Change Your Perception to Achieve Financial Freedom

by David@MoneyNing.com · 20 comments


He told me he had a gun, and I thought he was about to hurt me. But it turns out to be a friendly neighbor trying to protect everybody because there was a robber just down the street.

To say that perception is important just doesn’t do the term justice. It’s the sole contributor to our decision to purchase, and the reason why some of us make more money than others. Perception is one of the most crucial factors of personal finance because it affects the two main avenues of accumulating more wealth – our ability to earn and our discipline to save.

Let me explain.

Perception Can Make Us Buy and Spend More

You weren’t born wanting to buy that shiny new car, but through the glowing reviews and your research to see all the care and engineering that goes into making a vehicle, your perception of the car changed. You keep seeing those commercials on TV, and you start rationalizing the purchase. You start thinking that it’s actually a good time to buy a car when interest rates are low. Your feelings of all those safety features being worth the extra costs also become stronger by the day. You were sold before you even stepped onto the car lot. Buying is all about perceived value.

Trying to curb your spending can be really tough. Instead, see the value of being out of debt, and the value of delayed gratification in order to save more and spend less. Think of the freedom of having fewer monthly payments, and the delight of seeing an ever-growing account balance. The only way to be successful in saving is to see a higher value of having that wealth instead of the stuff that you buy. And let me tell you a secret – you will be much happier because you won’t be as stressed out trying to maintain that spending.

Perception Can Costs Us Money Too

I was just out today and gas was selling for $2.67! In California! Overnight, no one worries about the ultra-high gas price anymore. After all, gas is not $4 a gallon anymore so no problems right?

The same thing happened with housing prices shortly after the Great Recession and it could soon be happening once we start climbing out of our current economic mess. I remember thinking how much of a bargain a house selling for $599,000 is when it was being sold for $729,000 during the peak. If we bought then, we would have saved $130,000 in a year and a half.

Now, what about the sales event at your favorite department store? There are certainly plenty of sales at retailers these days. That pair of sunglasses probably looks great on you and instead of the original price of $350, it’s discounted to be $200. Wow.

Sometimes, our perception seems to trick us into thinking the wrong way about savings and spending. We seem to forget that gas prices used to be $2 a gallon, that comparable homes used to cost $300,000, and buying sunglasses is spending money and not saving money. We fall into the trap of brilliant marketers who understand human behavior. We end up spending money and not saving. We end up depleting our emergency funds, taking loans from our retirement funds, and spending it on flat-screen TVs and home remodeling. We end up delaying the one thing we wanted most, financial freedom.

What Should We Do?

In order to save more money, we first have to acknowledge that it’s natural for our perception to work against us. Once we recognize this, we can better spot the situation. We can then start focusing on telling ourselves that we are actually spending more money when we buy that pair of sunglasses, and that it’s nowhere near the point where we can splurge again when gas prices dropped to $2.67.

It’s at these critical moments when a decision can make a huge difference to your financial health. It doesn’t matter that you are still employed, because saving a dollar when you have income and saving a dollar when you don’t yield the exact same result. It’s these times where the frugal ones can truly distinguish themselves from the rest. It’s at these times where good decisions will lead to much faster wealth accumulation than would otherwise be possible.

It’s at these times that you decide what you should do. The answer should be obvious.

Perception is Important for Making Money Too

Ever wonder why your coworker got a promotion instead of you even though you work harder than him? The reason is simple. He/she is perceived to be the best candidate for the job. No one can guarantee that it’s the right choice or not, as anyone being considered obviously hasn’t been in that position before. If you want to earn more money, then start acting like you deserve better pay. Here are more little tips you can start doing immediately:

  • People You Are With – We all naturally gravitate towards people we see as equal but it doesn’t help our career at all. It’s a little unfortunate how this works actually, but start hanging out with coworkers at a level above you more often and people will magically give you more respect. As an experiment, if you befriend a department head, note how people within the department will start treating you.
  • Funny Is Not Always Good – Many young guys fall into this trap because it earned them many brownie points with the ladies at an early age. Injecting humor is always good but there’s a fine line between clever jokes and being goofy.
  • Hold Yourself Together – Learning to stay calm gives everyone the impression that you are a competent individual who knows what to do in every situation. I had dinner with a friend the other day after not seeing her for a couple of years. She no longer appeared as a clueless girl and her transformation was incredible. She told me that little has changed, but she stopped herself from overreacting and sending out signals that she actually has no idea what she was talking about half the time.

Surprisingly, reality counts little, while perception is everything. Change the way people perceive you and how you perceive the world. It could mean big bucks.

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{ read the comments below or add one }

  • Beau W. says:

    This is awesome advice. Very thought provoking. Nice work Sir..

  • Rick K says:

    $2.67 for a gallon of gas? Try $0.97 in OKC!

    How’s that for perspective?

    • David @ MoneyNing.com says:

      $0.97, wow!

      Seeing these numbers reminds me that I definitely love living in California to pay these prices.

      At least I’m not really driving these days so gas costs for me have gone way down.

  • Joe on the Move says:

    Interesting theory about who you hang out with at work determining your career trajectory.

    I guess we solved this problem fast in the post COVID-19 world though!

    • David @ MoneyNing.com says:

      This too shall pass, so keep this in your back pocket and start hanging out with higher-ups once in a while when work lunches are back in fashion!

  • contrastockhunter says:

    Agreed perception really is reality. The same is so true when it comes to investing successfully (a quicker path to financial freedom in my book). Once I learned how to look at things the right way, which very few folks do, I learned there was so much more opportunities out there.

    As for the politics of the workplace, i don’t think acting like you know what you are doing is enough. You’ve got to learn or simply say you don’t know. That’s fine and the people who work for you will respect you for it.

  • Wilson Pon says:

    A small change will either make it good or worse, David. However, if we didn’t take the chance and changing our perception, then we’ll be the big loser for sure.

  • Thicken My Wallet says:

    You hit upon a good point on the job front. It is not that you preceive or your colleagues preceives you as competent, it is that your managers do. I have seen far too many “nice” people be laid off or downsized not because they were not good at what they did but management did not preceive them to be crucial to the organization.

  • samorchard says:

    That is some really good advice, I think my problem had always been that I enjoy the cheery side of work when you had a giggle but worked hard and I think it meant people thought I wasn’t professional. I was always good with clients and won business from my meetings but people don’t always see that. When I got passed over for promotion I decided that I would start and work from home.

  • David@DINKSFinance says:

    Good advice. To some it seems obvious but there are plenty of people who don’t realize the impact that perception has on so many aspects of life.

  • Fred says:

    Another good piece David… Most people have it all wrong when they work on their spending. Instead, they should focus on saving and the spending will take care of itself.

  • Financial Samurai says:

    Hi David – Just curious to know how long you worked in “the corporate” world before you started blogging full time? Cheers

    • MoneyNing says:

      I worked at various summer jobs when I was young and got a glimpse of the corporate world then, but full time probably 6-7 years or so. I’ve been in managerial positions as well as sales which helped me tremendously in putting everything in perspective.

      • Financial Samurai says:

        Cool, thnx for sharing. What was your “a-ha” moment that let you to stop working in the corporate world, and focus on blogging full time? Was there a certain monetary threshold involved? Maybe we can do an interview at some point.

        • MoneyNing says:

          The moment was when I realized the potential of doing it full time and seeing how others were able to do it. It wasn’t so much a threshold but the fact that I was making enough money to support myself if I live frugally. My sales position being too demanding and the fact that I was no longer able to give my 100% to both my blog and my job was also a factor.

  • John says:

    I love the phrase “saving is spending in reverse” as well. Would refunds be considered neutral?

  • Craig says:

    Agree, when I get my paycheck I automatically put a little into savings and retirement, in a sense it is spending, like you say in reverse. It’s a good mentality to keep.

  • Jason @ MyMoneyMinute says:

    “Saving is Spending in Reverse” — I understand the concept, but had never heard it put that way. I like it.

  • Jules @ Lovely Las Vegas says:

    Good concept of looking at the value of things and evaluating purchases. Wise spending goes hand-in-hand with saving. Especially if the things we purchase have continual value and/or will last a long time.

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