Jan 23
5 Financial Lessons From the Book — Psychology of Money
What will you reply if somebody asks if you are satisfied with handling your money? And, can you firmly state that you will be able to retire comfortably someday?
We’re all here because we want to build riches or be in a position where money isn’t such a massive problem if and when we need it. To get to this position, we must practice a discipline that allows us to feel comfortable with our money, whether we are saving, investing, or spending it.
As a result, there are several strategies to produce money, but they all demand that we be disciplined by being creatures of habit when shoring up savings for a prosperous future.
What Exactly Wealth is?
Morgan Housel, author of The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness, believes that wealth is what we don’t perceive. How does that work, you ask?
Housel observes that wealth is not visible since it comprises financial assets that have not yet been turned into what people can see or conceptualize. He claims that attempting to show others how much money you have by spending it is one way to become impoverished. He warns that spending is the quickest way to have even less money.
Housel Draws the Following Distinctions in his Book:
Concept of Wealth
When people estimate wealth based on what they see, they have access to it. It is visible, concrete, and not concealed like people’s bank accounts are. Wealth is perceived in things like automobiles, mansions, and life on the gram. The perception may attempt to ‘fake it till you make it.’
Real Wealth
The book emphasizes That riches are hidden from public view. It might be any money that has not been spent on large items. Real wealth is difficult to define.
Wealth and Riches
To be affluent, one must be self-disciplined enough not to squander all they own. This should not imply that one should be a miser or forgo spending on needs. You may build wealth by not (excessively) spending what you have.
If you don’t know the difference between *wealth* and *wealth*, you might be setting yourself up for a lifetime of poor financial decisions.
While wealth is hidden — or rather, money that is not spent — wealth is present revenue that is consumed and difficult to miss. Even if the beautiful automobile or new home were paid for using a loan, the person would need to have a specific level of current income to qualify for such a large sum. The ‘wealthy’ would always go out of their way to be known.
Wealthy individuals have greater freedom, opportunities, and development by not immediately spending an income acquired. The revenue not paid can take one day to purchase more than it could in the present.
In this blog, there are five lessons from Housel’s work that can help you begin on the right track to accumulating money. As always, these are not set in stone and may be tailored to your own goals and desires.
1. Pay yourself First:
Always make sure that a portion of your earnings is yours to retain. This is because no one can generate riches unless they save. You might begin by setting aside a tenth of your salary for the future.
Tip: Look for a reliable investment vehicle where you may place your money and earn some money.
2. Expenses and You
Strive to keep your costs under control while working toward your money-building objective. Spend your money on things that aren’t important, but make excellent use of what’s left over after you’ve paid yourself.
Tip: If you can comfortably live within your means, you will be successful here.
3. Invest your Money
A passive income indicates that your money is working for you. To do this, invest part of your money once you have accumulated some savings, allowing your earnings to grow for you.
Tip: Make an effort to maximize your assets’ return (ROI).
4. Secure your Principle
Always be sure that you have safeguarded your money from loss by avoiding needless risks. Always invest in places where your principal is safe and easy to retrieve if required.
Tip: Consult a professional for advice on managing your money successfully.
5. Increase your Revenue Streams
Wealth does not build overnight, and increasing your revenue streams can help you attain your wealth creation objective. Take benefit of opportunities that come your way and continue to learn by keeping up with the current trends in wealth development.
Tip: Keep learning and developing with the times by constantly bettering yourself.
Final Thoughts
In some ways, accumulating money is more of a journey than a destination. By properly knowing the difference between riches and rich, you will go on that trip with more apparent objectives.
While avoiding spending (unnecessarily) what you have is a physical building block for riches, it only provides you the opportunity to grow your current income.
That means you should study everything you can about investing, the ups and downs, and trends, as well as seek expert financial guidance when needed to ensure you are on the correct route.
If you want to read this book here is the link you can get on your doorsteps Psychology of Money
I have also written 5 lessons from Atomic Habits. Click Here to read.
