Hello Readers, in this post we are going to discuss about a popular book on personal finance called “The Psychology of Money.”
The author of the book is Morgan Housel, who is a partner in a venture capital firm called "Collaborative Fund". Apart from this, Morgan Housel has also been a former columnist for 'The Motley Fool' and 'The Wall Street Journal'.
This book was published in 2020. This book focuses on how we think, and behave fundamentally about money. We get to learn a lot from this book and in this post, we will tell you about the Top 5 Learnings from this Book. Let's get started:
1. The first thing to learn is that protecting your wealth is more important than creating wealth. Many people become rich, but then they also end up losing all of it very soon. We have seen many such examples in the past. That's why it is very critical to constantly protect your wealth. Many people think that a good investment means making the right decisions. But according to Morgan Housel, investing well means avoiding bad decisions. We agree that it is necessary to take risks to earn money, but it is also our responsibility to save that money.
That is why we should always be modest and give equal importance to capital protection along with creating wealth.
2. The second learning is that money should be used to achieve freedom. More than a good job, a big house or a luxury car, wealth should be used to buy time. You will be truly rich when you can use your money to control your time and life. When you can do whatever you want, whenever you want, and for as long as you want, then only you will be truly financially independent.
3. The third learning is that real wealth is not what is seen but what we do not see. The only difference between being wealthy and being rich is that it is not difficult to recognize rich people because they own luxury cars and expensive houses. Even if they have bought it on EMIs.
In our society, people judge your wealth by your spending ability. But wealthy people do not spend most of their income. Their real wealth is in the form of assets such as stocks, rental income, intellectual property, etc. Wealthy people use their money to grow themselves, and to give themselves greater flexibility and the ability to make choices.
4. The fourth learning is that we should always be ready for surprises and unknown events. We must accept the randomness and uncertainty in life and plan for it. For this, we have to solve the difference between two things- What is about to happen and What could happen?
Often we take all the decisions thinking about what is going to happen according to us, and do not think about what could happen, and if it happened, then how we would be able to face the situation.
The reason for this is that we always think that we should know what is going to happen in the future. It is very difficult for us to admit that we do not know much about what will happen tomorrow, and therefore, we should be prepared for uncertain events.
5. The fifth and the last learning is that nothing is free in the world. For example, social media handles are free but in reality, they are asking for your time and data instead of money.
Therefore, everything has a price. We should know what that price is, and then decide whether we want to pay it or not. Similarly, if we talk about investment, we also have to pay a price which you cannot measure in dollars or rupees.
The real price of investing is to deal with various emotional and mental states like fear, doubt, uncertainty, greed, and regret.
According to Morgan Housel, instead of being afraid of market volatility, we need to think of it as a fee or a cost that one needs to pay to become a good investor. In investing, until we deal with emotions and invest rationally, we will not be able to be good investors.
So these were the top 5 takeaways from the book "The Psychology of Money". Tell us in the comments section which learning you liked the most, or if you have read this book, then tell us what you liked the most about the book.
Thanks for reading. We hope this was informative to you. Read more related articles.
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