7 Tips For Money Management From Morgan Housel

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ccess all the time is not just about hard work, perseverance and passion. Luck also plays its part. So, instead of focusing on just individuals, a better strategy can be to focus and study patterns as we tend to focus on extreme examples when it comes to individuals.</li><li>If you risk something that’s important to you for something that’s unimportant to you, it’s just plain foolish: This quote originally came from Warren Buffet when he rescued LTCM as he was asked to step in by the US Federal Reserve. The men who ran LTCM had IQ as high as any in the world yet they failed miserably. They were not bad people, but to make money they didn’t have and didn’t need, they risked what they did have and didn’t need. Another such example being of Ex McKinsey CEO Rajat Gupta who was charged with insider trading in June 2012 and sent to prison for 2 years. He gambled everything he had to get more and ended up losing it all. History is full of examples where people risked what they had (ex: brand value, reputation, family, health, lots of money, etc.) to get more of something that they didn’t really need (more money, fame, etc.).</li><li>One of the hardest financial skills to learn is to get the goalpost to stop moving: Human beings mostly have a natural tendency to constantly redefine their financial goals as they come closer to achieving them. Yes, you should continuously reinvent yourself and work towards bigger and audacious goals but at the same time, you need to understand that true success comes from loving the process and not the end result. If you keep on pushing your financial ‘goal post’ further down the line, chances are you will never be satisfied, no matter how much you’ll achieve. So, even if you choose to push your financial goal posts all the time, try and avoid the extreme ends of financial decisions. You should like risks because they pay off over time, but you should be paranoid of ruinous risks because it prevents you from taking future risks that will pay off over time.</li><li>Humility, kindness, and empathy will bring you more respect than ‘horse power’ ever will: It is about realizing that you can buy the fanciest of cars but that will not help you in being humble, kind, and empathetic to others. Chances are, in fact, it might work in the opposite direction. If you are chasing a

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fter success to get ‘respect’ from other people (however you define it), then you don’t need a supercar to do it. Being humble, kind and empathetic with people will bring you more respect and peace of mind than any 4 wheels ever can.</li><li>Have no sunk cost fallacy: Financial or personal decisions can/should be changed when required. Don’t stay put with a decision just because you have invested some time in it and now you think getting out won’t be a wise move. Remember, time is the most powerful force in investing. It neutralizes big mistakes and makes little things grow big. So even if you have made some poor financial decisions in the past, don’t continue to live them in the present. Discard them today, NOW. Pivot, restart, and let time work for you in your favor rather than the other way around.</li><li>Become ok with a lot of things going wrong: A small minority of things account for the majority of outcomes. Measure how you have done by measuring your full portfolio rather than individual investments: This is the same rule that is applied in investing by large equity firms. PE firms make most of their profits from less than 2% of firms they have in their portfolio. That means 98% of the time they are wrong but it doesn’t matter as Net-score nullifies the individual fails. Again, Gary Vee summarises it brilliantly, “The problem is that people are trying to be 3 and 0…3 right decisions and NO wrong decisions. I’m trying to be 118 right to 92 wrong. Keep it moving, adjust as you go, and stop focusing on dumb shit! The great blessing of my life is that I don’t judge myself. I don’t dwell. Now, this doesn’t mean that I’m delusional. I hold myself accountable, but I just don’t waste time putting myself down. If you can drop the habit of over-judging yourself, you’ll move much faster and be much better off in the long run. — Gary Vee”</li><li>Save to save (not just for a specific reason): Life is a chain of surprises. Use money to gain control over your time. The ability to do what you want, when you want, with whom you want, and for as long as you want is the best RoI money can give you. So, don’t just save to buy things that you may want but don’t need (new cars, bikes, watches, etc.). Rather, save so you can buy ‘time’ so you can do with it what you want.</li></ol></article></body>

7 Tips For Money Management From Morgan Housel — Psychology Of Money

Morgan Housel is a partner at The Collaborative Fund and a former columnist at The Motley Fool and The Wall Street Journal

He’s the author of the best-selling book, ‘The Psychology of Money’. His perspectives on money growth and management majorly revolve around practical and logical ideas that are easy to understand and implement.

For you to make your own judgment, I’ve shared some of his content below so you can decide for yourself.

I have consumed quite a bit of his content and in this article, I’ve tried to share the nuggets of wisdom that resonated most with me. His tips are practical and useful and once you understand the nuances and the psychology behind why you think about money the way you do, you’ll be able to better manage and grow your money. On that note, let’s get into it.

Be careful who you admire or condone: Many people want to make money and they tend to idolize people who have ‘made it’. I strongly believe that before you put someone on a pedestal, you should invest some time to understand where they came from and how they got to the place they did. Not all success is hard work and not all failures are due to lack of it. We only majorly hear the ‘success’ stories but not the million others who tried but couldn’t ‘make it’. Success all the time is not just about hard work, perseverance and passion. Luck also plays its part. So, instead of focusing on just individuals, a better strategy can be to focus and study patterns as we tend to focus on extreme examples when it comes to individuals.

If you risk something that’s important to you for something that’s unimportant to you, it’s just plain foolish: This quote originally came from Warren Buffet when he rescued LTCM as he was asked to step in by the US Federal Reserve. The men who ran LTCM had IQ as high as any in the world yet they failed miserably. They were not bad people, but to make money they didn’t have and didn’t need, they risked what they did have and didn’t need. Another such example being of Ex McKinsey CEO Rajat Gupta who was charged with insider trading in June 2012 and sent to prison for 2 years. He gambled everything he had to get more and ended up losing it all. History is full of examples where people risked what they had (ex: brand value, reputation, family, health, lots of money, etc.) to get more of something that they didn’t really need (more money, fame, etc.).

One of the hardest financial skills to learn is to get the goalpost to stop moving: Human beings mostly have a natural tendency to constantly redefine their financial goals as they come closer to achieving them. Yes, you should continuously reinvent yourself and work towards bigger and audacious goals but at the same time, you need to understand that true success comes from loving the process and not the end result. If you keep on pushing your financial ‘goal post’ further down the line, chances are you will never be satisfied, no matter how much you’ll achieve. So, even if you choose to push your financial goal posts all the time, try and avoid the extreme ends of financial decisions. You should like risks because they pay off over time, but you should be paranoid of ruinous risks because it prevents you from taking future risks that will pay off over time.

Humility, kindness, and empathy will bring you more respect than ‘horse power’ ever will: It is about realizing that you can buy the fanciest of cars but that will not help you in being humble, kind, and empathetic to others. Chances are, in fact, it might work in the opposite direction. If you are chasing after success to get ‘respect’ from other people (however you define it), then you don’t need a supercar to do it. Being humble, kind and empathetic with people will bring you more respect and peace of mind than any 4 wheels ever can.

Have no sunk cost fallacy: Financial or personal decisions can/should be changed when required. Don’t stay put with a decision just because you have invested some time in it and now you think getting out won’t be a wise move. Remember, time is the most powerful force in investing. It neutralizes big mistakes and makes little things grow big. So even if you have made some poor financial decisions in the past, don’t continue to live them in the present. Discard them today, NOW. Pivot, restart, and let time work for you in your favor rather than the other way around.

Become ok with a lot of things going wrong: A small minority of things account for the majority of outcomes. Measure how you have done by measuring your full portfolio rather than individual investments: This is the same rule that is applied in investing by large equity firms. PE firms make most of their profits from less than 2% of firms they have in their portfolio. That means 98% of the time they are wrong but it doesn’t matter as Net-score nullifies the individual fails. Again, Gary Vee summarises it brilliantly, “The problem is that people are trying to be 3 and 0…3 right decisions and NO wrong decisions. I’m trying to be 118 right to 92 wrong. Keep it moving, adjust as you go, and stop focusing on dumb shit! The great blessing of my life is that I don’t judge myself. I don’t dwell. Now, this doesn’t mean that I’m delusional. I hold myself accountable, but I just don’t waste time putting myself down. If you can drop the habit of over-judging yourself, you’ll move much faster and be much better off in the long run. — Gary Vee”

Save to save (not just for a specific reason): Life is a chain of surprises. Use money to gain control over your time. The ability to do what you want, when you want, with whom you want, and for as long as you want is the best RoI money can give you. So, don’t just save to buy things that you may want but don’t need (new cars, bikes, watches, etc.). Rather, save so you can buy ‘time’ so you can do with it what you want.