Until you can manage your mind, do not expect to manage money.—Warren Buffet
Getting into the field of property investment, your mindset plays a very important role. You need to think like a successful person in order to gain success.
Psychology tells us that the way we think, feel, and act is as unique to each human being as their fingerprint. No two people are the same. How else would it be possible that in the same room one person feels comfortable, the other one is cold and for a third person it appears to be hot? Or that one likes the food and the next one finds it awful?
People are largely driven by their sub-conscious and are typically not consciously aware of why they think the way they think or feel the way they feel, such as being angry or be happy. This is influenced by many factors such as our environment and surroundings, past events, education, our memories, values, attitudes, past decisions and beliefs. Everything we take in every second of our lives gets sub-consciously evaluated against them.
Everybody is unique and what you think is right, because it is right for you according to your sub-conscious mind – but it might not be right for somebody else. It was just your own personal evaluation and projection – it’s all just in your (own) mind. But the good news is: Your sub-conscious mind is just an order taker; it just does what you tell it to do. So it is literally easy to change your mind.
Are You Emotional?
The answer, of course, is yes, because all human beings have emotions. Some are more in touch with them and show their emotions and others less. For our personal relationships, emotions are essential of course, but when it comes to money and investments, we need to totally take out all emotions when making decisions. Well, except joy maybe after yet another successful property deal.
The “Great Bear of Wall Street” Jesse Livermore said more than a century ago: “The Financial Markets will remain the same yesterday, today, and tomorrow simply because of the four basic human characteristics of fear, greed, hope, and ignorance”. This still holds true today and is the same in property investing. If we let our emotions get away with us when making decisions, often we will not make the right decisions. Don’t decide on a property when you are angry or upset.
Mindset Matters Most
This is the most important concept. Warren Buffet is correct, that without the right mindset it would be difficult to become a successful investor. Whether you listen to financial traders, trainers, or successful entrepreneurs, they all say the same thing: Your mindset contributes 60 to 90 % to your success (only the actual number varies, depending on whom you ask). The rest is mechanics and knowledge.
The human mind is the most powerful ‘super-computer’ on Earth. If you ‘program’ it correctly it will help you tremendously, but conversely will also hinder you if you have the wrong mindset. So please read carefully and adopt your mindset where necessary. You have just significantly increased your chance of success.
How Do Investors Think Differently?
If you bought a handful of shares of your favorite company years ago and are still holding on to them, you are technically an investor, as you have invested into that company. When I am talking about investors, I mean people who let money work for them with the intention and purpose of increasing their net worth.
Do you think that great investors such as Warren Buffet or Donald Trump think differently than most other people? You bet they do! Even if not everything goes right, and they might be in debt with a billion dollars at a particular point in time, they know how to get out of such a situation, act accordingly, and are rich again soon after, as we have seen in Donald’s case.
You probably also have heard the saying: The rich are getting richer and the poor are getting poorer. Why is that so? Because the way they think is different!
A study once concluded that if all the wealth in this world was taken away from everybody and then distributed equally to all people in the world, it would probably take less than 10 years until exactly the same people who had no or little money before would be poor again and exactly the same people who were rich before would have all their wealth back.
Of course this cannot be proven, but doesn’t it give a lot of food for thought? If 1% of the people own maybe 40-50% of the wealth, should we say that this is ‘unfair’, envy them, or even try to take it away from them? Or rather, should we learn from them, understand how they think and act differently, and just model what they do for our own benefit? I highly recommend the latter!
Your Relationship With Money
What is your relationship with money? Some people think that money is evil, some despise the lifestyle of the rich and others focus on not spending money, rather than making more. So here is my first tip: You need to love making money! Not at all costs of course, but at least you should not have any problems with the concept.
So please examine your own relationship with money and adjust where necessary. The way we think and feel is largely driven sub-consciously and it might not be so easy to change it, but it is entirely possible.