21/07/2023
10 PRINCIPLES FROM THE PSYCHOLOGY OF MONEY by Morgan Housel
Introduction
That there are two topics that impact man, whether you are interested in them or not- health and money.
The writer believes that money isnβt guided by laws such as that of physics but by peopleβs behavior.
1. Luck and risk
Luck and risk are both the reality that every outcome in life is guided.
The world is too complex to allow 100% of your actions to dictate 100% of your outcomes.
He said that not all success is due to hard work, and not all poverty is due to laziness.
The trick when dealing with failure is arranging your financial life in a way that a bad investment here and a missed financial goal there wonβt wipe you out so you can keep playing until the odds fall in your favor.
2. Never enough
There is no reason to risk what you have and need for what you donβt have and donβt need.
Wanting to surpass your peers can be the fuel of hard work. But life isnβt any fun without a sense of enough.
That reputation, freedom, family, friends, being loved and happiness are all valuable and my best shot at keeping these things is knowing when itβs time to stop taking risks that might harm them.
3. Confounding compounding
That Good investing isnβt necessarily about earning the highest returns, because the highest returns tend to be one-off hits that canβt be repeated.
Itβs about earning pretty good returns that you can stick with and which can be repeated for the longest period of time. Thatβs when compounding runs wild.
4. Getting Wealthy vs. Staying Wealthy
Getting money requires taking risks, being optimistic, and putting yourself out there.
But keeping money requires the opposite of taking risk. It requires humility, and fear that what youβve made can be taken away from you just as fast.
5. Freedom
Controlling your time is the highest dividend money pays.
6. More respect
Itβs a subtle recognition that people generally aspire to be respected and admired by others, and using money to buy fancy things may bring less of it than you imagine. Humility, kindness, and empathy will bring you more respect than a car will ever will.
7. Wealth is what you donβt see
The only way to be wealthy is to not spend the money that you do have. Itβs not just the only way to accumulate wealth; itβs the very definition of wealth
8. Save money
Building wealth has little to do with your income or investment returns, and lots to do with your savings rate.
That one of the most powerful ways to increase your savings isnβt to raise your income.
Itβs to raise your humility.
9. Youβll change
At every stage of our lives we make decisions that will profoundly influence the lives of the people weβre going to become, and then when we become those people, weβre not always thrilled with the decisions we made.
Aiming, at every point in your working life,
to have moderate annual savings,
moderate free time,
no more than a moderate commute,
And at least moderate time with your family, increases the odds of being able to stick with a plan and avoid regret than if any one of those things fall to the extreme sides of the spectrum.
10. Nothingβs free
Everything has a price, and the key to a lot of things with money is just figuring out what that price is and being willing to pay it.
It is true that every job looks easy when youβre not the one doing it. Most things are harder in practice than they are in theory.
Thank you for reading