The Importance of Mindset in Financial Planning
The Importance of Mindset in Financial Planning
Nothing demonstrates the differences between two opposite financial mindsets more than one's approach to financial planning. This is especially true when people think of the possibility of gaining a large sudden influx of funds. Entrepreneurs dream about closing a huge contract which ensures their business' profitability. Many people fantasise about winning the lottery. Having any amount of money places a responsibility on one to make sure it is put to constructive use. This requires financial planning, which is available by means of consultation with one of the Partners at StoneHouse Capital.
The consumerist and the financial planning or investor mind sets are virtually diametrically opposed.
What is a Consumerist Mindset?
Many people don't know how to work with money. This is partly due to media exposure in which the product, service and experience is propagated. It's the promotion of consumerism in its extreme form.
The emphasis in this mindset is only on all the pleasures and status that money can bring. People with a mindset dominated by consumerism will immediately be able to tell you how they will spend money. The great pool of cash available will be subdivided into amounts allocated to various items. Mostly this will be done without the realisation that money spent this way may simply be wasted.
If they have any investment strategy, it will most likely be based on a single investment or an undiversified portfolio, with unrealistic ideas of having a "sure-fire winner". It's as if they almost hope for another lottery first prize.
The Results of a Consumerist Mindset
In extreme cases this can lead to financial disaster. Possession of money and riches can be a very short lived experience. There are many cases of people who won the lottery or gained large inheritances and still ended up in a worse financial position after a relatively short time. It is not uncommon for people to fall into substance abuse and addiction as a result of this mindset.
What is a Financial Planning or Investor Mindset
One does not have to be a professional investor, Certified Financial Planner (CFP), or a financial advisor to hold this mindset. However, holding this mindset opens one to taking professional advice from a CFP when necessary. People with this kind of mindset will most likely use wisely the money they already have. Quite often these people have lived with, or studied, financially successful role models. There are no ideas of getting rich quickly or overnight successes, but they are prepared for success when it happens. Implicit in a financial planning or investor mindset is a holistic approach, such as applied by the Partners at StoneHouse Capital.
The emphasis in this mindset is on some degree of financial discipline. This does not mean that all pleasures are excluded for the sake of saving money or investing it. It is important to note that their point of departure is setting aside money for investment purposes.
The Results of a Financial Planning or Investor Mindset
Whatever the source of influx of financial resources, this mindset will create a greater possibility of sustainable wealth and prosperity. Their approach is characterised by:
o Financial planning basics: They will have considered their financial needs, and set up various financial goals for different stages of their life.
o Financial advice: This mindset allows for consultation on investment and money matters with CFPs, like a StoneHouse Capital Partner.
o Investment management [http://www.stonehousecapital.co.za/articles/What]: They, or their CFP, will take care of matters like portfolio diversification, long and short term forms of investment
o Tax planning: They will at least take advice on how to manage their income in such a way as to gain the best possible tax benefit
o Retirement planning [http://www.stonehousecapital.co.za/Why]: Quite often this is started early in life to make adequate provision for retirement
o Savings: While they may start small they will at least have some reserve to deal with emergencies
o Estate planning [http://www.stonehousecapital.co.za/Estate]: They will have given thought to their financial legacy once they have passed on. They will have formalised this legacy in a well constructed will.
It should be noted that these two mindsets are extreme cases. Most people will find themselves somewhere between the two poles. Knowing and understanding the difference between these two mindsets can make a difference between whether or not one prospers financially during economic booms. It could also mean one survives a financial disaster or not.
Nothing demonstrates the differences between two opposite financial mindsets more than one's approach to financial planning. This is especially true when people think of the possibility of gaining a large sudden influx of funds. Entrepreneurs dream about closing a huge contract which ensures their business' profitability. Many people fantasise about winning the lottery. Having any amount of money places a responsibility on one to make sure it is put to constructive use. This requires financial planning, which is available by means of consultation with one of the Partners at StoneHouse Capital.
The consumerist and the financial planning or investor mind sets are virtually diametrically opposed.
What is a Consumerist Mindset?
Many people don't know how to work with money. This is partly due to media exposure in which the product, service and experience is propagated. It's the promotion of consumerism in its extreme form.
The emphasis in this mindset is only on all the pleasures and status that money can bring. People with a mindset dominated by consumerism will immediately be able to tell you how they will spend money. The great pool of cash available will be subdivided into amounts allocated to various items. Mostly this will be done without the realisation that money spent this way may simply be wasted.
If they have any investment strategy, it will most likely be based on a single investment or an undiversified portfolio, with unrealistic ideas of having a "sure-fire winner". It's as if they almost hope for another lottery first prize.
The Results of a Consumerist Mindset
In extreme cases this can lead to financial disaster. Possession of money and riches can be a very short lived experience. There are many cases of people who won the lottery or gained large inheritances and still ended up in a worse financial position after a relatively short time. It is not uncommon for people to fall into substance abuse and addiction as a result of this mindset.
What is a Financial Planning or Investor Mindset
One does not have to be a professional investor, Certified Financial Planner (CFP), or a financial advisor to hold this mindset. However, holding this mindset opens one to taking professional advice from a CFP when necessary. People with this kind of mindset will most likely use wisely the money they already have. Quite often these people have lived with, or studied, financially successful role models. There are no ideas of getting rich quickly or overnight successes, but they are prepared for success when it happens. Implicit in a financial planning or investor mindset is a holistic approach, such as applied by the Partners at StoneHouse Capital.
The emphasis in this mindset is on some degree of financial discipline. This does not mean that all pleasures are excluded for the sake of saving money or investing it. It is important to note that their point of departure is setting aside money for investment purposes.
The Results of a Financial Planning or Investor Mindset
Whatever the source of influx of financial resources, this mindset will create a greater possibility of sustainable wealth and prosperity. Their approach is characterised by:
o Financial planning basics: They will have considered their financial needs, and set up various financial goals for different stages of their life.
o Financial advice: This mindset allows for consultation on investment and money matters with CFPs, like a StoneHouse Capital Partner.
o Investment management [http://www.stonehousecapital.co.za/articles/What]: They, or their CFP, will take care of matters like portfolio diversification, long and short term forms of investment
o Tax planning: They will at least take advice on how to manage their income in such a way as to gain the best possible tax benefit
o Retirement planning [http://www.stonehousecapital.co.za/Why]: Quite often this is started early in life to make adequate provision for retirement
o Savings: While they may start small they will at least have some reserve to deal with emergencies
o Estate planning [http://www.stonehousecapital.co.za/Estate]: They will have given thought to their financial legacy once they have passed on. They will have formalised this legacy in a well constructed will.
It should be noted that these two mindsets are extreme cases. Most people will find themselves somewhere between the two poles. Knowing and understanding the difference between these two mindsets can make a difference between whether or not one prospers financially during economic booms. It could also mean one survives a financial disaster or not.
