by Mindy Crary
Why is it that some people are constantly going broke, but have to have the latest and greatest thing, while other people are like the millionaire next door, living well below their means?
In my experience, it’s because these two different types of people have different money set points.
We arrange our life to match our unconscious expectations of the amount of money you “should” have—this is your money set point. It’s based solely in your head, in your wealth mindset.
You have an upper limit that prevents you from busting through your comfort zone, and a lower limit that prevents you from financially crashing. That sweet spot in the middle is your money set point.
When people have a lower limit problem, every time they start bringing in a little more money, the basics they “can’t live without” get a little more expensive. So no matter how much they make, they always seem to end up with the same result.
This is called your net cash flow. When you’re in that situation, you want to find away to make more money and keep more money, right? And with most things, clarity is the first step. Clarity around exactly what money is coming into your household every month, and clarity on the best use of every dollar leaving it.
If you think you might have a lower limit problem, ask yourself: If you couldn’t do the work you’re currently doing, what amount of money do you know you could go out and generate in another way?
I knew a client once who made really good money, but said, “If everything went to hell, I know I could go out and get a job waitressing and make enough to cover the basics.” Her basics were about $40,000 annually, so that was her lower limit.
On the other side of things, upper-limit problems are almost always wrapped up in our self-worth. And it crosses all kinds of boundaries — from happiness and love to money and self-worth.
We get a raise, we get a promotion, we land that big client… And we start to feel bad, feel guilty. We get sick, pick a fight with our partner, run out and spend it all on who knows what.
THAT is an upper limit problem.
To help identify your upper limit, think about an amount of money that you feel absolutely comfortable generating as income on a monthly basis. You should have zero physical reaction to this number.
Now, double that number . . . how did that feel? Did you start to react? If that number was still in your comfort zone, try increasing it by $5,000 . . . how about now? Play around until you find a number that makes you nervous; that’s your upper limit.
The easiest way to raise your money set point is to consciously plan how you’re going to allocate it. Every year, I make a list of everything I want to spend money on, in addition to my normal monthly expenses and savings (of course, this list gets changed, updated and reviewed several times per year as I think of new things and cross off old ones). For me, this list creates the why behind increasing the upper limit. If I can reasonably predict how I would allocate the money, then I have no internal conflict about generating it.
If you think you might have upper limit issues, you might want to make a list like that and post it someplace conspicuous, to remind yourself why it’s so important for you to raise your limit. The more you tend to “settle” for what you get money-wise, the more frequently you should look at the list.
And if you really think you have upper limit issues, you might want to get some support in generating the list, to help you see the possibility and reinforce the idea of expecting more.
Your money mindset sweet spot is when you have an upper limit and a lower limit that are working for you, not against you.
Remember: Just because you have a money set point doesn’t mean it’s set in stone. You can work to adjust it, and find your very own sweet spot.
Mindy Crary, personal finance expert and author of Personal Finance That Doesn’t Suck, helps both you AND your money succeed. From growing your wealth to the actual person behind it, Mindy bridges the gap between the energetic, spiritual and practical financial services industry with a creative twist. Check out Mindy’s excellent (and FREE) ebook on Money Chakra.
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