When it comes to money, no one is completely sensible. Even though we believe it would be in
our best interests, we don't make and stick to a budget or save money every payday. We
know we need a financial plan, but we put it off because we don't want to do the effort.
We either spend too much or too little out of carelessness or excitement. Our financial
activity frequently generates embarrassment. There are many books accessible when it
comes to helping in saving, finances, and accumulating wealth (most of them are a snooze).
Some are fun and digestible, but most importantly, they are USEFUL!
Hello everyone and welcome back to a new video from mindful psychology ! in today
video we’ll talk about The psychology of money and 2022 financial goals! so lets get started!
Morgan Housel's The Psychology of Money is one of the best works. Morgan Housel is a former
financial columnist for the Wall Street Journal. He is now a partner at Collaborative Fund,
an early-stage venture capital firm. The major reason we enjoy this book
is that it is based on the premise that financial success is more about how you behave
than how knowledgeable you are with money. The author cleverly points out that the way
we think about money and are educated about it is quite scientific and governed by laws and norms,
almost like physics. While we should teach money management as psychology—replacing
rules with emotions and nuance—finance is driven by people's behaviours, not laws.
Wealth, greed, and happiness are timeless lessons. It's not always about what you know
when it comes to money. It all boils down to how you act. Even for the most intelligent people,
behaviour is difficult to teach. Managing money, investing it, and making business decisions are
all thought to entail a lot of quantitative computations, with facts and formulae telling
us just what to do. People don't make financial decisions on spreadsheets in the real world.
Personal history, your unique view of the world, ego, pride, marketing, and unusual incentives
all mixed together around the dinner table or in a conference room. The author provides
19 short stories about money psychology. The book has 18 lessons that everyone should
consider regarding finance Lets discuss a few
Lesson 1: No one is insane.
Your own financial experiences account for maybe 0.0000001%
of what happens in the world, but they account for about 80% of how you think the world works.
Essentially, each person's financial experience (determined by their birthplace,
the decade they grew up in, and their family's socioeconomic level)
will influence their financial decision-making.
Judgments are based on a combination of the information available and your own views
about how money works, so some individuals make strange financial decisions, but no one is insane.
Lesson 2: Chance and Risk Luck and danger serve as
reassuring reminders that life's outcomes are influenced by causes other than one's own efforts.
Nothing appears to be as good or as horrible as it appears.
They're so similar that you can't believe in one without believing in the other as well.
They both happen because the world is too complicated for your behaviours
to determine your outcomes 100 percent of the time.
Lesson 3. Never enough Getting the goalpost to stop moving
is the most difficult, but also one of the most critical financial skills to master.
If your expectations rise in tandem with your performance, there's no point in pushing for more
because you'll feel the same after putting in more work. When the taste of having more—more money,
more power, more prestige—increases ambition faster than satisfaction, it becomes dangerous.
The issue is social comparison. The idea is that the social comparison ceiling
is so high that almost no one will ever reach it.
Lesson 4. Confounding Compounding Good investment isn't always about
getting the best returns, because the best returns are usually one-time events
that can't be replicated. It's all about generating reasonable profits that you can
stick with and repeat for as long as possible. That's when compounding gets out of hand.
Warren Buffett's $84.5 billion net wealth grew by $81.5 billion after he turned 65.
Lesson 5: Getting Rich vs. Maintaining Your Wealth
Making wise decisions isn't always the key to successful investing.
It's all about not making mistakes on a regular basis. Getting money
necessitates taking chances, believing in yourself, and putting yourself out there.
Keeping money, on the other hand, necessitates the polar opposite of risk-taking. It necessitates
humility and the fear of losing everything you've built just as quickly. It requires
frugality and an acceptance that at least some of what you’ve made is attributable to luck,
so past success can’t be relied upon to repeat indefinitely.
Lesson 6: If You Have Tails, You Have Winnings
Even if an investor is half-right, he or she can still make a fortune.
This is how a lot of things in business and investing work. In finance,
where a small number of events can account for the bulk of outcomes,
long tails—the extreme ends of a distribution of outcomes—have a huge impact.
Even if you grasp the math, that can be difficult to deal with. It defies logic that an investor
may be incorrect half of the time and still make a fortune. It means we undervalue how
common it is for many things to go wrong. As a result, when they occur, we tend to overreact.
Lesson 7. Freedom Controlling your
time is the highest dividend money pays.The capacity to wake up every morning and say,
"I can do whatever I want today," is the highest sort of prosperity.
People seek to increase their riches in order to be happier. Because everyone is different,
happiness is a difficult topic to discuss. However, if there is a common denominator
in happiness—a universal source of joy—it is people's need to have control over their life.
Moving forward to lesson 17 and the last one 18. lesson 17 is The Seduction of Pessimism
Optimism has the ring of a sales pitch. Pessimism appears to be someone attempting to assist you.
Optimism is the belief that the chances of a good ending
over time are in your favor, even if there are setbacks along the route.
Pessimists frequently extend current developments without taking into consideration how markets
adjust. Progress is too gradual to detect, but setbacks are too frequent to overlook.
and the last lesson is When You’ll Believe Anything
By far the most powerful force in the economy is stories.
They can either provide the fuel that allows the physical aspects of the economy to function,
or they can act as a brake that limits our potential. You're more likely to believe
a storey that exaggerates the chances of it being real if you want it to be true.
When you're smart and want to solve problems, but you have little control
and the stakes are great, a compelling narrative emerges.
They have a lot of power. They have the ability to persuade you to believe anything.
What will you learn from this book, in general? it has many lessons that we stated above but
generally The first point to remember is that everyone is unique. Your attitude toward money
is largely determined by your background. Two children, one born into poverty and the other
nurtured in a household with multiple generations of wealth, will develop spending
and saving habits that are vastly different. Even as adults, our perspectives are shaped
by our personal experiences. A person who grew up during the Great Depression
is more likely to invest cautiously than someone who started investing in the 1980s.
So should you take the plunge and read the whole thing?
There is something for everyone in this book. The teachings on greed and excess were the most
interesting to me. Others may see this as a tool to help them become better investors.
In several portions, it reads like a straight business book. In certain cases, it resembles a
self-help project. Housel, on the other hand, is a gifted writer who masterfully blends these tones.
If you take it up, I imagine you'll find it difficult to put it down.
That’s it for today guys! if you liked the video, please make sure to subscribe and
press the bell icon! would you read this and if you have, how has it changed your life?
we’d love to hear your thoughts in the comment section down below! Thank you for watching