20 Lessons From The Psychology of Money That Changed How I Think About Money

these are 20 lessons from the book the psychology of money that changed how i think about money and hopefully it can change yours too no one is crazy well i mean some people are what we experience makes up about point zero zero zero zero zero zero zero one percent of what's actually going on in the world and yet it makes up like eighty percent of how we think the world works for instance when you see this you might think that wow that was magic you didn't see that it took like two and a half minutes to actually make it happen i had to do a bunch of takes but finally it actually worked you just saw something cool and even my bracelet changed change oh there we go so when we see people freak out and sell everything when the market goes down or buy lottery tickets we might think that that is a crazy irrational decision no one's crazy if you were in their shoes you might do the same thing luck versus risk let's say that i go out there i do some research and i buy a stock and five years from now maybe that stock either didn't grow at all or maybe even lost money it's possible that when i bought that stock i i made a bad decision it's also possible that i made the right decision and i just got some bad luck there was stuff that is not in my control that happened like this stock could have had an 80 chance of making money and it just so happened that i landed on that 20 chance that it wasn't gonna work out doesn't mean i made a bad decision not necessarily but it could also work the other way where you just get some dumb luck where you pick something that was actually a bad decision and it ended up working out for you this is something that's really important when it comes to listening to financial advice and taking action in your own financial life like for an example bill gates happened to be in one of the only schools that had a computer in his state if that hadn't have happened maybe he wouldn't be worth tens of billions of dollars you never know how kind of risk and luck are going to be involved in your decisions and how it can completely change everything most of us have enough we have enough to live on to have food to drink coffee to have something to watch a youtube video on but we always seem to push for more power more money bigger house more clothes nicer cars and yes i fall into that trap as well where once i hit half a million subscribers i'm hopefully gonna get a tesla so don't forget to subscribe but seriously we need to realize when we have enough and right now i do have enough that would be a bonus that is completely unnecessary and sometimes realizing that and that if we can keep our needs few then we can have enough a lot sooner than somebody else and be content in our lives there are some things that are just never worth risking in order to get more things like our reputation our freedom our family and friends our happiness and the best way to make sure that we can keep all these things is not risking any of them to have more than we need when we already have enough compound interest i'm gonna be honest this is something that i struggle with when we see somebody who's at the top of their field whether that's in youtube in business in investing in a relationship we want kind of that end result but we want it now and we don't see all of the work and the years that went into that for instance if you look at warren buffett he started investing when he was 10 years old i don't know what you were doing at 10 but i i wasn't investing and by the time he was 30 he hit a million dollars by the time he was 59 he hit 3.8 billion dollars and now he's worth almost 100 billion dollars but if he had started investing at 20 instead of at 10 that could have made an enormous difference in how much he's worth today a lot of times we look at the results instead of looking at the compound effects that went into it plan on the plan not going according to plan as mike tyson once said everybody has a plan until they get punched in the face so when we're making plans for our financial lives we should have plans for if those plans go terribly awry we should have emergency funds we should be aiming for probably having six months to a year's worth of living expenses in case things go wrong what happens if there's a recession and you can't withdraw your money from the stock market what happens if there's a housing crisis well we don't want to obsess about all the negative things that could happen in the world structure our finances to be unbreakable be a pilot of your findings there's an old saying with pilots that being a pilot is hours and hours of boredom punctuated by moments of sheer terror a good definition of financial genius is doing the average thing when everybody around you is going crazy freedom comes first honestly i i couldn't agree with this more that's what i talk about in financial minimalism all the time it's the idea that even doing something that you love on a schedule that you hate or with people that you hate can make it feel like that's something that you hate so even if you love your job right now focusing on building freedom in your life is what's really important because what if in a year you get a terrible boss or you hate your job or they try to move you or they do something or you hate your work environment or the schedule they put you on we should be focusing on building freedom like that's why i quit the other jobs that i was at where i could have made more money with them but i didn't like the hours i didn't like what i was doing so even though for the first couple years i made way less money i would rather have the freedom and less money because all i need is enough no one gives a no one is as impressed by your material stuff as you are like let's be honest when you see somebody driving that cool car you don't think that that person is cool you think that the car is cool or how cool you would look if you were driving that car this is something that i used to really struggle with where i would always be focused on my clothes my car what people thought about me my job whatever it was and how people perceive me when in reality no one really cares they're just worried about themselves so that's really freeing because you don't need to spend money on stuff you don't need to impress people you don't even like i think that's from fight club [Applause] be wealthy not flashy when most people say that they want to be a millionaire what they really mean is they want to spend a million dollars which is literally the opposite of being a millionaire but most people judge how successful they are on how much money they spend how flashy their stuff is but true success and true wealth is measured in freedom be frugal shocker right building wealth really has very little to do with how much money that you make and almost everything to do with your savings right now a lot of people only save for specific things they save for a house they save up for a car for a vacation whatever it is but he talks about how important it is to save just for the sake of saving you don't need something that you're saving up for you're saving up because that's what's gonna buy your freedom that's what's gonna buy options that's what's gonna buy memories is saving money not to spend it and because you know that stuff won't make you happy never tell me the odds actually you know the odds are quite interesting the odds of making money in the stock market are 50 50 over one day 66 over one year 88 over 10 years and a hundred percent over 20 years so this just really shows the importance of being in the market for a long time taking advantage of that compound interest and not freaking out when the market goes down or trying to time it but just trying to be in the market and continually put more and more in over a long period of time and that's how you're like guaranteed to make money now if you guys want to be guaranteed some money you could sign up for weeble and get up to 12 free stocks when you open and fund a new account this is the main app i use to invest and it's honestly just free money so there's a link down in the description we suck at telling our own future now most people stick with the job that they chose when they were trying to go to school at 18. but the odds of picking a job that's gonna be fulfilling you're gonna actually care about and enjoy going to work and enjoy every day for the next like 40 years are astronomically low and that's because we can't really tell what the future holds i used to have five-year plans and ten year plans and now i really don't plan past about six months and if something's really not fulfilling you and you're just doing it because that's what you've done in the past it's not really a good reason to do it it might be time to kind of make a shift and see what you can change so that you're not stuck doing this thing you don't like doing for the rest of your life not all prices are on the label like i said earlier there's like a hundred percent chance of making money if you invested in the stock market over a 20-year period of time and the historical average is around 11 per year however that money does not come free there is a fee that you have to pay but that fee is not money it is volatility and uncertainty and this can be really powerful to understand especially with everything that's going on right now when you see the market dip 20 and you lose 20 of your money that can be really scary unless you look at it as this is the fee if i can stick through this this is what's gonna make me money in the long term as opposed to people who can't handle it and they sell and get out of the market like you have to realize that that stress that uncertainty that worry that is the price for the returns that you're gonna make you are not me that that's kind of obvious and congratulations to you but we often look at people giving financial advice and a lot of it that even i've talked about sometimes is very blanket this will equal this like this will be a good decision if you invest your money this way it'll be a good decision that's not necessarily true so we have to be very careful who we listen to when you're giving financial advice to an 18 year old as opposed to a 30 year old who's just starting a family as opposed to a 50 year old who's getting ready for retirement a decision that would be great for one person would be a horrible decision for somebody else to realize that i i'm not you and the other people that you listen to you have to take it with a grain of salt and kind of adapt it to your circumstances because every circumstance is different so we all have to make slightly different decisions the joker was right some people just want to see the world burn no like legit negativity is what sells this is why i don't listen to any news of any sort and i have no idea what's going on in the world if someone writes an article that the market's gonna go up 50 next year nobody will give a crap but if that same person writes a very similar article saying that the markets are going to go down 50 next year everybody will start losing their minds so when you're watching the news or looking at forecasts just realize that negativity sells so take it all with a grain of salt because you never know who's just trying to make money off of negative things happening and trying to hype them up so that they can get more clicks it's a bit of a scam beware of your love of stories if you dislike investing in the stock market or you just like investing in real estate or dislike starting a business you're gonna find a story that kind of makes sense with that narrative that you have in your head you're gonna try to fill in the gap this is called appealing fictions if you think that the stock market is gonna go down next year you will find tons of things to support that idea if you think it's going up you'll probably find tons of things to support that idea so it's actually really important to not go into researching or planning things or even having discussions with people with a story or an idea in mind already that you're trying to draw things from other places to match that story that you already have going in your own head this happens in politics all the time where somebody will have one mindset and they will surround themselves uh with people who agree with that mindset and never take a step back and ask if each side has merits that there is some middle ground with but honestly we just love our stories less ego more wealth saving money is the gap between your ego and your income so wealth is created by suppressing what you could buy today in order to have more money and options in the future so no matter how much you earn you can't really start building wealth unless you can practice delayed gratification like it's just really important to remember that wealth is what you don't see you need to sleep at night sometimes getting the highest possible returns is not really what we should be shooting for we should be shooting for being able to sleep at night and not stress about our finances so when we're looking into investment one of the questions that we should be adding to the list will i be able to sleep at night and if the answer is no and it's gonna be a big stress on your life then maybe you should look in a different direction it's just it's just not worth losing sleep over investing doesn't have to be complex a lot of people get overwhelmed with the options that are out there when it comes to investing you can do real estate a business you have all these stocks like thousands and tens of thousands of stocks that you can choose from and therefore they don't do anything because it's too stressful and it doesn't really need to be that complex he talks about one of the simplest ways to start investing and that is just to simply open a roth ira and invest into low cost index funds something like vtsax and just continually putting money in it every single month for the long term and not worrying about the market because again you're looking for that 20 years down the road this might sound really simple but it actually works stats show that 85 percent of large cap active managers didn't beat the s p 500 over the decade ending in 2019 just putting your money in the s p 500 and leaving it embrace some risk some risk is good in order to make money in the stock market you have to put money into the stock market and therefore take a risk yes it could be safer to keep that money in a savings account but if you don't take that risk you are guaranteeing that you won't get that reward so while it's important to make sure that we avoid risk that could actually like ruin our lives taking a calculated risk on something that has very good odds of an upside is totally worth it and we can't just not take action because there is some risk involved now something that has a very low risk and hopefully a very large upside is actually subscribing to this channel so if you haven't subscribed already don't forget to do that and i'll see you guys next week

Channel: Gabe Bult

Views: 971,427

Keywords: the psychology of money, psychology of money, morgan housel, the psychology of money by morgan housel, the psychology of money book, the psychology of money book review, how to make money, ali abdaal, gabe bult, 20 lessons from the Psychology of Money, 20 lessons that changed my life, 20 lessons, psychology of money morgan housel, the psychology of money audiobook

Id: b-RNsGGuOhE

Length: 13min 38sec (818 seconds)

Published: Mon Sep 05 2022