The concept of wealth is a mind-set rather than a number. There is no such thing as a threshold of net worth which, once exceeded, defines you as wealthy. Quite simply, you are wealthy if you feel wealthy. Research shows that most people feel they are not wealthy regardless of their net worth. Robert Frank, a columnist for the Wall Street Journal, once wrote that even wealthy people say they need twice as much wealth as they currently have in order to feel secure.
Your state of mind can make a huge difference to your financial outcomes. A scarcity mind-set leads to jealousy, greed, poor financial decisions, discontent and misery. Feeling wealthy creates confidence, optimism, a willingness to take on more risk, and a greater desire to borrow and to spend. Economists talk about ‘the wealth effect’ - a psychological phenomenon that causes people to spend more as the value of their assets rises.
There was a time when motivational experts encouraged us to think of the word ‘abundance’, as it is the opposite of the word ‘scarcity’. Supposedly, reframing our lives as being abundant would bring about greater wealth and happiness. It’s no surprise that this trick of the mind didn’t work. The secret is to think not of abundance but ‘enoughness’. Enoughness is the state of being and having enough. To be in this state requires a belief in yourself, that nothing is lacking and everything is OK in your life just as it is.
We can waste a lot of time and emotional energy complaining and worrying about what we don’t have enough of and feeling trapped by scarcity. True freedom comes not from massive wealth but from enoughness. In the words of Lao Tzu, “When you realise nothing is lacking, the whole world belongs to you”.
Liz Koh is an Authorised Financial Adviser. The advice given here is general and does not constitute specific advice to any person. A disclosure statement can be obtained free of charge by calling 0800 273 847. For free eBooks, go to www.moneymax.co.nz and www.moneymaxcoach.com