Financial writers often refer to a state of mind called the ‘investment mentality’ when describing people who are able to manage their money so that it renews itself and is not squandered away.
Good examples of spending with an investment mentality include:
-Buying assets that will generate more money or grow in value, such as a property to rent out, stocks & shares or specific tools with which to undertake a trade
-Investing time and money to learn new skills and experiences, such as taking an evening course and putting yourself forward for opportunities at work
-Setting up a business or creating opportunities for promotion and advancement
-Looking at each purchase and questioning ‘why’ it is needed
Evolving to an Investment Mentality
For many the journey to financial independence involves three main states of mindset:
Job Mentality – also known as the ‘wage slave’. All income is spent on outgoings, with little or nothing left at the end of the month.
Savings Mentality – spending is reduced below earnings and extra money used to clear debts and save for the future
Investment Mentality – As much income as possible is invested in generating more money and those profits invested again & again to build significant wealth. All purchases given careful consideration to minimise money waste and maximise return-on-investment.
The Evolution of my Financial Mind
When I left university and got my first job, my main motivator was to at last have a decent income so that I could splash out on a fast car, some nice clothes, the latest mobile phone and all the other gadgets and gizmos that I couldn’t really afford during full-time education. I was definitely in the full midst of my Spend Mentality and succeeding very well at spending everything I earned, whilst also giving my credit card a good work out too. Moving on a couple of years, my attitudes started changing and I started to think more about the future. The realisation of the value of money started to dawn on me and I began moving into a Savings Mentality.
My desire to have the latest and greatest, began to be overtaken by a preference to be free of debts. I also wanted to own my place and have always being of the attitude that renting is dead-money. I was fortunate enough to be supported by my parents as I worked to pay of my debts and saved up a deposit for my flat.
I also started my pension and began investing in the stock market (through an ISA). Whilst the pension is still going, I ended up cashing in the ISA a couple of years ago to go travelling around the world – I guess you can’t be a saver all the time!
Whilst some would consider travelling as squandering cash, I consider it a worthwhile spend and have benefited from much broader views and increased confidence. Since returning to work I have participated in a number of large, high profile projects, which have involved a massive investment in personal time and energy to ensure delivery. Whilst my social life might have suffered, the skills and experience that I have acquired are now opening doors to much more lucrative areas of work and it has been well worth the sacrifice.
I would say that I am now moving from a saver mentality to an investor mentality and have a number of goals for the future that include trading up to a larger property, growing my investment portfolio and securing a level of financial freedom to fully enjoy life.
Your Stage in the Journey
Where do you currently stand in the financial journey? Are you a saver or a spender? What are you doing to help achieve financial independence?
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