Nest thermostat mounted on wall showing 63 degree temperature.
Mind Money

Your Inner-Money Thermostat

When I was a teenager I attended a conference called Millionaire Mind Intensive with my brother and his wife. It was a three-day class taught by T. Harv Eker.

One of his lessons was about your “inner-money thermostat.” 15 Years later and this concept has never left me.

Over the years, my ideas of the inner-money thermostat have evolved, but the general idea is the same one taught by T. Harv Eker.

“How much money is a lot of money to you?” – A question I frequently ask people during personal finance mentoring sessions and discussions.

The answers I receive are generally surprisingly low. $10,000; $1,000; $20,000; $500. I don’t think anyone has ever responded $1 million or more.

What is an inner-money thermostat anyways?

Let’s say you set the thermostat in your home to 72 degrees. When the temperature in your house gets below 72, the heat comes on. When the temp gets above 72, the air conditioner turns on.

Whether it gets too hot or too cold, your thermostat helps bring your temperature to whatever is comfortable for you.

T. Harv Eker’s belief is that everyone has a financial success thermostat. If you’re doing poorly financially, you’ll kick it up a notch and get back to your “temperature”. When you experience some unusual financial success, your thermostat will bring you back down.

No way this is accurate, right? Let’s look at some examples.

Steve is doing pretty well, at least he thinks he is. He’s 25 years old and he earns $50,000 per year. He has $2,500 in the bank, and for Steve, that’s pretty good.

Steve is investing 5% of his income into a 401k, which is enough to maximize his employer’s dollar-for-dollar match, just like he was always taught to do.

Steve is a good employee. He’s promoted and gets a 20% raise, so now he’s earning $60,000 per year.

As soon as Steve sees how much his pay check increases after taxes, he starts thinking about what he can afford with that extra income. He’s already investing, so what else would he need the money for anyways?

Now, Steve has a new job AND a new car. His payment is $600 a month, which isn’t even his entire raise. Steve made sure not to spend his entire raise on the car, so he could allow himself to go to restaurants and bars more frequently.

Steve’s Inner-Money Thermostat

Steve got a raise, which is great! He had an opportunity to increase his savings by maintaining his lifestyle and investing his new found income.

Instead, Steve’s inner-money thermostat kicked in brought him back to his comfort zone.

Steve likely shares the same mindset about money as most people. In this scenario, he probably thought:

A) I’m making more money, so I deserve nicer things.
B) Everyone says that I’ll be able to retire by investing 5% of my income and earning a match, so why invest more?
C) The $2,500 in my savings is a lot of money and I’ll never need more cash than that.

Steve’s inner-money thermostat is set extremely low. It’s likely that every time Steve has an opportunity to increase his financial success, his thermostat will kick in and bring him down.

Steve may not be a financial failure and he will be far ahead of the average American when it comes time to retire. However, he is leaving LOADS of potential untapped by allowing his inner-money thermostat to remain low.

Steve will likely never invest more than 5% of his pay, so for him to find true success, he’s going to need an incredibly high income.

So what does a good example look like?

Meet Ben. Ben is also 25 years old earning $50,000 per year, was recently promoted, and now earns $60,000 per year.

Ben has a goal of retiring early. He knows that in order for that to happen, he’s going to have to invest like crazy. He can’t think of any reason why he can’t be a millionaire within 10-15 years.

Ben lives a modest lifestyle, and is satisfied with that. His belief system is that he should maintain his current lifestyle no matter how many raises he receives.

Since Ben’s goal is to retire early, he’s investing 20% of his income. Additionally, every time Ben gets a raise, he adds the additional income directly to his investments.

Ben has saved $10,000 in a savings account in case of emergency, and he’s satisfied with that. However, Ben is always looking to increase his income, decrease his expenditures, and invest more.

The 20% that Ben was investing to begin with was equal to $10,000. Now that Ben is earning an additional $10,000 per year, he’s doubled the amount he’s investing.

His new savings/investing rate is 33.3%, and he plans to continue to increase this with every raise he receives.

Ben’s Inner-Money Thermostat

As I mentioned earlier, Ben believes that he can be a millionaire. He knows that it’s not a fast process, but it’s also not a very complex process.

With every dollar he invests, Ben has the satisfaction of knowing he’s a little closer to his dream.

At this point it’s clear that Ben has a high inner-money thermostat. He believes that:

A) There’s no reason why he can’t be a millionaire
B) Having a higher income is not connected to the lifestyle he’s expected to live, but to how much money he’s able to invest

The interesting thing about high inner-money thermostats is that they tend to keep going up. Eventually, Ben will reaching $100,000 and then $1 million. With that, I wouldn’t expect Ben to stop there as his thermostat will continue to rise as he experiences financial success.

Is Your Inner-Money Thermostat Too Low?

The answer to this question is not a simple number. However, you can find our inner-money thermostat temperature by answering this:

How much money would change your life?

If your answer is in the low thousands, your thermostat is likely set too low.

Would having to pay your car insurance deductible break your bank? Would you be forced to move if your rent was raised $100/month?

These are signs that you need to turn up the heat!

How to Turn Up Your Thermostat

  1. Set a goal for saving an amount of money you never thought you could obtain.
  2. Increase your monthly savings rate incrementally.
  3. Invest your entire tax refund rather than spending it.
  4. When you receive a raise, invest everything above your previous income.
  5. Commit to your financial success.
  6. Believe in yourself and understand that your potential income is limitless.

By taking action on a regular basis, you will quickly realize how easy it is to save money. You’ll invest more, and as far as the money that you could have spent, you’ll miss it less and less until you don’t even notice.

For every small financial win that you experience, your inner-money thermostat will increase. Before you know it, your entire viewpoint on finances will have transformed, and you’ll never look back.

Thanks for reading and be sure to check out Four Walls on Facebook or Instagram @FourWallsofFIRE and don’t forget to subscribe!

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  • Reply
    Chris Lund
    April 20, 2019 at 2:02 pm

    Increasing your savings and investing… Getting ahead financially… Here is a viewpoint I have shared many times over the years, and it may also be from T. Harv Eker (not for sure): If you pay yourself (save and invest) last, you’ll never do it. If you pay yourself first, you’ll never miss it. Interesting, but is it real??? It was real for me. I have talked to many people about this phenomenon over past 20 years plus, and you know what, most of the wealthy people I talked to said yes, they noticed the same thing!!! Matt, how about you and Gina??? Further, what happens when you do start saving and investing first, even if it is a small amount, but you focus on some financial goals, pretty soon you find ways to increase it, like you mentioned… And pretty soon, it becomes more fun and exciting watching your finances improve than it is fun to waste money on stuff you never really cared about anyhow… Pretty soon, you would rather see that raise go to your bottom line, move you towards financial freedom, rather than have that newer, nicer car… Pretty soon, you would rather pass up on the $8 latte from time to time, and put that money towards your nest egg… Saving and investing – getting started – also T. Harv Eker (he rocks) – it is not the amount, it is the habit! My son Justin, when he was just a few years old, could not pronounce habit, and I had him running around saying, “Daddy, it’s not the amount, it’s the wabbit”! He is one of very few 16 year olds that has over $10K in his financial freedom account, and plans to be financially free by age 30! I started at age 29, and quit my full time job at age 39, so I see no reason he won’t accomplish his goal. Changing your finances might not just improve your finances, but it might just improve your kids’s financial future, too!

  • Reply
    Chris Lund
    April 20, 2019 at 2:17 pm

    By the way, here is something about the financial thermostat that T. Harv Eker says he is famous for saying: Give me five minutes with anyone and I can predict their financial future for the rest of their lives… It isn’t just how you are doing today, but it is your mindset around money. He says that most people will have the same financial blueprints for their entire life, unless they purposely change it! Decide now, might as well improve your financial thermostat, and make your finances better or the rest of your life! Is that good or good?! By the way, Matt, studying T. Harv Eker, and attending the 3 day Millionaire Mind Intensive, had a big impact on my financial life, too! Harv has since sold the company that does MMI (was Peak Potentials), but MMI does still exist, and Harv still teaches about financial freedom, etc. I still read some of Harv’s stuff from time to time, and he has a few books out, including “Secrets of the Millionaire Mind”, which teaches a lot of the same stuff he did in MMI back all those years ago (most of the secrets to wealth, really don’t change that much over time).

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