When it comes to planning for the future, one of the most harmful mindsets you can have is one of scarcity. Also known as conditioned thinking, a scarcity mindset holds you back from achieving your goals, especially when it pertains to financial freedom and growing your wealth. Here’s how conditioned thinking works.
A great example of conditioned thinking relates to road signs we encounter while driving. Without thinking about it, you know that a red octagon sign placed at an intersection means to stop. Likewise, a yellow triangle means to yield. That’s conditioned thinking at work. In short, consistent exposure to an object or a way of thinking causes an automatic response.
Not sure if you’ve been a victim of conditioned thinking? Let me ask you this, how are you planning to prepare for your impending retirement? Chances are, you said something along the lines of a 401(k) or other retirement planning product. Am I right? If you said yes, you’re not alone. That’s because we’ve been conditioned to believe the only way to properly save for retirement is with traditional financial products like a 401(k).
While there’s nothing wrong with following the traditional retirement planning route, it’s not the only option. The problem is, not everyone realizes this and that’s because they’re not asking the right questions. In order to fully maximize the way your money works for you is to know how it works for you.
So, what are the right questions?
Am I deferring a lower rate today to a higher tax rate tomorrow?
One of the “benefits” of a 401(k) is the ability to put untaxed money away to grow your retirement savings. Sounds great, right? The problem here is your money doesn’t stay untaxed. When it comes time to withdraw your retirement funds, your money will be taxed at a much higher tax rate than when you first invested the money.
Do I have control over my money when it’s in a 401(k)?
Perhaps one of the biggest downfalls of relying solely on a 401(k) to grow wealth is not having total control over your money. Accessing your money in response to an emergency is not only a lengthy process, but you are also penalized for doing so.
What are the real costs and fees associated with a 401(k)?
The tradeoff of having your retirement accounts managed by a financial service provider is paying fees and commissions. While they may seem minor up front, they can have a big effect on your wealth over time. The cost of having someone handle your investment portfolio is directly related to how large your account balance is. As your wealth grows, so do your fees. Adding to these fees is the fact that every dollar taken from your investment portfolio for fees and commissions is one less dollar that can compound and grow.
Can I use this money to grow wealth?
In order to grow wealth, money needs to be put to work in a way that allows it to reach its full potential. That means understanding the true costs of a product or service, as well as finding the best way to ensure your money compounds over time. Additionally, ask yourself if there is more than one function you can assign to your money.
Knowing the right strategies to grow wealth is important. Breaking away from conditioned thinking and learning to utilize other methods like the Infinite Banking Concept or a combination of financial products, is a safer bet than relying solely on traditional methods. Once you know how to make your money work for you, you are free to make the financial decisions that will not only grow your wealth but also create a legacy for future generations.
The good news? You don’t have to figure it all out on your own. Sage Wealth Strategy is here to guide you through the wealth growing process whether it be planning for retirement or reach other financial goals. Contact us to learn more.