how we think and behave around money ? the psychology of money by Morgan housel ? reel story?Wealth Lessons From The Psychology of Money. Rel wealth?

 I've read a lot of personal finance

books but none goes into how we think

and behave around money better than this

book the psychology of money by Morgan

housel .

So in today's article let me share

with you the 18 wealth lessons from this

amazing Book lesson number one recognize

that when it comes to our money no one

is crazy we easily judge people based on

their worldview or where they decide to

invest their money we judge someone who

is putting all their money into gold as

someone who is still living in the 16th

century we judge someone putting all

their money in nfts as someone living in

a fantasy world and we judge someone

putting all their money in vtsax as

someone void of a personality however

every decision people make with money is

justified by taking the information they

have at the moment and plugging it into

their unique mental model or how the

world works both my parents were born

during the Korean War and they spent

most of their adult lives in a war-torn

country that was trying to rebuild

theirself so they have a certain

worldview based on their experience food

isn't something you throw away because

you never know where your next meal will

come from you work when you can and then

whatever job is available because

freedom to choose your work is a fantasy

and the stock market sounds like a scam

because frankly where they grew up the

stock market didn't exist so let's be

careful before we judge I might think

investing all my money in a low-cost

broad market index fund is safe but

someone else might see that as being

crazy we all make decisions based on our

own unique experiences and world view

let's first seek to listen and

understand before we jump to judgment

number two wealth lesson understand luck

and risk when it comes to wealth

building whereas I like to think we have

no idea how luck and risk will play into

building our future the line between

inspiringly bold and foolishly Reckless

can be a millimeter thick and only

visible with hindsight we live in a

world of extremes we praise Mark

Zuckerberg for having turned on Yahoo's

2006 one billion dollar offer to buy his

company what a genius he saw the future

and took bold risks that ultimately paid

out however in the same sentence we

criticized Yahoo for having turned down

a big buyout offer from Microsoft what a

bunch of fools didn't they know what a

great deal Microsoft was offering but

the truth is that we honestly don't know

depending on how Facebook and Yahoo's

future Panda are opinions their approach

to these by out offers could be

completely different we can never know

what is luck and what is skill so

therefore take a conservative approach

with money arrange your financial life

in a way so that not one bad investment

or a misfinancial goal can wipe you out

hold a good amount of reserving cash

diversify your investment and keep your

household expenses low number three

wealth lesson recognize the power of

enough or better yet the danger of not

knowing are enough when it comes to

Growing our net worth we tend to

attribute high value to technical

knowledge such as investing tax planning

and financial forecasting however the

hardest Financial skill is getting the

goal post to stop moving is so human

nature I was so happy with my brand new

Civic that is until I saw my neighbor

drive up in a brand new Tesla I was

overjoyed by my 2000 year-end bonus that

is until I found out my colleague

received a three thousand dollar bonus

when you have no sense of your enough

you will spend your life constantly

chasing a moving goal post a life never

fulfilled because the ceiling of social

comparison is assuming that no one will

ever hit so identify you enough by

knowing what is most important to you

not what is important for your neighbor

or your co-worker identify what level

wealth is enough for you and stick to

that number number four wealth lesson

recognize the ridiculous power of

compounding Albert Einstein said it best

compound interest is the most powerful

force in the universe Warren Buffett's

net worth is well over 100 billion

dollars at the time of this article.

however what many people have a hard

time comprehending is the fact that 99

of Warren Buffett's net worth was earned

after his 50th birthday in 1986 when he

was 56 years old Warren Buffett became a

billionaire Warren Buffett by any major

comparison is a phenomenal investor

however it wouldn't do justice to

compound interest if we attributed all

his success to his stock picking

abilities alone because the real Secret

Sauce to his success is actually time

the fact that he's been a great investor

for three quarters of a century the main

takeaway is this don't try to find

winning stocks good investing isn't all

about earning the highest returns

because High returns most often can be

attributed to luck as we mentioned

earlier it's hard to tell if it's based

on someone's phenomenal skill or if

they're just lucky so aim to earn okay

returns for a long period of time

leverage the most powerful force in the

universe compound interest to your

benefit number five wealth lesson

recognize that there is a clear

distinction between getting rich and

staying Rich it's easy to bucket the

skills required to making money and

keeping that money as the same skills

however they're completely different

Mike Tyson was excellent at making money

at the peak of his career Mike Tyson

could command 30 million payout for each

of his fight however due to his lavish

lifestyle he filed for bankruptcy in

2003 with 27 million dollars in debt as

good as Mike Tyson was in the boxing

ring and then making ridiculous amount

of money he really sucked at keeping his

money Tyson once built a mega mansion in

the dreams in Connecticut and an iconic

feature of this home was a 2.2 million

dollar bathtub made of pure gold he also

once owned three Bengal tigers named

Kenya storm and Boris spending two

hundred thousand dollars in annual food

budget alone making money takes risks

risks such as trusting the stock market

to grow our net worth however keeping

our money requires the opposite of

taking risks humility and fear that what

we've made can be taken away from us in

a blink of an eye number six wealth

lesson understand the tale follow the

average what do we mean by the tale

we're referring to the furthest end of a

distribution curve it's easy to assume

that all events have an equal impact

upon the market and the economy however

the reality is that all impacts aren't

distributed equally most often a small

number of events account for the

majority of the outcome take a look at

the stock market when we see the amazing

growth of the market over the past 50 or

100 years we might think that all the

companies contributed equally to its

growth however when we look deeper most

of the companies in the index were

effectively failures most recently

companies like apple and Amazon were

what's true of the S P 500 or the total

stock market to its positive returns

everyone else losers the key takeaway

here is not to say that we should

actually try to identify these Tales

because that is impossible to do

especially for average investors like

uni rather the point of tales highlights

the importance of following the average

a good definition of an investing genius

is the man or woman who can do the

average things when all those around

them are going crazy Tales Drive

everything number seven wealth lesson

and this is my personal favorite and

that is to recognize that of all the

things that you can buy with money time

and therefore freedom is the greatest

purchase the highest form of wealth is

the ability to wake up every morning and

say I can do whatever I want today for

me this is very personal because I spent

a good 20 years of my professional life

in some form of institution whether in

the military a school or company at the

time it was hard to wrap my head around

the value of ultimate freedom because

I've never truly experienced it but

studies and my personal experience has

made me a Believer happiness is a

complicated subject because everyone's

different but if there's a common

denominator in happiness a universal

fuel of Joy it's that people want to

control their lives if you have the

means to buy back time buy back Freedom

even if it's a small sliver of complete

Freedom it'll provide you the best

return for your money number eight while

fussing very straightforward no one is

impressed by your car when you see

someone driving a nice car you rarely

think wow the guy driving the car is

cool instead you think wow if I had that

car people would think I'm cool

subconscious or not this is how people

think so if you like nice cars try one

because you want to not to impress

someone else number nine wealth lesson

real wealth is most often hidden we

naturally judge people's wealth by oec

because that's all the information we

have to go off on they aren't going to

show us their bank account or investment

Holdings so we can only make inferences

based on outward appearances how fancy

is their car how big is their home how

lavish was their last overseas vacation

however this is the worst way to truly

gauge someone's wealth modern capitalism

makes helping people fake it until they

make it a cherished industry the honest

truth is that any one of us with a

decent credit score can look rich if we

wanted to we can finance a new

Lamborghini we can take out a two

million dollar mortgage for a mansion

and we can put that fancy trip to Greece

on a credit card but true wealth is

actually what we don't see because

wealth is actually built when we don't

spend the money not buying that nice car

or the large Mansion or taking that

overpriced first-class flight so next

time you see someone with a lot of nice

rich things don't be impressed the world

is filled with people who may look poor

but actually wealthy and people who look

rich but are actually living on borrowed

credit number 10 wealth lesson if you

want to Achieve Financial Independence

you must learn to save money this is

more important than your investment

returns your income or your ridiculous

good looks wealth is just accumulated

leftovers after you spend what you take

in and since you can build wealth

without a high income but you have no

chance of Building Wealth without a high

savings rate it's clear which one

matters more when it comes to money we

get so enamored with the sexiest tools

investment vehicles and get rich schemes

but Building Wealth is very simple spend

less than you earn and save money so

care less about what others think of you

lower your ego save more and build real

wealth number 11 wealth lesson when it

comes to managing your money don't try

to be a perfectly rational spreadsheet

just be reasonable enough reasonable is

more realistic and you have a better

chance of sticking with it for the long

run which is what matters when managing

your money when we think of money and

numbers we automatically think we need

to become a spreadsheet meticulously

calculating the pros and cons of every

purchase dilemma and arriving at the

most ideal decision however we're humans

not computers to set the expectation

that we should behave like one is just

setting ourselves up for failure so

accept reasonable accept our social

beings so we don't need to aim for

spreadsheet level Perfection with every

financial decision if you can do

reasonable enough consistently over a

long period of time you will win with

money number 12 wealth lesson recognize

that the world is surprising we often

use history to predict the future but

the biggest lesson that history should

teach us is that the future is not

predictable we have no idea what will

happen next it is smart to have a deep

appreciation for economic and investing

history history helps us to calibrate

our expectations study where people tend

to go wrong and offers a Rough Guide for

what tends to work but it is not in any

way a map of the future history is good

for General takeaways General

understanding of greed and fear how

people behave under stress and how

people respond to incentives but be wary

when someone tries to use specific

historical Trends Industries or Market

movements to explain what is happening

today the economic and political

landscape of yesterday is completely

different from today and it will be even

more so tomorrow take the general

lessons but be wary whenever someone

gets too specific number 13 wealth

lesson always make room for error a

margin of safety or a buffer room no

plan will ever go according to the

original plan in World War II's Battle

of Stalingrad the largest battle in the

world history there was a point in the

battle where the desperately needed

German tanks failed to function properly

where they wore now from all the

fighting were they too damaged from the

last engagement no it was actually the

mice few of the mice that had nested

inside the tanks had eaten away all the

insulation covering the electrical

system making them inoperable the

Germans went into battle with one of the

most sophisticated equipment in the

world at the time yet they were defeated

by something no one could have ever

expected mice the honest truth is that

despite how ridiculous such stories

sound things like this happen all the

time so the good rule of thumb is to

expect the unexpected and always make

room for error when it comes to my

finances my favorite margin of safety is

to hold cash at least three to six

months in an easily accessible checking

or savings account I personally favor 12

months Bill Gates said this when

Microsoft was a young company I wanted

to have enough money in the bank to pay

a Year's worth of payroll even if we

didn't get any payments coming in even

at the early stage of the company Bill

Gates knew he needed a margin of safety

to make his dream come true number 14

wealth lesson or actually this is more

of a life lesson recognize that you will

change or as I like to say You must

change this reminds me of what a

marriage counselor once said a couple in

their 40s went into a therapy session

and the wife was complaining to the

counselor how her husband was no longer

the same man she married 20 years ago

the fire was gone it was a lot more

reserved now not as spontaneous as when

they first started dating do you know

what the marriage counselor said well

good I really hope he's not the same guy

you married 20 years ago do you still

want to be married to a 20 year old

college student when it comes to

planning our financial future we

oftentimes approach it with the

Precision that we'll know exactly what

our future selves will want but the

truth is that we will change we have to

change I may be completely okay wearing

the same shirt right now but who knows

when I'm 15. I might have a fashion

Eureka moment and might want a bigger

closed budget therefore we should avoid

the extreme ends of financial planning

assuming you'll be happy with the very

low income or choosing to work endless

hours in pursuit of high one increases

the odds that you'll one day find

yourself at a point of regret number 50

Teen Wolf lesson recognize that when it

comes to investment returns even the

ones that follow the market nothing is

free I advocate heavily for Index Fund

investing a simple low-cost and most

effective for average investors like you

and I so it's easy to assume that there

is no cost to this way of investing

however there is it may not be in

dollars and cents but in motion markets

don't move in the way we want it spikes

up and spikes down at a moment's notice

you watch the stock market long enough

you'll go through all stages of emotion

Joy fear excitement doubt and regret you

name it you'll experience them all this

is because even if you have Steel in

your blood veins very few investors have

the ability to say I'm actually fine if

I lose 20 of my money this is even more

true for new investors who have never

experienced a 20 or even a 10 decline

ever before but except that this is the

price we have to pay if we want to reap

the benefit of investing in the market

and build wealth in the long run if we

can accept that market volatility is the

fee we have to pay to invest in the

market we can stick around long enough

for investing games to really work for

us number 16 wealth lesson I identify

what specific money game you're playing

it's easy to assume that when we're

talking about money and Building Wealth

we're all pursuing the same goal playing

the same game ultimately to get rich

however when we unpeel the layers what

we'll often find is that there is a

great deal of variability to what Rich

looks like for each person for one

person it may be having a comfortable

middle class retirement when they turn

60. for another person it might mean

being able to live in a 16 room mansion

and fly in a private jet every weekend

therefore the money strategy or the

money game that each individual is

playing is and has to be completely

different the 60 year old retiree will

be fine saving 20 percent of their

income in a low-cost Index Fund however

the aspiring private jet passenger must

take greater risks either starting their

own business or investing in very risky

assets so be worth taking Financial cues

from people playing a different game

than you are understand what money game

you want to play and adhere to advice

from individuals that are in the same

game as you number 17 wealth lesson

Embrace optimism people naturally

gravitate towards pessimism it's more

captivating and frankly more plausible

tell some one that everything will be

great and they're likely to either shrug

you off or offer a skeptical eye however

tell someone that they're in danger and

you have their undivided attention what

do you think we have so many Doom and

Gloom news and content out there no news

coverage is about how good times are

ahead rather they're all about how we're

at the brink of a new Great Depression

or another worldwide Financial

catastrophe but optimism is what will

enable us to take Smart Financial risks

and build wealth if we believed

everything in the news and truly believe

that the world was going to end tomorrow

there's no way we would put a penny into

the stock market but the fact is that

the stock market has gone up 17 000

fools in the last century it's easier to

create a narrative around pessimism

because the story pieces tend to be

fresher and more recent optimistic

narratives require looking at a long

stretch of history and development which

people tend to forget and take more

effort to piece together embracing

pessimism is easy but don't choose an

easy path Embrace optimism number 18

wealth lesson be okay with knowing we

don't know I have not met an investor

who genuinely thinks Market forecasts as

a whole are accurate or useful but

there's still tremendous demand for

forecast in both media and from

financial advisors why does this happen

it's because we all want the complicated

world that we live in to make sense and

forecasts are stories that help to fill

that blind spot psychologist Philip

tedlock once wrote we need to believe we

live in a predictable controllable world

so we turn to authoritative sounding

people who promise to satisfy that need

but we must be careful we must come to

terms with accepting that we really

don't know no one really knows the

future this also means accepting much of

what happens in the world is out of our

control this could be a hard pill to

swallow but the sooner we accept it

sooner we can make financial decisions

that can leverage this fact why hold a

lot of cash because we don't know what

calamity is right around the corner why

live way below our means because we

don't know what could happen to our

income tomorrow why invest in a broad

market index fund because we have no

control over a single individual company

or even a group of companies follow the

market don't try to beat it sooner we

accept the fact that there is more we

don't know than we know sooner we can

make financially smart decisions thank

you guys for watching and this Spirit of

making smart decisions if you'd like to

learn 12 of my favorite non-money books

that changed my life please check out my

video here until next time all the best

foreign.