The crypto investors who hang on as Bitcoin plunges are the perfect example of a problematic mindset that keeps people from building wealth
- As the price of Bitcoin falls, many cryptocurrency investors are doubling down.
- This tendency to stick with something even when you're wrong is common, says CEO Ramit Sethi, author of "I Will Teach You to Be Rich."
- He explains that many people aren't willing to admit they were wrong about something because they've built their identity around that thing, internalizing money messages that might not hold up over the long term.
Have you ever seen someone double down on something even when confronted with evidence that they were wrong?
A good example of this: cryptocurrency investors.
One report covering investors who lost a significant portion of their money to cryptocurrencies revealed some haunting insights on this:
"In the United States, Charles Herman, a 29-year-old small-business owner in Charleston, S.C., became obsessed with virtual currencies in September. He said he now felt that he had wasted 10 months of his life trying to play the markets.
"'There's just so much more behind this new wave of technology and innovation that I'm sure will take over our society in due time,' Mr. Yoo said. With prices down so much, he said he was actually looking to put more money into the markets."
What do you see here? Many of them don't treat bitcoin as an investment. Instead, bitcoin becomes part of their identity.
And when that happens, it becomes nearly impossible to change - even when they've lost a ton of money.
It's not just cryptocurrency investors, either. This is the same reason why people will publicly support a politician and - when worse and worse behavior is revealed - they don't change their mind, but instead they actually double down.
Why does this happen? Why do we hold onto our beliefs even when there's a ton of evidence that we're wrong?
The money messages that control our lives
When it comes to money, people rarely ever want to admit they were wrong … and I don't blame them. So much of who we are and how we measure our worth is tied up to money.
That's not a judgement on individuals, either. In fact, a lot of our beliefs around money come in the way of "money messages" - the beliefs and values surrounding finances so deeply embedded in our society that we don't even realize they're guiding our attitudes and behavior.
We typically absorb these messages as kids from our families, but they can really come from anywhere.
Here are a few money messages people commonly believe - and a better way to approach them:
MONEY MESSAGE: "I can't get a raise in this economy."
BETTER MESSAGE: "I can get a very large raise if I show my boss that my work is invaluable to the company."
MONEY MESSAGE: "I can't afford that."
SOLUTION: "Yes, I can afford that expensive purchase. I just need to figure out how."
MONEY MESSAGE: "The best way to save money is to cut spending."
SOLUTION: "There's a limit to how much I can save, but there's no limit to how much I can earn."
MONEY MESSAGE: "This cryptocurrency / stock is the hottest investment to get rich quick!"
SOLUTION: "There's no such thing as a get rich quick scheme. The only way to be rich is to scale up my earnings and invest for the long run."
Each of these money messages are so ingrained in our thinking that we don't realize that they're there. They become a part of our identity and guide our behaviors surrounding them.
And if you don't realize they're there, they can become dangerous and lead you down paths you didn't necessarily even want to follow just because you thought you must.
Keep your identity small
Think about some other messages you've told yourself:
- "I should follow my passion."
- "I should hook up with a lot of people before I settle down."
- "I work hard, so I deserve this nice apartment."
- "My kids should take care of themselves after they graduate from college."
Notice that some of these messages aren't necessarily bad. However, they still can prevent us from doing the things we love and living our Rich Life.
Investor Paul Graham once said, "keep your identity small."
Once something becomes part of your identity, it's hard to change - even if all evidence tells you that you should.
Many people who get caught up in things like cryptocurrency investing, politics, or religion don't keep their identity small. They become "crypto" people, Republicans, Democrats, Libertarians - publicly! Once that happens, they're tied to it. They've publicly tied their identity to someone or something, and it would be psychologically devastating to change their minds now.
I don't mind identities. I have a few of my own:
- Personal finance guy
- Gym rat
- Hot sauce fan
But be extremely cautious about the messages you tell yourself, because once you internalize it, you'll do anything to justify your choices.
Ramit Sethi is the author of the New York Times bestseller, "I Will Teach You To Be Rich," and writes for more than 1 million readers on his websites, iwillteachyoutoberich.com and GrowthLab.com. His work on personal finance and entrepreneurship have been featured in The New York Times, Wall Street Journal, and Business Insider.
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