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How does your Locus of Control Tie into Wealth Building: 3 Steps to Master Mindset over Money

locus of control luck personality psychology self-reflection strategy wealth Mar 09, 2021
Woman with fingers crossed for good luck

Have you ever bought a lottery ticket and spent the next day or week sharing with the people in your circle just how you would spread your winnings? The car you would drive, the house you would live in, all of the bills you would payoff for your friends and family. The excitement felt that you could be the winner during the drawing, the disappointing crash from your high when you don't.

There is a term in psychology referred to as the Locus of Control. Psychology Today defines it as: "Locus of Control refers to the degree to which an individual feels a sense of agency in regard to his or her life. Someone with an internal locus of control will believe that the things that happen to them are greatly influenced by their own abilities, actions, or mistakes. A person with an external locus of control will tend to feel that other forces—such as random chance, environmental factors, or the actions of others—are more responsible for the events that occur in the individual's life."

Easily put, if you have an external Locus of Control, you believe that outside factors have a substantial influence on your life. Examples may include; the weather, politics, random luck, and actions of a friend or family member. People that have an internal locus of control believe that their actions directly influence things within their life.

Psychologists have differing opinions on whether a person is born with their predetermined genetic Locus of control or if environmental factors influence it.

The bigger question here is, what does a concept like Locus of Control have to do with wealth building? To begin with, you must understand that everyone has a Locus of Control, which may be internal or external. Knowing how to use that thought process will help you on your journey to build wealth and find financial independence. These 3 steps can help you learn how to leverage your Locus of Control leaning; to maximize your wealth-building strategy.


1. Determine if you have an Internal or External Locus of Control

Self-reflection is an essential part of your overall strategy. If you don't take a step back from time to time to evaluate where you personally are mentally about your plan, you will be lined up for failure. Building wealth takes intentionality, and the best strategists are masters of themselves. Determine what your Locus of Control is and aim to fully understand the concept.

2. Consider the strengths and opportunities of both leanings

Both leanings have their strengths and opportunities. People with an Internal Locus of Control tend to be better at handling stress and variability; they may struggle with not maintaining control of situations outside of their purveyor. Individuals with an external locus of control are typically great team players. They should endeavor to practice being mindful when they are self-victimizing.


3. Use your understanding to stay on the road to financial independence

Wealth building is a marathon, not a sprint. Very few people make their money by winning the lottery or buying that stock at just the right time. A study by Fidelity Investments in 2017 found that 88% of millionaires are self-made. Only 12% of the millionaires studied inherited a significant amount of money. Most millionaires made their first million by investing slowly but surely in their retirement account. Now people on the FIRE road may be working to retire early, but that doesn't change the consistency and intensity needed to win.

Your Locus of Control leaning is outside of your control. What you can control is how you will take this information and apply it to your life.


References:
https://www.psychologytoday.com/us/basics/locus-control
https://clearingcustody.fidelity.com/app/literature/item/9884619.html

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