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Building wealth has little to do with how smart you are & a lot to do with how you behave.
Thankfully, The Psychology of Money by @morganhousel explores why smart people do dumb things with their money & offers timeless advice on wealth & happiness.
https://abs.twimg.com/emoji/v2/... draggable="false" alt="👇" title="Rückhand Zeigefinger nach unten" aria-label="Emoji: Rückhand Zeigefinger nach unten">Here& #39;s my top 20 takeaways
Thankfully, The Psychology of Money by @morganhousel explores why smart people do dumb things with their money & offers timeless advice on wealth & happiness.
Here& #39;s my top 20 takeaways" title="Building wealth has little to do with how smart you are & a lot to do with how you behave.Thankfully, The Psychology of Money by @morganhousel explores why smart people do dumb things with their money & offers timeless advice on wealth & happiness.https://abs.twimg.com/emoji/v2/... draggable="false" alt="👇" title="Rückhand Zeigefinger nach unten" aria-label="Emoji: Rückhand Zeigefinger nach unten">Here& #39;s my top 20 takeaways" class="img-responsive" style="max-width:100%;"/>
No One& #39;s Crazy
"Every decision people make with money is justified by taking the information they have at the moment and plugging it into their unique mental model of how the world works."
People do crazy things with money, but their choices make perfect sense in the moment.
"Every decision people make with money is justified by taking the information they have at the moment and plugging it into their unique mental model of how the world works."
People do crazy things with money, but their choices make perfect sense in the moment.
Luck & Risk
"Nothing is as good or as bad as it seems."
Luck & risk are siblings—they influence outcomes outside of effort.
When studying success, be careful who you admire. Focus less on the individual & more on patterns. The more common the pattern, the more useful it& #39;ll be.
"Nothing is as good or as bad as it seems."
Luck & risk are siblings—they influence outcomes outside of effort.
When studying success, be careful who you admire. Focus less on the individual & more on patterns. The more common the pattern, the more useful it& #39;ll be.
Never Enough
"There is no reason to risk what you have and need for what you don’t have and don’t need."
The hardest financial skill to learn is getting the goalpost to stop moving. Some things just aren& #39;t worth risking to get more. Remember:
Happiness = Results - Expectations
"There is no reason to risk what you have and need for what you don’t have and don’t need."
The hardest financial skill to learn is getting the goalpost to stop moving. Some things just aren& #39;t worth risking to get more. Remember:
Happiness = Results - Expectations
Compounding
"But good investing isn’t necessarily about earning the highest returns... It’s about earning pretty good returns that you can stick with and which can be repeated for the longest period of time."
You don& #39;t need a huge force to create huge results, just enough time.
"But good investing isn’t necessarily about earning the highest returns... It’s about earning pretty good returns that you can stick with and which can be repeated for the longest period of time."
You don& #39;t need a huge force to create huge results, just enough time.
Getting Wealthy vs. Staying Wealthy
"Getting money requires taking risks, being optimistic, and putting yourself out there. But keeping money requires the opposite of taking risk."
There are a million ways to get rich, but only 1 way to stay rich—having humility & being frugal.
"Getting money requires taking risks, being optimistic, and putting yourself out there. But keeping money requires the opposite of taking risk."
There are a million ways to get rich, but only 1 way to stay rich—having humility & being frugal.
Tails, You Win
"You can be wrong half the time and still make a fortune."
Investing follows the 80/20 rule: Few things account for most of the results. When tail events (market crash, pandemics, etc) happen & everyone& #39;s going crazy, you can make a fortune by staying the course.
"You can be wrong half the time and still make a fortune."
Investing follows the 80/20 rule: Few things account for most of the results. When tail events (market crash, pandemics, etc) happen & everyone& #39;s going crazy, you can make a fortune by staying the course.
Freedom
"The ability to do what you want, when you want, with who you want, for as long as you want, is priceless. It is the highest dividend money pays."
Want to live a happier, more fulfilling life? Use your money to buy time & options, not things.
"The ability to do what you want, when you want, with who you want, for as long as you want, is priceless. It is the highest dividend money pays."
Want to live a happier, more fulfilling life? Use your money to buy time & options, not things.
Man in the Car Paradox
"No one is impressed with your possessions as much as you are."
The wealth signaling paradox: We tend to signal our wealth to be liked & admired. But people don& #39;t admire you; they end up just admiring your possessions. Seek respect instead.
"No one is impressed with your possessions as much as you are."
The wealth signaling paradox: We tend to signal our wealth to be liked & admired. But people don& #39;t admire you; they end up just admiring your possessions. Seek respect instead.
Wealth is What You Don& #39;t See
"Spending money to show people how much money you have is the fastest way to have less money."
The world is filled with people who look rich but are near insolvency. The only way to get wealthy is to not spend the money you don& #39;t have.
"Spending money to show people how much money you have is the fastest way to have less money."
The world is filled with people who look rich but are near insolvency. The only way to get wealthy is to not spend the money you don& #39;t have.
Save Money
"The first idea—simple, but easy to overlook—is that building wealth has little to do with your income or investment returns, and lots to do with your savings rate."
Your savings is the gap between your ego & income. Save more by not caring what other people think.
"The first idea—simple, but easy to overlook—is that building wealth has little to do with your income or investment returns, and lots to do with your savings rate."
Your savings is the gap between your ego & income. Save more by not caring what other people think.
Reasonable > Rational
"Do not aim to be coldly rational when making financial decisions. Aim to just be pretty reasonable."
Remember, you& #39;re a human & not a robot. It& #39;s easier to stick with being reasonable than to always be rational, which matters most in the long-run.
"Do not aim to be coldly rational when making financial decisions. Aim to just be pretty reasonable."
Remember, you& #39;re a human & not a robot. It& #39;s easier to stick with being reasonable than to always be rational, which matters most in the long-run.
Surprise
"History helps us calibrate our expectations, study where people tend to go wrong, and offers a rough guide of what tends to work. But it is not, in any way, a map of the future."
Study history not to predict the future but to understand how people respond to surprise.
"History helps us calibrate our expectations, study where people tend to go wrong, and offers a rough guide of what tends to work. But it is not, in any way, a map of the future."
Study history not to predict the future but to understand how people respond to surprise.
Room for Error
"The most important part of every plan is planning on your plan not going according to plan."
If you want to get ahead in life, you have to take risks. But no risk that can wipe you out is worth taking.
Save for big purchases, but also save for the unexpected.
"The most important part of every plan is planning on your plan not going according to plan."
If you want to get ahead in life, you have to take risks. But no risk that can wipe you out is worth taking.
Save for big purchases, but also save for the unexpected.
You& #39;ll Change
"Long-term planning is harder than it seems because people& #39;s goals and desires change over time."
Consider 2 things when making long-term decisions:
https://abs.twimg.com/emoji/v2/... draggable="false" alt="▪️" title="Schwarzes kleines Quadrat" aria-label="Emoji: Schwarzes kleines Quadrat"> Avoid the extreme ends of financial planning
https://abs.twimg.com/emoji/v2/... draggable="false" alt="▪️" title="Schwarzes kleines Quadrat" aria-label="Emoji: Schwarzes kleines Quadrat"> Accept that you& #39;ll likely change
Don& #39;t fall prey to sunk costs.
"Long-term planning is harder than it seems because people& #39;s goals and desires change over time."
Consider 2 things when making long-term decisions:
Don& #39;t fall prey to sunk costs.
Nothing& #39;s Free
"Everything has a price, but not all prices appear on labels."
Everything has a price. The key is to figure out what that price is and being willing to pay it.
"Everything has a price, but not all prices appear on labels."
Everything has a price. The key is to figure out what that price is and being willing to pay it.
You & Me
"Beware taking financial cues from people playing a different game than you."
Don& #39;t take long-term investment advice from short-term traders. Bubbles form when the momentum of short-term gains attract investors looking to make quick cash. Know your goals & stick to it.
"Beware taking financial cues from people playing a different game than you."
Don& #39;t take long-term investment advice from short-term traders. Bubbles form when the momentum of short-term gains attract investors looking to make quick cash. Know your goals & stick to it.
The Seduction of Pessimism
"Optimism is the best bet for most people because the world tends to get better for most people most of the time. But pessimism holds a special place in our hearts."
Pessimism reduces your expectations & chance of finding good opportunities over time.
"Optimism is the best bet for most people because the world tends to get better for most people most of the time. But pessimism holds a special place in our hearts."
Pessimism reduces your expectations & chance of finding good opportunities over time.
When You& #39;ll Believe Anything
"The more you want something to be true, the more likely you are to believe a story that overestimates the odds of it being true."
Stories, not statistics, are the most powerful force in the economy because they help us make sense of the world.
"The more you want something to be true, the more likely you are to believe a story that overestimates the odds of it being true."
Stories, not statistics, are the most powerful force in the economy because they help us make sense of the world.
All Together Now
"Go out of your way to find humility when things are going right and forgiveness/compassion when they go wrong."
"Less ego, more wealth."
"If you want to do better as an investor, the single most powerful thing you can do is increase your time horizon."
"Go out of your way to find humility when things are going right and forgiveness/compassion when they go wrong."
"Less ego, more wealth."
"If you want to do better as an investor, the single most powerful thing you can do is increase your time horizon."
How Morgan Housel Manages His Money
"Every investor should pick a strategy that has the highest odds of successfully meeting their goals. And I think for most investors, dollar-cost averaging into a low-cost index fund will provide the highest odds of long-term success."
"Every investor should pick a strategy that has the highest odds of successfully meeting their goals. And I think for most investors, dollar-cost averaging into a low-cost index fund will provide the highest odds of long-term success."
If you enjoyed this thread, then be sure to check out The Psychology of Money. It& #39;s a short read jammed pack with lessons on wealth, greed, and happiness. https://amzn.to/3jzfNmg ">https://amzn.to/3jzfNmg&q...