The Most Important Thoughts on Wealth and Freedom from the Top Money Expert
The money lessons from the author of “Psychology of Money,” Morgan Housel
The book “Psychology of Money” by Morgan Housel is one of my favorite books and an absolute must-read for anyone alive. This book is an international bestseller and, as the subtitle says, provides:” Timeless lessons on wealth, greed, and happiness.”
I recently watched an interview with Morgan Housel, and that was super interesting for anyone who wants to improve their financial situation. You will never learn anything substantial about finances and wealth from traditional education, but fortunately, you can learn from YouTube.
I struggled financially for years, and the Morgan Housel upbringing struck me in this interview. His parents were super money-savvy. Mine did not have any clue about finances. But as with any skill, instead of blaming your parents or the past, you can learn everything you need about money and improve your life.
If you don’t fix your finances, you can not enjoy any aspect of life. The good news is that you do not have to be a millionaire to have a fulfilled life, but understand how money works in your favor.
In this article, I summarize the most important thoughts on wealth and freedom from the YouTube interview with the author of “Psychology of Money” and “Same as Ever: Timeless Lessons on Risk, Opportunity and Living a Good Life,” Morgan Housel.
Become introspective to have healthy finances.
Most financial advice is on the type of stock investment, type of banking account, or credit cards you should use. Morgan Housel's approach is different. After reading his books, he hopes you can ask yourself:” Who am I”?
The first step in sorting up your finances is finding out
- What do you want
- Why are you insecure
- Why do you want to show off to others
- Why do you think about these things that you do
- Why do you think where you are in a social hierarchy, greed and fear
The author says that he hopes reading his book will spark curiosity in you, and that is where you start learning. That will trigger you to think about what you really want in life, and you understand more clearly what money can and can not do for you.
The difference between being rich and wealthy
Morgan Housel defines rich as having enough money to buy what you want, pay for your mortgage, make your car payment, go out for dinner with your friends, and have money in a bank.
Wealth is very different — the money you did not spend. So wealth is hidden in the money you did not spend on the car, the money you did not spend on a big house, or the money you did not spend on jewelry.
Wealth — the unspent money gives you independence and autonomy and the ability to wake up every morning and do whatever you want with your life.
Do you want a better car or independence?
Most people want to become millionaires because they want to spend money on nice clothes, cars, or houses. But Morgan Housel's father lived below his means his entire life. After 20 years of being an ER doctor, he had had enough.
Watching for twenty years, children and adults dying every day and doing night shifts, he burned out. And he decided to retire. He could retire and finally enjoy his life because he invested enough money.
His colleagues from the medical school were also burnt out and wanted to retire, but they could not as they spent money on bigger houses and nicer cars.
Independence made Morgan Housel's father much happier than any car or big house would have done.
Happiness through having control over your life
Happiness is one of the most complicated topics, but some essential ingredients are independence and control over what you do.
What makes people very unhappy in life is not having control over what happens in their future, not having control over their schedule, where they will work, and whether they will get laid off.
That uncertainty is a massive anchor and weight on your life and health.
Autonomy and control are essential in life, and if you don’t have it at work, it has serious health consequences, leading to stress-related diseases.
Not having control of your life makes your body shut down.
Everybody experiences that. If you are stressed, you can feel your heart pounding. It is the psychological response to stress. And if you have that for 5, 10, or 20 more years, it will eventually kill you.
Some CEOs make $30 or 50 million per year, but they don’t have any control over their time. Every minute is planned, and they must do things they don't want.
They wake up tired but have to go to meetings and close deals. They have no control over their time.
You need control over your time to live a good quality and happy life.
Don’t compare yourself to others
Although Americans earn twice as much as in the 1950s, they are less happy than in the 50s. One of the primary reasons is that they compare yourself to other people. The others are also wealthier than in the 1950s, as they, too, upgraded their lifestyles.
There have been many technologies since the 1950s that were not available, and yet Americans are less happy. Part of the problem is a lack of appreciation of the latest innovations and technology. Also, when you compare yourself to others, there will always be things you or others can do better.
That leads to some anxiety and unhappiness. Lowering your expectations may help. A great example was Steven Hawking, who had no control over his body but was one of the happiest people.
When asked what is the secret of his happiness, he said that his expectations were reduced to zero after he was diagnosed with a disease. And everything else since was a bonus.
So, if your financial expectations rise faster than your income, you will never be happy about the money. It doesn't matter how much money you make. People who make $50 K annually can be happier than a billionaire who needs more to meet personal financial expectations.
Investing is the real secret to success.
Some skills are not associated with wealth, and one is investing. An example is Warren Buffet or Morgan Housel's parents. Warren Buffet is a billionaire investor, and Morgan Housle’s parents became the top 3 % of professional investors without having any financial background.
If you have endurance in your investing, you can be filthy rich. A great example is Warren Buffet — if he had stopped at fifty, we would never have heard of him. But because he has been doing it for many decades, we can see the results of the compound effect. 99 % of Warren’s Buffet net worth came after he was sixty.
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Conclusion
Your relationship with money depends on many factors, but you must be honest and ask yourself what you want in life, why you do what you do, and the true nature of your behavior. That will help you to become introspective.
Happiness is a complicated topic, but an essential part of happiness comes from being independent and controlling your time. It means having enough money to say no to some offers.
A lot of stress comes from not having control over your life. Every saved dollar in your life can give you control, and even if you are on a low income, your mind can shift.
The ticket out is not a nicer car, house, or clothes. The ticket out is independence. That will give you a better career, making you happier and healthier.
The only thing that will give you independence is having enough money saved up. So you can choose where you want to live and what job you want, and even when you get sick, it will get so much off your shoulders.
You don't have to be a genius to do well with money. Investing is not normally associated with wealth, but this is one thing that can make anyone wealthy. The best way to invest is to keep it simple- be conservative and not try to predict anything.
You can watch the full video below.
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