LESSONS FROM THE BOOK " THE PSYCHOLOGY OF MONEY "

 

1.Nobody is insane.

Individuals use their own mental models of how the world functions to justify their financial actions based on the knowledge they currently possess. Money choices are influenced by one's background and upbringing. When we have money, we do insane things. However, nobody is insane.

2.Chance and Danger

Both of these represent the fact that everything that happens in life is influenced by factors other than personal initiative. You can believe in one and not the other because they are so similar. The world is too complicated to let one hundred percent of your actions determine one hundred percent of the results.

3.Never Enough

Without a sense of sufficiency, life isn't enjoyable. Realizing that the opposite—an unquenchable want for more—will drive you to regret is enough. The fight against social comparison is an unwinnable one. Recognize that you will have less than people in your immediate vicinity.

4.Compounding confusion

Warren Buffet's net wealth of $84.5 billion, $81.5 billion was acquired after he turned 65. His secret is time, but his skill is investing. The most effective thing you can do to improve your investing performance is to extend your time horizon.

5.Making Money vs. Maintaining

It Being paranoid and frugal at the same time is the only way to remain prosperous. It takes risk-taking, optimism, and putting yourself out there to make money. However, risk-taking is the antithesis of keeping money.

6.You Win, Tails

Given that a small number of events account for the majority of outcomes in finance, long tails—the extreme ends of the result distribution—have a significant impact. A tail event is the cause of anything significant, lucrative, well-known, or powerful.

7.Liberty

The greatest dividend money can give is the freedom to manage your time and do as you like. Living your life as you see fit is the ultimate form of prosperity. It is impossible to overestimate the intrinsic value of money since it allows you to have control over your time.

8.The Man in the Car Paradox

Nobody is as awed by your belongings as you are. To gain favor and admiration, people frequently flaunt their money. In practice, though, admiration is frequently avoided. They measure their own desire to be liked and admired against your money.

9.What You Can't See Is Wealth

We often evaluate wealth based on appearances, such as homes, vehicles, and clothing. Investment accounts are not visible to us. We measure financial success based on appearances. Real wealth is not readily apparent. It is assets that have not been transformed into visible objects.

10.Conserve funds.

Increasing your savings rate is more important for building wealth than your income. Wealth comes from having less ego. The difference between your paycheck and ego is what you save. If you want less, you can spend less. If you don't care what people think of you, you'll want less.