” and “Growth” Mindset
If you’ve never heard the term “growth mindset” before, it’s explained in a book written by Stanford psychologist Carol Dweck called Mindset: The New Psychology of Success:
“A ‘fixed mindset’ assumes that our character, intelligence, and creative ability are static givens which we can’t change in any meaningful way, and success is the affirmation of that inherent intelligence, an assessment of how those givens measure up against an equally fixed standard; striving for success and avoiding failure at all costs become a way of maintaining the sense of being smart or skilled. A ‘growth mindset,’ on the other hand, thrives on challenge and sees failure not as evidence of unintelligence but as a heartening springboard for growth and for stretching our existing abilities. Out of these two mindsets, which we manifest from a very early age, springs a great deal of our behavior, our relationship with success and failure in both professional and personal contexts, and ultimately our capacity for happiness.” — Brain Pickings
When I first discovered this concept, I felt like a mirror was being handed to me. For the first time in my life, I fully understood why I felt held back by lack of money and other shortcomings in my life. Even more, I learned that I was doing the job of holding myself back, not my circumstances.
That’s when I realized that many who struggle with their personal finance goals are likely stuck in a fixed mindset – just like I used to be.
How to Tell if Your Mindset is Fixed or Growth
How did I know I had been stuck in a fixed mindset? Because I saw my challenges as nearly surmountable. I almost felt like it was my lot in life to struggle financially. That was how I was born and how I grew up, and, therefore, that would be how I would end up.
Not just that, but I also attributed much of the struggle to myself. If I failed at reaching a financial goal, I didn’t see the failure as independent from myself. Rather, I saw the failure as a reflection of myself:
I failed to hit my savings goal this month, therefore I am a financial failure.
This kind of thinking is drastically different from the growth mindset, which perceives failure as something that happened and can be learned from – but is not reflective on the self. Here’s how a growth mindset would view the example above:
I failed to hit my savings goal this month. Therefore, I need to learn why that happened so that I can solve the problem and reach success next month.
See the difference? A fixed mindset makes you feel almost hopeless. If I feel like I’m going to perpetually suck at finances, why would I ever be motivated to get better? But if I feel like I can learn to get better at finances, then I have something to strive for.
So how can you tell if you’re stuck in a fixed mindset or if you have a growth mindset? Examine how you feel in your successes and failures. Are they tied to who you are as a person? Do they define you? If so, you’re in a fixed mindset.
But if you separate yourself from your failures and successes – if you know that everything is an opportunity to learn more – then you’re in a growth mindset. Here’s more on the concept from Carol Dweck:
“What it all comes down to is that a mindset is an interpretative process that tells us what is going on around us. In the fixed mindset, that process is scored by an internal monologue of constant judging and evaluation, using every piece of information as evidence either for or against such assessments as whether you’re a good person, whether your partner is selfish, or whether you are better than the person next to you. In a growth mindset, on the other hand, the internal monologue is not one of judgment but one of voracious appetite for learning, constantly seeking out the kind of input that you can metabolize into learning and constructive action.” — Brain Pickings
In other words, if a setback makes you feel hopeless, your mindset is in fixed mode. If a setback drives you to learn to do better, your mindset is in growth mode. But guess what, you can change the mindset you’re in!
How to Switch to a Growth Mindset in Your Finances
Nothing feels more hopeless than a fixed mindset. Even success can be a problem – because, when the fixed mindset reaches success, it can’t strive for more success. Instead, it has to defend the ground it has gained to feel validated. No risks or challenges can be taken because the success might turn into a failure.
A fixed mindset is no mindset to be in when it comes to life or personal finances. If you feel stuck in it, here’s what you can do to change to a growth mindset:
Remove Results (Good or Bad) from Your Sense of Self
If you hit a financial plateau or snag and your first response is to shame yourself, stop it immediately.
Your successes and failures do not define you. What you do about them does.
As long as you tie your successes and failures to your sense of self, you will remain in a fixed mindset. But when you remove your sense of self from these things, then you can make the switch to growth.
Missing a financial goal doesn’t mean you’re destined to financial failure. Dealing with past financial mistakes doesn’t mean you’re the kind of person who makes financial mistakes (hint: all people make financial mistakes – no matter how much money they do or don’t have). Your financial situation is NOT a reflection of who you are.
What you do about it is who you are. So get up and live to fight another day for your financial goals. Celebrate success, learn from failure, and keep striving for your financial dreams.
Embrace the Challenge
Once you remove success and failure from your sense of self, you can finally embrace challenges. Whereas before a challenge could either kick you off the top of your mountain or lead you to failure, now, with a growth mindset, you can see that a challenge is an opportunity.
Challenge is an opportunity because the goal isn’t to be perfect. The goal is to be better. Better today than we were yesterday. Better tomorrow than we are today. And that can only happen when we face our challenges head on and learn everything we can from them.
View challenge as an opportunity, not something to be avoided. Welcome it with open arms because you know the way it can expand your experience and knowledge. Then you’ll break through that fixed mold and make your way to growth.
I’m Living Proof that the Switch Can Be Made
This information is only the tip of the iceberg of Dweck’s research. If you find it at all interesting, I highly recommend reading her book. But if you feel like it’s impossible to make the switch, know that it isn’t. I didn’t know it before, but after reading about these concepts, I realized that I was able to make the switch myself.
And I didn’t do it alone.
I had help from my now husband (then boyfriend). I’ve had help from my friends. And I’ve had help in changing my entire worldview from one of fear to one of growth.
I used to be firmly placed in the fixed category – so firmly I didn’t even know it. But over the years I’ve taken risks and removed my successes and failures from myself as a whole. I now know that these things don’t reflect who I am as a person in any way. I used to define myself by my profession, my salary, and my financial successes and failures. But now, now I define myself by my effort.
The effort I make, the desire I have to learn and grow. These are the things that make up who I am now. It wasn’t an easy transition to make, but once I realized growth isn’t possible without risk, I realized I had no choice but to take a leap of faith. And then a world of possibility unfolded before me.
So, what do you say? Are you open to exploring a whole new world? A world free of financial fear? A world full of financial potential? Join me in the transition and kick that fixed mindset to the curb. You’ll be amazed at what you can do.
Image Credit: Jon Ottosson