Consumer vs. Investor Mindset

As I write this post I am 30,000 feet up in the air in a nice, luxurious delta airplane. I guess we can say I have a forest view of how the mindset works. See how I set that up! My argument today is that a consumer mindset is designed to be poor until your passing from this beautiful blue planet of ours. Call me a conspiracist if you want but this country, very well any other country, is a damn pyramid scheme. I mean at the end of the day someone has to be CEO & someone has to pick up a shovel and dig ditches. Unfortunately, that is the way it works, and my conspiracy is the government likes it that way. That is why companies spend millions of dollars learning how consumers purchase products & how to keep them coming back. Of course, they don’t study a person who has an investor mindset because that would require too much on their part.

So, what is the major difference of mindsets between a consumer versus an investor? Is it that the consumer sees a shiny iPhone to buy and the investor sees an increase in stock value? Or is that the investor focuses on the company’s numbers and a consumer focuses on company colors and marketing gimmicks. Whelp, it’s neither actually. From the forest view, it’s very simple to see. The difference is the same between the rich & poor. The rich think long-term and the poor think about the next day. Hence, living paycheck to paycheck.

Honestly, the main difference is that an investor is a long-term thinker. When I chat with my clients before financial coaching they are focused on trying to stop living paycheck to paycheck & trying to see past their current day of bad financial situations. Which I understand, focusing on today is only natural for humans. They want to get out of that bad situation and solely trained focused on the tree in front & not the beautiful forest behind said tree.

Granted the difference between a consumer & investor does break down into much more detail but the concept of viewing a tree & forest is the reality. Let’s take a relatively new product in the market. We have Apple who came out with another new iPhone. I’ll refrain from pretending to know every difference but from what I researched the improvements seem minimal. Now the cost for the cheapest new iPhone is $999 not including taxes and the cost of an Apple stock (AAPL) is currently $217.88 as of 9/18/2019. Quick plug but checkout Robinhood for free trading if you feeling the itch to start investing already!

So, we now have our example person Azari. Just like the rest of America he sees the new iPhone advertisement, watches the reveal, researches the improvements and then he has a decision of buying or not buying. A short-term thinker will rationalize that buying the phone is a necessity or simply just a want. Another common thought is the phone is “affordable” since it can be paid over 24 months. After all, $41 payment for 24 months is more appetizing than paying $999 at once. But those thoughts are the complete opposite of a long-term thinker. When you are thinking long-term the first realization is this asset (iPhone) will not provide a monetary Return On Investment (ROI). Preferably the next thought that races in are the money spent on the iPhone could be better invested elsewhere. Instead of paying $41 into a non-appreciating asset Azari can invest that $41 monthly or $999 at once into the market, paying down debt, saving for an emergency fund, education or a small business.

From that example, a major takeaway is long-term thinkers understand that a dollar invested today will be worth more than a dollar spent. Hopefully, you are starting to see the bigger picture on the differences of a consumer & investor thought process. When you adopt the investor mindset you literally start analyzing every extra purchase. Not just with the new iPhone but other consumer products as well. Consider the larger purchases you will have later in life such as a vehicle or home. I have seen people purchase past beyond their means which limits your investing power by thousands of dollars in a lifetime.

Developing an investor mindset comes with many advantages compared to the consumer mindset. And I don’t like to waste time so let’s cut to the biggest advantage, opportunity. Remember, this is what you should walk knowing. By using the money to invest in assets with a potential ROI is giving yourself the opportunity. Re-visiting our example with Azari, if he invests the money in the stock market then he will have the opportunity to grow his money. If he invests the money to pay down the debt he will save money on interest. If he invests the money into his education, he will have the opportunity to demand a larger salary. If he invests the money into his own business, he has the opportunity to create a second stream of income. However, if he uses the money to purchase the phone he only has the opportunity to stay exactly where he stands.

Bottom Line

A consumer will always remain a consumer until they evolve into the mindset of an investor. Simply put if you want to grow you need to think like an investor in the majority of financial purchasing transactions. Let’s all grow together & share the knowledge.

 

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