Get Rich Education
Real Estate Investing with Keith Weinhold
Podcast
Episodes
Listen, download, subscribe
Why Getting Rich Doesn't Feel Rich—The Baseline Trap | 622
• 39 minKeith breaks down the "baseline trap" in investor psychology, showing how rising income and lifestyle creep can quietly undermine the feeling of financial freedom. He then shares a grounded outlook for U.S. home prices, outlining how inflation, AI-driven job growth, limited inventory, and strong homeowner equity are shaping the market. He closes with a data-driven look at where population growth is heading through 2040, especially in Texas and Florida, and what that could mean for long-term real estate demand and investing strategy. Episode Page: GetRichEducation.com/622 For access to properties or free help with a GRE Investment Coach, start here: GREmarketplace.com GRE Free Investment Coaching: GREinvestmentcoach.com Get mortgage loans for investment property: RidgeLendingGroup.com or call 855-74-RIDGE or e-mail: info@RidgeLendingGroup.com Invest with Freedom Family Investments. For predictable 10-12% quarterly returns, visit FreedomFamilyInvestments.com/GRE or text FAMILY to 66866 Join Mid South Home Buyers' one-time, free live webinar featuring Keith Weinhold on September 30 at GetRichEducation.com/MidSouth to learn how Memphis' economic expansion could create new real estate investment opportunities, and have your questions answered in real time. Will you please leave a review for the show? I'd be grateful. Search "how to leave an Apple Podcasts review" For advertising inquiries, visit: GetRichEducation.com/ad Best Financial Education: GetRichEducation.com Get our wealth-building newsletter free— GREletter.com Our YouTube Channel: www.youtube.com/c/GetRichEducation Follow us on Instagram: @getricheducation Complete episode transcript: Keith Weinhold 0:01 Welcome to GRE. I'm your host Keith Weinhold. Investor psychology often falls into the baseline trap. Learn what's going to happen to home prices over the next year. Then more than half of America's population growth until 2040 will occur in just these two states. All today on Get Rich Education. What if I told you that one of America's strongest cash flow real estate markets is also becoming the new brains and brawn behind AI? That city is Memphis, believe it or not. In September 30th, we're going to show you why the smart money is paying attention now, along with an investing opportunity you won't want to miss. Join me, Terry Kerr and Matthew Van Horn of Mid South Homebuyers, the largest turnkey company in Memphis with more than 6000 homes under management, for a free live webinar the likes of which I've never done before. We're going to look at what billions in new investment could mean for jobs, housing demand, neighborhood appreciation, and your portfolio. Everyone who attends live will also get exclusive access to the best deal terms Mid South has ever offered. Reserve your free seat at getricheducation.com/midsouth again. that september 30. Don't say we didn't tell you. Save your spot at getricheducation.com/midsouth Speaker 1 1:34 You're listening to the show that has created more financial freedom than nearly any show in the world. This is Get Rich Education. Keith Weinhold 1:50 Welcome to GRE from Jackson Hole, Wyoming, to Jackson, Mississippi, and across 188 nations worldwide. I'm Keith Weinhold. This is Get Rich Education, and Happy Labor Day. Let's talk about your investor psychology, because as you grow your wealth and your portfolio size, there is a trap that you will almost certainly fall into, and I'm not infallible. I've fallen into this trap to some extent too. That is the baseline trap. It's the tendency for every improvement in your income, your wealth, or your lifestyle to become your new normal. Once this happens, the improvement stops feeling like progress, and you need even more just to feel equally successful, if you get used to flying first class and then you have to drop back to coach again, it feels less like flying and more like being deported. Psychologically, we fall into the baseline trap because the human mind evaluates Life relatively, not absolutely. We don't simply ask ourselves how good is my life, how good is my situation. Instead, we ask how does this compare with what I've recently experienced, what I expected, and what others have, and there are a number of forces that drive the baseline trap. One is hedonic adaptation. Hedonic means pleasure seeking. People rapidly adjust to improvements. The first month of receiving a new $5,000 in passive income that feels transformative. After two years, it feels completely ordinary. The income didn't become less valuable. Your nervous system simply stopped registering it as new. Yesterday's luxury became today's wallpaper. A force driving the baseline trap is a shifting reference point. Gains and losses are measured against a mental baseline. Once your portfolio reaches, say, a $2 million net worth, well, your mind soon begins treating the $2 million as mine. You're like, hey, this is mine now, even if much of it came from recent appreciation. A decline to 1.8 million, therefore, feels like losing 200k rather than still having substantially more wealth than you did just a few years ago. Well, instead, you're only focused on the 200k paper loss. Then there's loss aversion psychologically. Losses generally hurt more than equivalent gains feel good. After a higher standard becomes normal, surrendering and. Any part of it feels like some blood-curdling loss. That's why reducing spending from 20k to 15k per month that can feel painful, even if 15k once felt luxurious to you. Keith Weinhold 5:16 There's also the lifestyle creep component. People convert variable gains into fixed commitments. What do I mean? I mean like a strong income year. Oh, pretty soon that becomes a larger mortgage. Rental cash flow that becomes a vehicle payment. A bonus that becomes private school tuition, portfolio appreciation. Well, that supports new borrowing. See, pleasures that were once optional have now become obligations. And you got to ask, wait, how did that happen to you? You're supposed to have a life of options and not obligations. That's what financial freedom is supposed to be. The baseline then is no longer merely psychological; it becomes embedded in real monthly expenses. Then there's also the dangerous driver of the baseline trap that's called, oh no, social comparison. We commonly measure success against our peers, but instead, what you should do is measure it against your former self. Because as you become wealthier, see your comparison group changes too. If you've got five rentals, you soon stop comparing yourself with someone that owns none, you might even begin comparing yourself with people who own 50 of them, and why not? It's natural, after all. That is where you want to go, despite enormous progress. See, that's how you can feel left further behind. Then there's the recency bias. Your mind gives enormously disproportionate weight to recent experience. A few years of 15% returns, like what happened in 2021 and 2022 in real estate. Oh, you could begin expecting 15% after rapidly appreciating real estate, continued appreciation feels normal. A favorable cycle gets mistaken for the natural baseline, and then when conditions normalize, ordinary performance feels rather defective. Then there's identity inflation. That's a trap. This is when accomplishments become woven into your very identity, like I'm a multi-million-dollar entrepreneur, or I own 20 properties, or my income always grows. Okay, once success becomes identity, maintaining the baseline feels necessary just to preserve your self worth. Now, with this condition, see a temporary setback. It doesn't merely affect the numbers. Keith Weinhold 8:08 It feels like evidence that you're becoming a lesser person, and the brain rewards progress more than possession. Humans are energized by movement toward a goal, reaching the goal often produces less lasting satisfaction than you expect. Buying the 10th rental creates a dopamine hit, and owning it three years later does not. The investor therefore creates another target, not always because another property is even needed, but because continued pursuit restores the feeling of progress, success erases the memory of constraint. As your wealth grows, it becomes difficult to remember emotionally what financial insecurity even felt like I mean you might intellectually remember earning 60k, but you no longer experience today's 300k income in comparison with it. Your comparison point quietly changes from your former life to your best recent year. The paradox is that your circumstances improve faster than your experience of them? The goal is not to stop growing; it is to prevent every improvement from becoming a new psychological necessity. Keep growing your means, but don't let success redefine enough every time you achieve it, don't let it redefine enough. Let's say you acquire rentals and you do generate another 5k per month. The trap is that your spending and expectations gradually rise by 5k. You're wealthier, but you don't. Don't feel freer. Instead of investments buying freedom, they merely finance a more expensive baseline, and it can distort how you view your portfolio. 10 properties once felt like an extraordinary accomplishment, and soon 10 feels ordinary, and 20 becomes necessary. You keep moving the finish line, and this is closely related to hedonic adaptation and lifestyle creep. But it extends beyond spending because your definition of enough keeps on rising. So the antidote certainly is not living small forever-it's deliberately separating the growth rates of your assets and your lifestyle. What you want to do is grow your means faster than you grow your baseline. Really, that's the key. You're gonna be more satisfied. Instead of simply living below your means, you sure do want to grow your means, but don't let every gain become a permanent new obligation. Let som
Get Rich Education RSS Feed
