PSYCHOLOGY OF MONEY - How I Understood the ‘Psychology of Money’ in 6 Visuals
“You are one person in a game with seven billion other people and infinite moving parts.” — Morgan Housel
I recently read the summary of ‘Psychology of Money’ by Morgan Housel to improve my knowledge of personal finance. I reviewed some of the key messages and transformed them into the 6 visuals below 👇🏼
PSYCHOLOGY OF MONEY
1. Your financial goals will hit obstacles
Long term financial planning is imperative to ensure your goals are clear. However, things change. You might change career. You might have a baby on the way. You might need money for an emergency. We do not know what the future holds or what you will want in 10 years. Accept that your desires are likely to shift.
2. Wealth is what you don’t see
Staying wealthy involves a combination of frugality and paranoia. Wealth is the financial assets that haven’t been converted into the stuff you see. The world is full of people who appear rich on social media but are living on the edge of insolvency and modest people who are actually very wealthy.
3. It’s never as good or as bad as it seems
When looking at your own and other people’s wealth, it’s never as good or as bad as it seems. Focus less on specific individuals as this could warp your view on wealth. The more extreme the wealth of the individual, the more likely this was influenced by luck or risk.
4. Be comfortable with things not working
Embrace the realisation that things will go wrong. Investments will go wrong but the lessons learnt will be invaluable. Look at the overall portfolio and not individual investments to reduce a polarized outlook of progress.
“Everything has a price, but not all prices appear on labels.” - Morgan Housel
5. Less ego, more wealth
There literally is no reason to risk what you have and need for what you don’t have and don’t need. Enough is realising when that insatiable appetite for more will lead you to regret.
6. Make room for error
Room for error allows you to take more risks and endure the inevitable highs and lows of the market. It keeps you in the financial game for a longer period of time.
“Every forecast takes a number from today and multiplies it by a story about tomorrow.” - Morgan Housel
Thanks for reading ...