When it comes to money, there are four definite mindsets.
The employee mindset
This is what you learn at school. Do well at school and hopefully you will land a good job with a good company. Hopefully you’ll be doing work you enjoy as you climb the corporate ladder and earn bonuses and pay rises until you are rewarded with a large salary and an impressive title.
People with an employee mindset talk in terms of the number of hours they work, the benefits their job offers and how many holidays they can enjoy. They look forward to the large retirement benefits they will receive when they finish work so they can do the things they always wanted to do. They are hoping their employer will take care of them and reward their loyalty and hard work.
In most countries, this is the most common path and least efficient way to climb the money tree. Income from personal exertion is highly taxed and there is little opportunity to invest before the government takes its share.
The self-employed person
Many professionals and home-based business owners have this mindset. These people can set their hourly rate, have the freedom to work when and if they choose and can arrange their schedules to fit in with family responsibilities and other commitments.
Even though self-employed people consider themselves to be in business for themselves, they are in reality still in a job. Their income stops the moment they get sick, take time off or retire. Like the employee, they are selling their time.
The business owner
The business owner has the courage to follow his dream and put his ideas into action. This offers a riskier, but potentially more rewarding path to financial freedom. The business owner is always looking for good people to support him. The business owner has a mindset that his business makes him money.
Valuable businesses are systems that deliver value by organising and combining the efforts of people and resources. Creating a business requires leadership, organisational and management skills and capital. It means taking risks and reaping the rewards if things work out. Starting, organising and running a business is one of the most reliable paths to wealth. There are tax incentives, and if things work out well, an ongoing cash flow that can last for generations. Most self-made millionaires are entrepreneurs and business owners.
This person’s main concern is maximising his return. He analyses the risks and benefits and works out how soon he can expect to get his money back. These people are always looking for opportunities to make their money work for them. The mindset of an investor is that money makes money.
Throughout history, investing in land and buildings, shares (stocks) and bonds, or commodities has been a reliable and efficient way to accumulate wealth.
The employee and the self-employed person work for money. The business owner and investor make their money work for them.