The Psychology of Money by Morgan Housel teaches that financial success has more to do with behavior than intelligence. Housel uses stories to illustrate how our experiences and emotions strongly influence our financial decisions and perceptions more than objective facts. The book advocates developing reasonable long-term financial strategies and goals rather than chasing extreme returns, in order to build wealth over decades through consistent, average returns despite uncertainties and life changes.
This document discusses adolescent decision making. It notes that effective decision making is a skill that must be learned and practiced, and ineffective decision making can lead to long-term negative consequences. It outlines cognitive and brain development factors that influence adolescent decision making. Specifically, it discusses how the prefrontal cortex, which controls impulses, is not fully developed in adolescence. This can impair ability to control impulses and increase risk-taking behavior. The document also examines common decision making biases and strategies that can be taught to help adolescents make better decisions, such as considering multiple options and consequences of choices.
Clay Christensen asks students to consider three questions about finding happiness in their career and personal lives. He emphasizes that money is not the most powerful motivator; rather, it is opportunities to learn, contribute to others, and be recognized for achievements. Management offers many ways to help others while taking responsibility and contributing to a team. Past students who focused solely on deals and financial success often became unhappy, divorced, and alienated from their families because they did not keep the purpose of their lives at the front. People must allocate their time and energy thoughtfully according to their priorities to find satisfaction in life.
The document contrasts optimism and pessimism, defining optimism as having a tendency to expect favorable outcomes and believe that good predominates over evil. Pessimism is defined as having a tendency to anticipate undesirable outcomes and believe that evil and pain in the world outweigh goodness and happiness. A realist is contrasted as someone who does not habitually see the best or worst in situations.
1) Hedonic adaptation refers to how changes in income or life experiences only temporarily impact happiness and satisfaction diminishes as people adjust to their new circumstances.
2) While hedonic adaptation takes time, certain activities like positive addictions to exercise and religion may help prevent full adaptation through incremental boosts to well-being.
3) Prospect theory suggests that gains and losses are perceived relative to one's current state, so the impact of changes depends on how much one has adapted to their new normal.
Parsheus_Kapadia_Psychology Of Money_PPT.pptxspam345217
The document summarizes key points from the book "Psychology of Money" by Morgan Housel. It discusses lessons about developing a long-term mindset for investing, allowing for error in plans, and defining one's personal approach to managing finances. The author advocates for purposeful saving over time, embracing humility over flashy displays of wealth, and investing in a way that promotes peace of mind.
Top 10 Finest Analogies From the Book "Psychology of Money"DEEP GAJBE
These 10 analogies from the book psychology of money will help you understand the Human Investment Psychic and make you understand the science behind the human investing psychology cycle, such as emotions, surrounding situations, mindset, and so on.
We hope you enjoy reading this e-book from Imperial Money Pvt. Ltd.
The Psychology of Money by Morgan Housel discusses strange ways people think about wealth, greed, and happiness. It explains that wealth represents financial assets not yet converted to physical assets, but people often seek status by buying lavish items. True wealth provides growth opportunities and flexibility. The book also emphasizes that investing success requires enduring volatility, as rare events can significantly impact outcomes. It warns against relying too heavily on past data and encourages leaving room for error to endure potential outcomes over the long run.
The Psychology of Money by Morgan Housel discusses strange ways people think about wealth, greed, and happiness. It explains that wealth represents financial assets not yet converted to physical assets, but people often seek status by buying lavish items. True wealth provides growth opportunities and flexibility. The book also emphasizes that investing success requires enduring volatility, as luck and unexpected events influence outcomes. It advises readers to choose reasonable investment strategies aligned with their goals and time horizons over strictly rational ones. Overall, the book offers insights into human psychology around money and financial decision-making.
This document discusses adolescent decision making. It notes that effective decision making is a skill that must be learned and practiced, and ineffective decision making can lead to long-term negative consequences. It outlines cognitive and brain development factors that influence adolescent decision making. Specifically, it discusses how the prefrontal cortex, which controls impulses, is not fully developed in adolescence. This can impair ability to control impulses and increase risk-taking behavior. The document also examines common decision making biases and strategies that can be taught to help adolescents make better decisions, such as considering multiple options and consequences of choices.
Clay Christensen asks students to consider three questions about finding happiness in their career and personal lives. He emphasizes that money is not the most powerful motivator; rather, it is opportunities to learn, contribute to others, and be recognized for achievements. Management offers many ways to help others while taking responsibility and contributing to a team. Past students who focused solely on deals and financial success often became unhappy, divorced, and alienated from their families because they did not keep the purpose of their lives at the front. People must allocate their time and energy thoughtfully according to their priorities to find satisfaction in life.
The document contrasts optimism and pessimism, defining optimism as having a tendency to expect favorable outcomes and believe that good predominates over evil. Pessimism is defined as having a tendency to anticipate undesirable outcomes and believe that evil and pain in the world outweigh goodness and happiness. A realist is contrasted as someone who does not habitually see the best or worst in situations.
1) Hedonic adaptation refers to how changes in income or life experiences only temporarily impact happiness and satisfaction diminishes as people adjust to their new circumstances.
2) While hedonic adaptation takes time, certain activities like positive addictions to exercise and religion may help prevent full adaptation through incremental boosts to well-being.
3) Prospect theory suggests that gains and losses are perceived relative to one's current state, so the impact of changes depends on how much one has adapted to their new normal.
Parsheus_Kapadia_Psychology Of Money_PPT.pptxspam345217
The document summarizes key points from the book "Psychology of Money" by Morgan Housel. It discusses lessons about developing a long-term mindset for investing, allowing for error in plans, and defining one's personal approach to managing finances. The author advocates for purposeful saving over time, embracing humility over flashy displays of wealth, and investing in a way that promotes peace of mind.
Top 10 Finest Analogies From the Book "Psychology of Money"DEEP GAJBE
These 10 analogies from the book psychology of money will help you understand the Human Investment Psychic and make you understand the science behind the human investing psychology cycle, such as emotions, surrounding situations, mindset, and so on.
We hope you enjoy reading this e-book from Imperial Money Pvt. Ltd.
The Psychology of Money by Morgan Housel discusses strange ways people think about wealth, greed, and happiness. It explains that wealth represents financial assets not yet converted to physical assets, but people often seek status by buying lavish items. True wealth provides growth opportunities and flexibility. The book also emphasizes that investing success requires enduring volatility, as rare events can significantly impact outcomes. It warns against relying too heavily on past data and encourages leaving room for error to endure potential outcomes over the long run.
The Psychology of Money by Morgan Housel discusses strange ways people think about wealth, greed, and happiness. It explains that wealth represents financial assets not yet converted to physical assets, but people often seek status by buying lavish items. True wealth provides growth opportunities and flexibility. The book also emphasizes that investing success requires enduring volatility, as luck and unexpected events influence outcomes. It advises readers to choose reasonable investment strategies aligned with their goals and time horizons over strictly rational ones. Overall, the book offers insights into human psychology around money and financial decision-making.
1) The document discusses different perspectives on wealth, risk, and happiness. It explores how one's views on money and investing are shaped by their upbringing and environment.
2) Luck and risk are interconnected - achieving success requires hard work but circumstances outside one's control also influence outcomes. Small changes can have large, compounding effects over time.
3) Having enough money for one's needs is more important than amassing wealth. Comparing oneself to others often breeds dissatisfaction. Focusing on savings is key to maintaining wealth.
The document discusses several concepts related to personal finance and wealth accumulation. It addresses that:
1) An individual's views on money are influenced by the economic environment they grew up in, as equally intelligent people from different backgrounds may have different financial mindsets and risk tolerances.
2) Both luck and risk play a role in financial outcomes, as a single risky event can trigger other related risks, and seemingly small early advantages can compound into large differences in wealth over time.
3) Maintaining wealth is challenging due to human tendencies like never feeling content, comparing oneself to others, and lifestyle inflation as incomes rise. Focusing on savings and managing risks is important for long-term financial security.
The document discusses strategies for wealth creation and financial success. It makes three key points:
1) Take responsibility for your own financial situation rather than blaming external factors. Successful people achieve wealth through their own choices and actions.
2) Spend less than you earn by limiting discretionary spending and saving the difference. Small amounts of savings add up over time.
3) Understand the difference between assets, which generate money, and liabilities ("flossets"), which reduce money. Focus on accumulating assets rather than possessions to achieve true wealth.
Psychology of Money Summary & LessionsAnantha Ramu
The document summarizes key lessons from the book "Psychology of Money" about financial decision-making and wealth accumulation. It discusses that 1) everyone's financial behavior is influenced by their background, 2) risk, luck, and effort do not always correlate with outcomes, 3) social comparisons and never-ending goals can be problematic, 4) money grows exponentially through compounding if left to grow, and 5) maintaining optimism, flexibility and reason are important mindsets for long-term financial success and freedom.
Secrets to subconscious_autopilot_wealthMOMOBACHIR
This document contains terms and conditions for a publication. It states that the publisher has tried to be accurate but does not guarantee all information is correct due to the changing nature of the internet. It warns readers not to rely on the publication as a source of legal, business, or financial advice. The document includes a table of contents that lists 8 chapters on topics like thinking big versus small, doing versus dreaming, and playing to win or lose. It encourages readers to think positively and have a vision and plan to achieve their goals.
Are you a business owner? Then here’s a financial planning boot camp that just might be fun. We’ll cover the six main items you need to understand and review key questions to help you figure out the finances of your business. Topics include investment strategies, how much insurance you need, setting up financial filing systems and who to turn to for help. Come with questions and leave with a plan and checklist to get you on track.
Speaker: Dave Caruso, Founding Chair & Managing Director, Coast Capital Group
Twitter: @CoastalWealth
LinkedIn: linkedin.com/in/davecarusoccg
Blog: coastalcapitalwealth.com/news/
Facebook: facebook.com/CoastalCapitalGroup
his presentation was given to business owners and other leaders in Massachusetts’ North Shore April 2014.
Venue: Enterprise Center, (Hawthorne Hotel), Salem, MA
Speaker: Dave Caruso CFP® | Founding Chairman / Managing at Coastal Capital Group | WBZ1030 Boston Financial Editor
Topic: ‘Getting Your Financial Act Together’ (View the presentation slides below.)
Coastal Capital’s major themes of focus in educating you as to how to ‘Connect Your Money With Your Life’ are: Mindset & Psychology; Lifestyle; Investment Services; Financial Plans and Health.
Its not only about getting a solid financial plan in place to handle your investments, its also about helping with the other important parts of your life so that there is balance. One should understand what your mindset is in the psychology of the markets and behavioral science as well as understanding investments and putting a plan together
The document discusses several key lessons about personal finance and wealth management. It notes that (1) financial decisions made by others that seem "crazy" may make sense based on their unique experiences, and that (2) both luck and risk are intertwined factors influencing investment success more than skill alone. Additionally, it advises (3) pursuing financial goals without taking unnecessary risks that could jeopardize what you already have.
1. Be clear about your income sources and amounts to understand your financial situation.
2. Create a budget and track your expenses to identify unnecessary spending.
3. Plan for irregular expenses like emergencies to avoid being caught off guard by large unexpected costs. Taking control of your finances requires understanding your cash flow and managing your spending.
The document discusses the important role that money plays in people's lives and societies. It touches on how money enables the exchange of goods and services between individuals. The document also reflects on common attitudes and excuses people have around money management, such as procrastination or feeling like they don't have enough money. It stresses that financial independence requires dedication, hard work, and developing strong money management skills over time.
The Psychology Of MONEY: 10 Lessons To Make You RichFlavian Mwasi
Picture this. You've just stumbled upon the secret formula that the world's richest people don't want you to know. A formula so powerful it could turn your financial life around in a heartbeat, but here's the catch. You've got only one shot to get it right. Want to know what it is?
Authored By: Garrett R. Morgan, CFP
This paper represents our team\'s philosophy on wealth and is place in your life. We hope it brings meaning and value to the way you view the world and we welcome your feedback.
Authored By: Garrett R. Morgan, CFP. This paper outlines our philosophy on wealth and its place in your life. What got you where you are is very rarely what is needed to get you where you\’re going. Take the next step and take a quantam leap forward.
This document provides advice and guidance for business owners on various topics such as inspiration, growth, surrounding yourself with great people, facing fears, removing distractions, and learning. The overall message is that business owners should continuously work on self-improvement, take action to achieve their goals, and focus on developing the skills and mindsets needed for success.
This document summarizes key points from a book on the psychology of money. It discusses several topics:
1) No one's financial decisions are truly "crazy" - they are shaped by experiences like inflation during one's teenage years.
2) Both luck and risk play large roles in financial success, but our brains prefer simple explanations. We cannot perfectly separate a "lucky break" from a truly skilled decision.
3) The power of compounding returns can be confounding. Even small returns over long periods can result in large gains, but it is hard for people to appreciate this and resist the urge to chase returns.
4) Maintaining wealth requires humility, frugality and accepting luck
The document discusses the three aspects of money: make money, manage money, and multiply money.
To make money, one must earn an income through employment, business ownership, or other means. Strategies for making more money include increasing skills and value, expanding one's network, taking on additional work, and placing a high value on one's time.
Managing money well is crucial, as it is the only time one has full control over funds. Effective money management involves knowing spending, creating a spending plan, prioritizing savings, automating finances, and using practical savings tips.
The final aspect is multiplying money through investment. Low-risk options include money markets, while higher-risk options include
There are a few key things to keep in mind when it comes to the psychology of money. First, our relationship with money is often shaped by our childhood experiences. If our parents were stressed about money, we're likely to have similar feelings. Second, our culture plays a role in how we think about money. In some cultures, money is seen as a source of evil, while in others it's seen as a necessary evil. Finally, our own personal beliefs and values can influence our relationship with money.
1) The document discusses different perspectives on wealth, risk, and happiness. It explores how one's views on money and investing are shaped by their upbringing and environment.
2) Luck and risk are interconnected - achieving success requires hard work but circumstances outside one's control also influence outcomes. Small changes can have large, compounding effects over time.
3) Having enough money for one's needs is more important than amassing wealth. Comparing oneself to others often breeds dissatisfaction. Focusing on savings is key to maintaining wealth.
The document discusses several concepts related to personal finance and wealth accumulation. It addresses that:
1) An individual's views on money are influenced by the economic environment they grew up in, as equally intelligent people from different backgrounds may have different financial mindsets and risk tolerances.
2) Both luck and risk play a role in financial outcomes, as a single risky event can trigger other related risks, and seemingly small early advantages can compound into large differences in wealth over time.
3) Maintaining wealth is challenging due to human tendencies like never feeling content, comparing oneself to others, and lifestyle inflation as incomes rise. Focusing on savings and managing risks is important for long-term financial security.
The document discusses strategies for wealth creation and financial success. It makes three key points:
1) Take responsibility for your own financial situation rather than blaming external factors. Successful people achieve wealth through their own choices and actions.
2) Spend less than you earn by limiting discretionary spending and saving the difference. Small amounts of savings add up over time.
3) Understand the difference between assets, which generate money, and liabilities ("flossets"), which reduce money. Focus on accumulating assets rather than possessions to achieve true wealth.
Psychology of Money Summary & LessionsAnantha Ramu
The document summarizes key lessons from the book "Psychology of Money" about financial decision-making and wealth accumulation. It discusses that 1) everyone's financial behavior is influenced by their background, 2) risk, luck, and effort do not always correlate with outcomes, 3) social comparisons and never-ending goals can be problematic, 4) money grows exponentially through compounding if left to grow, and 5) maintaining optimism, flexibility and reason are important mindsets for long-term financial success and freedom.
Secrets to subconscious_autopilot_wealthMOMOBACHIR
This document contains terms and conditions for a publication. It states that the publisher has tried to be accurate but does not guarantee all information is correct due to the changing nature of the internet. It warns readers not to rely on the publication as a source of legal, business, or financial advice. The document includes a table of contents that lists 8 chapters on topics like thinking big versus small, doing versus dreaming, and playing to win or lose. It encourages readers to think positively and have a vision and plan to achieve their goals.
Are you a business owner? Then here’s a financial planning boot camp that just might be fun. We’ll cover the six main items you need to understand and review key questions to help you figure out the finances of your business. Topics include investment strategies, how much insurance you need, setting up financial filing systems and who to turn to for help. Come with questions and leave with a plan and checklist to get you on track.
Speaker: Dave Caruso, Founding Chair & Managing Director, Coast Capital Group
Twitter: @CoastalWealth
LinkedIn: linkedin.com/in/davecarusoccg
Blog: coastalcapitalwealth.com/news/
Facebook: facebook.com/CoastalCapitalGroup
his presentation was given to business owners and other leaders in Massachusetts’ North Shore April 2014.
Venue: Enterprise Center, (Hawthorne Hotel), Salem, MA
Speaker: Dave Caruso CFP® | Founding Chairman / Managing at Coastal Capital Group | WBZ1030 Boston Financial Editor
Topic: ‘Getting Your Financial Act Together’ (View the presentation slides below.)
Coastal Capital’s major themes of focus in educating you as to how to ‘Connect Your Money With Your Life’ are: Mindset & Psychology; Lifestyle; Investment Services; Financial Plans and Health.
Its not only about getting a solid financial plan in place to handle your investments, its also about helping with the other important parts of your life so that there is balance. One should understand what your mindset is in the psychology of the markets and behavioral science as well as understanding investments and putting a plan together
The document discusses several key lessons about personal finance and wealth management. It notes that (1) financial decisions made by others that seem "crazy" may make sense based on their unique experiences, and that (2) both luck and risk are intertwined factors influencing investment success more than skill alone. Additionally, it advises (3) pursuing financial goals without taking unnecessary risks that could jeopardize what you already have.
1. Be clear about your income sources and amounts to understand your financial situation.
2. Create a budget and track your expenses to identify unnecessary spending.
3. Plan for irregular expenses like emergencies to avoid being caught off guard by large unexpected costs. Taking control of your finances requires understanding your cash flow and managing your spending.
The document discusses the important role that money plays in people's lives and societies. It touches on how money enables the exchange of goods and services between individuals. The document also reflects on common attitudes and excuses people have around money management, such as procrastination or feeling like they don't have enough money. It stresses that financial independence requires dedication, hard work, and developing strong money management skills over time.
The Psychology Of MONEY: 10 Lessons To Make You RichFlavian Mwasi
Picture this. You've just stumbled upon the secret formula that the world's richest people don't want you to know. A formula so powerful it could turn your financial life around in a heartbeat, but here's the catch. You've got only one shot to get it right. Want to know what it is?
Authored By: Garrett R. Morgan, CFP
This paper represents our team\'s philosophy on wealth and is place in your life. We hope it brings meaning and value to the way you view the world and we welcome your feedback.
Authored By: Garrett R. Morgan, CFP. This paper outlines our philosophy on wealth and its place in your life. What got you where you are is very rarely what is needed to get you where you\’re going. Take the next step and take a quantam leap forward.
This document provides advice and guidance for business owners on various topics such as inspiration, growth, surrounding yourself with great people, facing fears, removing distractions, and learning. The overall message is that business owners should continuously work on self-improvement, take action to achieve their goals, and focus on developing the skills and mindsets needed for success.
This document summarizes key points from a book on the psychology of money. It discusses several topics:
1) No one's financial decisions are truly "crazy" - they are shaped by experiences like inflation during one's teenage years.
2) Both luck and risk play large roles in financial success, but our brains prefer simple explanations. We cannot perfectly separate a "lucky break" from a truly skilled decision.
3) The power of compounding returns can be confounding. Even small returns over long periods can result in large gains, but it is hard for people to appreciate this and resist the urge to chase returns.
4) Maintaining wealth requires humility, frugality and accepting luck
The document discusses the three aspects of money: make money, manage money, and multiply money.
To make money, one must earn an income through employment, business ownership, or other means. Strategies for making more money include increasing skills and value, expanding one's network, taking on additional work, and placing a high value on one's time.
Managing money well is crucial, as it is the only time one has full control over funds. Effective money management involves knowing spending, creating a spending plan, prioritizing savings, automating finances, and using practical savings tips.
The final aspect is multiplying money through investment. Low-risk options include money markets, while higher-risk options include
There are a few key things to keep in mind when it comes to the psychology of money. First, our relationship with money is often shaped by our childhood experiences. If our parents were stressed about money, we're likely to have similar feelings. Second, our culture plays a role in how we think about money. In some cultures, money is seen as a source of evil, while in others it's seen as a necessary evil. Finally, our own personal beliefs and values can influence our relationship with money.
1. The Psychology of Money
The psychology of money is a book written by Morgan Housel that teaches us
doing well with money has a little to do with how smart we are and a lot to do
with how we behave. And behavior is hard to teach, even to really smart people.
It tries to explained why we should have better relationship with money for
making better financial decisions. Morgen Housel uses interesting stories to
illustrate our unlogical behavior with money. Financial success is not a hard
science. It’s a soft skill, where how we behave is more important than what we
know. The aim of this book is to use short stories to convince you that soft skills
are more important than the technical side of money. Money is everywhere, it
affects all of us, and confuses most of us. Everyone thinks about it a little
differently. It offers lessons on things that apply to many areas of life, like risk,
confidence, and happiness.
We are challenged by the fact that no amount of learning or open-mindedness can
truly restore a sense of fear and uncertainty. People from different generations,
raised by different parents who earned different incomes and held different
values, in different parts of the world, born into different economies, experiencing
different job markets with different incentives and different degrees of luck, learn
very different lessons. Everyone has their own unique experience with how the
world works. And what we have experienced is more compelling than what we
learn second hand. Morgan Housel states that a person’s personal experiences
with money make up 0.00000001% of what’s happened in the world but those
experiences make up around 80% of what we think of the world.
Luck and risk are siblings. They are both the reality that every outcome in life is
guided by forces other than individual effort. Nothing is good or as bad as it
seems. It is easy to convince ourself that our financial outcomes are determined
entirely by the quality of our decisions and actions, but that is not always the case.
Sometimes we can make good decisions that lead to poor financial outcomes.
And we can make bad decisions that lead to good financial outcomes. We have
to account for the role of luck and risk.
Morgan Housel describe how it tends to be rich people who do crazy things with
money. The thinking is that as soon as they get rich, their goals change. They
want more and more and do it in a way that puts everything they have already
earned at risk. It is crucial for us to recognize when we have enough and to start
2. playing it safe. The idea of having “enough” might look like conservatism,
leaving opportunity and potential on the table.
Lessons from one field can often teach us something important about unrelated
fields. It is difficult for the mind to comprehend the power of compounding. The
key to good investing is to give it time. As an investor, we don’t need incredible
returns, we need to have reasonable returns over a long period of time. This is
how we get rich.
Good investing is not about making good decisions. It’s about consistently not
screwing up. Housel suggests that the we should focus on getting our finances
into shape so that we cannot be broken rather than focusing on huge returns. Many
of us chase big returns only to lose everything. Instead, patience and earning
average returns over longer periods of time builds generational wealth.
We can be wrong half the time and still make a fortune. Anything that is huge,
profitable, famous, or influential is the result of a tail event—an outlying one-in-
thousands or millions event. And most of our attention goes to things that are
huge, profitable, famous, or influential. When most of what we pay attention to
is the result of a tail, it’s easy to underestimate how rare and powerful they are.
So instead of trying to recreate what Elon Musk, Reed Hastings or Jeff Bezos do,
a clear investor is someone who does the basics right. They follow the average
trends by making sound, sensible decisions that help them to achieve their own
realistic goals rather than trying to recreate a miracle.
The highest form of wealth is the ability to wake up and say, ‘I can do whatever
I want today’. People want to become wealthier to increase their happiness. But
happiness is a complicated subject because we’re all different. Money’s greatest
value then is its ability to give you control of your time. Housel says that
controlling your time is the highest dividend that money can pay.
Another lesson is the man in the car paradox. When you see a guy in a Ferrari,
you don’t think that you want to be friends with that guy, you think that you want
to be that guy. Many people build wealth because they think it will make people
like them but all it will do is make people want to be like them which is a very
different thing.
3. Wealth is something what we don’t see. Spending money to show people how
much money we have is the fastest way to have less money. Here Morgan Housel
advises that we should not judge a person’s wealth on what we see and in what
possession people have. Housel states that true wealth is having the option to
purchase more stuff than you can right now.
Saving money is one of the best things we can do is remove your ego from the
equation. Don’t spend money on unnecessary things
Savings = Income – Ego
Having more savings in the bank and lower costs because we have removed the
ego from our spending may mean that we can have the flexibility to work fewer
hours or for a lower salary for a job we are more interested in or to invest in an
opportunity you may not have been otherwise able to.
People should be reasonable rather than always being rational. Do not aim to be
rational when making financial decisions. Aim too just be pretty reasonable.
Reasonable is more realistic, and we have a better chance of sticking with it for
the long run. Being reasonable rather than always rational leads to better
investment decisions.
History is mostly the study of surprising events. But it is often used by investors
and economists as an unassailable guide to the future. “Things that have never
happened before happen all the time.” Experiencing specific events does not
necessarily qualify us to know what will happen next. In fact, it rarely does
because experience leads to overconfidence more than forecasting ability.
History is littered with good ideas taken too far, which are indistinguishable from
bad ideas. The wisdom in having room for error is acknowledging that
uncertainty, randomness, and chance “unknowns” are an ever-present part of life.
The only way to deal with them is by increasing the gap between what you think
will happen and what can happen while still leaving you capable of fighting
another day. People underestimate the need for room for error in almost
everything they do that involves money.
4. Housel states that you’ll change over time. So, make sensible goals because in 5
or 10 years you won’t necessarily want the same things as you want now.
Imagining a goal is easy and fun. Imagining a goal in the context of the realistic
life stresses that grow with competitive pursuits is something entirely different.”
When we’re making long-term decisions, then, remember to avoid the extreme
ends of financial planning and accept the reality of changing our mind.
Everything has a price and just because we can’t see it, it doesn’t mean we won’t
end up paying it. The market goes up and down. Sometimes we will lose money.
If we are able to frame these dips as fees for playing the game rather than as losses
it will help us stay the course. And as Housel has covered, staying the course is
how we make the big money in the long run.
We should be aware of who we are taking financial advice from. It’s very hard to
apply the advice of someone who has different amounts of money or different
goals. It won’t work in the end. Instead, look at the average and do what works
for people in your situation in general. The most important thing is to do our best
to find out what game we are playing.
Optimism is the best bet for most people because the world tends to get better for
most people most of the time. But pessimism holds a special place in our hearts.
Pessimism isn’t just more common than optimism. It also sounds smarter. It’s
intellectually captivating, and it’s paid more attention than optimism, which is
often viewed as being oblivious to risk. Optimism is a belief that the odds of a
good outcome are in your favor over time, even when there will be setbacks along
the way.
The last lesson is appealing fiction, and why stories are more powerful than
statistics. It’s easy to get caught up in a good story but we have to be careful
because some stories can be too good to be true. Appealing fictions have a big
impact on how we think about money particularly investments and the economy.
The book is divided into different chapters with a lesson. The Psychology of
Money aims to examine the weaknesses in our mental attitudes with money.
Housel lays out his own principles of how he believes we should think of and
handle our finances. If we want to do better as an investor, the single most
5. powerful thing we can do is increase our time horizon. Time is the most powerful
force in investing. It makes little things grow big and big mistakes fade away. It
can’t neutralize luck and risk, but it pushes results closer towards what people
deserve.