This article comprehensively presents The Psychology Of Money summary well suited to your needs. This book by Morgan Housel explores the psychology of money and how it affects our financial decisions. Here are some of the top lessons from the book:
Decisions about money are more psychological than intellectual.
Morgan reveals that virtually all our decisions about money are based on our mental storyline about how the world operates.
This mental impression in turn is built by our experiences and encounters. As such, we should not be quick to judge others’ decisions as wise or unwise, and most importantly we should do some due diligence in making our financial decisions as the experiences that created our current thought pattern may differ from the current happenings.
Nothing is as good or bad as it seems.
In The Psychology of Money, Morgan Housel illuminates the fact that our experiences and psychology about money are greatly influenced by both risk and luck than most people realize. They both accentuate the reality that every outcome in our lives is controlled by forces far greater than individual efforts.
The time and place of your birth and upbringing play major roles in your approach to money. The upside is, you didn’t choose where you were born but you can always relocate, unlearn, and relearn focusing on broad patterns instead of individual lives
Enough is Never Enough.
We often think that we need more money to be happy. However, research has shown that there is a limit to how much money can increase our happiness. Once we have enough money to meet our basic needs, any additional money has a much smaller impact on our happiness.
Compound Interest Is The Key.
In chapter four of the book, we are introduced to the power of Compound interest in building sustainable wealth. The revelation of Warrant Buffet earning almost 90% of his networth after his 65th birthday was the perfect example.
It is the ability of money to earn money. Over time, compound interest can turn a small amount of money into a large amount of money, only if you have the patience to nurture it for several years.
Planning is Important.
Starting out on any quest without a strategic action plan is tantamount to planning to fail. Sadly, most people make financial decisions without thinking about the long-term consequences. This can lead to financial crises in the future. We need to take the time to plan for our future so that we can make better decisions about our money.
Employ the Wisdom of The Pilot.
Times and seasons change. For one to stay afloat, it is imperative to adjust appropriately to the changes. When we are flying a plane, we are constantly monitoring the gauges and making adjustments to keep the plane on course.
The same should apply to our finances. We need to constantly monitor our spending and make adjustments so that we can stay on track to reach our financial goals.
Freedom is the Goal.
Financial freedom or security is the end goal of all our financial pursuits. Money is a tool that should grant us the freedom and capability to live our lives in the most desirable and pursue our truest aspirations. It should give us the freedom to do what we want with our time and our lives. We should not let money become our master.
Getting Wealthy is the easier part.
“There are a million ways to get wealthy but only one way to stay wealthy: some combination of frugality and paranoia.” The key to staying wealthy is to create a fine balance between measured frugality and selective extravagance. Progressively finance your dream lifestyle while ensuring a steady growth in your wealth portfolio.
Be wealthy, not flashy.
Riches shouts but wealth speaks. Shouting exhausts you and eventually you are forced to humble. Wealth is about having enough money to meet your needs and wants, while impacting others as much as desired. It is not about having the most expensive car or the biggest house.
Go Against The odds.
The odds are often stacked against us. However, this does not mean that we should not try. We should always strive to achieve our goals, even if the odds are against us.
These are just a few of the many lessons that we can learn from The Psychology of Money. Hope you found some enlightenment from this article. Understanding your own psychology about money and that of others will essentially help to better appraise and decide on how money is spent.
Written By: Dr Josiah Nang-Bayi
Author: www.moneyfarmacademy.com
@josiah_nangbayi on IG/X/Tiktok
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