The Psychology of Money by Morgan Housel is a book that talks about doing well with money is not always what you know, it's how you behave. "Money relies more on psychology than finance."
Housel tells us to "focus less on specific individuals and case studies and more on broad patterns." We of course can look at successful people such as Bill Gates, Warren Buffet, Mark Zukerberg but need to be able to apply finance to our own life and situations. We need to "recognize the role of luck in success, and the role of risk meaning we should forgive ourselves and leave room for understanding when judging failures."
The book also talks about Bernie Madoff and how he had everything: wealth, prestige, power, and freedom. One thing he didn't have was a sense of enough. "The hardest financial skill is getting the goalpost to stop moving." This to me feels like the gambling mentality and the risk of pushing just a little more. The author even mentions a story in the book when he asked a Las Vegas dealer what games he plays and what casinos he should vist. The dealer said "The only way to win in a Las Vegas casino is to exit as soon as you enter." I have to wonder if these people who do not have a sense of enough are not happy and believe that if they keep pushing to the next thing, it will bring more happiness to their life.
Warren Buffett's financial sucess can be traced to the fact that he started at a young age. "His skill is investing, but his secret is time." Buffett also spends a lot of time reading and continuing to learn more everyday.
The author makes this point that I defintely agree with: "The highest form of wealth is the ability to wake up every morning and say and do whatever they want to do." People want to become wealthy to be happy. Every person's idea of happiness can be slightly different. When it comes down to it, people want to control their lives and decisions. They want to have freedom to choose the day they want- this creates their joy and happiness.
This brings us to our careers. What are we looking for? What interests us? Some may want to be a doctor, Investment Banker, or Lawyer but as these professions bring money and prestige they also bring long hours, stress, and time away from family and friends. I once talked to a man who was a Defense Attorney. He worked such long hours and the stress made him drink more. He became an alcoholic. He didn't see him family since he left before they got up in the morning and returned home well after midnight when his family was sleeping. His marriage fell apart and he got divored. His kids were angry at him for many years for always missing important parts of their lives. Later in life he got sober and become a Counselor at a Drug Rehab center and was remarried. He had repaired his relationship with his kids. He was finally happy. He told me that he wishes that he didn't place his career number one alll those years ago.
People who have financial success are those who tend to not care what other people think about them. "People's ability to save is more in their control then they might think." You hear it all the time that the neighbor gets a new car, boat, or camper. Then to "keep up with the Jones" we then think we also need the next new item. Or we have friends going on an expensive trip and think we also need to book a trip even though it's not in the budget. "Savings can be created by spending less. You can spend less if you desire less." The author mentions to save any amount of money you can. Life is full of surprises and having money set aside can get us out of a tough spot.
Overall this book was interesting to read. How we approach our finances and money is also how we are raised and what our values are. Since most schools do not teach finance classes, we have to rely on what our parents teach us and what habits we learn from them. Stop being caught up in wanting more and be grateful for what you have. Manage your money so that you can sleep at night and put plans into place for savings and investing.
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