But the hidden nature of wealth makes it hard to imitate others and learn from their ways. After he died, Ronald Read became many people’s financial role model. He was lionized in the media and cherished on social media. But he was nobody’s financial role model while he was living because every penny of his wealth was hidden, even to those who knew him.The world is filled with people who look modest but are actually wealthy and people who look rich who live at the razor’s edge of insolvency. Keep this in mind when quickly judging others’ success and setting your own goals.

People are good at learning by imitation. 

Learning to be happy with less money creates a gap between what you have and what you want—similar to the gap you get from growing your paycheck, but easier and more in your control. Having lower expenses means your savings go farther than they would if you spent more.Big investment returns and fat paychecks are amazing when they can be achieved, and some can achieve them. But the fact that there’s so much effort put into and so little put into the other is an opportunity for most people.Past a certain level of income, what you need is just what sits below your ego.

Stanford professor Scott Sagan once said something everyone who follows the economy or investment markets should hang on their wall: “Things that have never happened before happen all the time.”History is mostly the study of surprising events. But it is often used by investors and economists as an unassailable guide to the future.A trap many investors fall into is what I call “historians as prophets” fallacy: An overreliance on past data as a signal to future conditions in a field where innovation and change are the lifeblood of progress.

Stories are, by far, the most powerful force in the economy. They are the fuel that can let the tangible parts of the economy work, or the brake that holds our capabilities back. At the personal level, there are two things to keep in mind about a storydriven world when managing your money.<ol><li>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.</li><li>Everyone has an incomplete view of the world. But we form a complete narrative to fill in the gaps.</li></ol>

That's what money is, ubiquitous, so something bad happening tends to affect everyone and captures everyone’s attention.

Everything Everywhere All Around 

There are few financial variables more correlated to performance than commitment to a strategy during its lean years—both the amount of performance and the odds of capturing it over a given period of time. The historical odds of making money in U.S. markets are 50/50 over one-day periods, 68% in one-year periods, 88% in 10-year periods, and (so far) 100% in 20-year periods. Anything that keeps you in the game has a quantifiable advantage.

Time Is The Magic Of Inve

Everything has a price, and the key to a lot of things with money is just figuring out what that price is and being willing to pay it.The problem is that the price of a lot of things is not obvious until you’ve experienced them firsthand, when the bill is overdue.

Why do so many people who are willing to pay the price of cars, houses, food, and vacations try so hard to avoid paying the price of good investment returns?Well, the price of investing success is not immediately obvious. It’s not a price tag you can see, so when the bill comes due it doesn’t feel like a fee for getting something good. It feels like a fine for doing something wrong.

It Never Is Obvious 

Two dangerous things happen when you rely too heavily on investment history as a guide to what’s going to happen next.1. You’ll likely miss the outlier events that move the needle the most.2. History can be a misleading guide to the future of the economy and stock market because it doesn’t account for structural changes that are relevant to today’s world.

Learn To Understand The Present 

can feel the same as doing something you hate.People like to feel like they’re in control—in the drivers’ seat. When we try to get them to do something, they feel disempowered. Rather than feeling like they made the choice, they feel like we made it for them. So they say no or do something else, even when they might have originally been happy to go along.When you accept how true that statement is, you realize that aligning money towards a life that lets you do what you want, when you want, with who you want, where you want, for as long as you want, has incredible return.

Doing something you love on a schedule you can’t control,

Good investing isn’t necessarily about earning the highest returns, because the highest returns tend to be one-off hits that can’t be repeated. It’s about earning pretty good returns that you can stick with and which can be repeated for the longest period of time. That’s when compounding runs wild.

Time Is The Magic Of Investment 

Predicting what you’ll use your savings for assumes you live in a world where you know exactly what your future expenses will be, which no one does. Few financial plans that only prepare for known risks have enough margin of safety to survive the real world.In fact, the most important part of every plan is planning on your plan not going according to plan.

Failure can be a lousy teacher, because it seduces smart people into thinking their decisions were terrible when sometimes they just reflect the unforgiving realities of risk. The trick when dealing with failure is arranging your financial life in a way that a bad investment here and a missed financial goal there won’t wipe you out so you can keep playing until the odds fall in your favor.

Failure Is The Same

Heinz Berggruen fled Nazi in 1936, one of the most successful art dealers all time in 1990s.Walt Disney had produced more than 400 cartoons in mid-1930s, most of them beloved but most of them lost a fortune. Snow White and the Seven Dwarfs changed everything. The $8 million it earned in the first six months of 1938 was an order of magnitude higher than anything the company earned previously.

The difference between what someone suggests you do and what they do for themselves isn’t always a bad thing. It just underscores that when dealing with complicated and emotional issues that affect you and your family, there is no one right answer. There is no universal truth. There’s only what works for you and your family, checking the boxes you want checked in a way that leaves you comfortable and sleeping well at night.

Getting money requires taking risks, being optimistic, and putting yourself out there.But keeping money requires the opposite of taking risk. It requires humility, and fear that what you’ve made can be taken away from you just as fast. It requires frugality and an acceptance that at least some of what you’ve made is attributable to luck, so past success can’t be relied upon to repeat indefinitely.

Getting money is one thing. Keeping it is another

It’s almost a badge of honor for investors to claim they’re emotionless about their investments, because it seems rational.But if lacking emotions about your strategy or the stocks you own increases the odds you’ll walk away from them when they become difficult, what looks like rational thinking becomes a liability. The reasonable investors who love their technically imperfect strategies have an edge, because they’re more likely to stick with those strategies.

"While we can see how much money other people spend on cars, homes, clothes, and vacations, we don’t get to see their goals, worries, and aspirations. A young lawyer aiming to be a partner at a prestigious law firm might need to maintain an appearance that I, a writer who can work in sweatpants, have no need for. But when his purchases set my own expectations, I’m wandering down a path of potential disappointment because I’m spending the money without the career boost he’s getting. We might not even have different styles. We’re just playing a different game."

Money has been around a long time. But the modern foundation of money decisions—saving and investing—is based around concepts that are practically infants. Take retirement. At the end of 2018 there was $27 trillion in U.S. retirement accounts, making it the main driver of the common investor’s saving and investing decisions. But the entire concept of being entitled to retirement is, at most, two generations old.It should surprise no one that many of us are bad at saving and investing for retirement. We’re not crazy. We’re all just newbies.

There's First In Everything 

"Success is a lousy teacher. It seduces smart people into thinking they can’t lose.” Bill GatesWhen things are going extremely well, realize it’s not as good as you think. You are not invincible, and if you acknowledge that luck brought you success then you have to believe in luck’s cousin, risk.

Success Is Deceiving 

The truth is that wealth is what you don’t see.Wealth is the nice cars not purchased. The diamonds not bought. The watches not worn, the clothes forgone and the first-class upgrade declined. Wealth is financial assets that haven’t yet been converted into the stuff you see. When most people say they want to be a millionaire, what they might actually mean is “I’d like to spend a million dollars.” And that is literally the opposite of being a millionaire.

Warren Buffett’s net worth is $84.5 billion. Of that, $84.2 billion was accumulated after his 50th birthday. $81.5 billion came after he qualified for Social Security, in his mid-60s.Warren Buffett is a phenomenal investor. But you miss a key point if youattach all of his success to investing acumen. The real key to his success is that he’s been a phenomenal investor for three quarters of a century. Had he started investing in his 30s and retired in his 60s, few people would have ever heard of him.

But How To Get Enough?

Wealth is just the accumulated leftovers after you spend what you take in. And since you can build wealth without a high income, but have no chance of building wealth without a high savings rate, it’s clear which one matters more. More importantly, the value of wealth is relative to what you need.

The hardest financial skill is getting the goalpost to stop moving. Modern capitalism is a pro at two things: generating wealth and generating envy. Perhaps they go hand in hand; wanting to surpass your peers can be the fuel of hard work. But life isn’t any fun without a sense of enough. Happiness, as it’s said, is just results minus expectations.

Warren Buffett Stays Wealthy becauseHe didn’t get carried away with debt.He didn’t panic and sell during the 14 recessions he’s lived through.He didn’t sully his business reputation.He didn’t attach himself to one strategy, one world view, or one passing trend.He didn’t rely on others’ money (managing investments through a public company meant investors couldn’t withdraw their capital).He didn’t burn himself out and quit or retire.He survived. Survival gave him longevity. And longevity—investing consistently from age 10 to at least age 89—is what made compounding work wonders.

The highest form of wealth is the ability to wake up every morning and say, “I can do whatever I want today.”People want to become wealthier to make them happier. Happiness is a complicated subject because everyone’s different. But if there’s a common denominator in happiness—a universal fuel of joy—it’s that people want to control their lives.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.

What people really value were things like quality friendships, being part of something bigger than themselves, and spending quality, unstructured time with their children. “Your kids don’t want your money (or what your money buys) anywhere near as much as they want you. Specifically, they want you with them,” Pillemer writes.Take it from those who have lived through everything: Controlling your time is the highest dividend money pays.

How you behaved as an investor during a few months in late 2008 and early 2009 will likely have more impact on your lifetime returns than everything you did from 2000 to 2008.A good definition of an investing genius is the man or woman who can do the average thing when all those around them are going crazy.Tails drive everything.

So people’s ability to save is more in their control than they might think.Savings can be created by spending less.You can spend less if you desire less.And you will desire less if you care less about what others think of you.Money relies more on psychology than finance.And you don’t need a specific reason to save.Only saving for a specific goal makes sense in a predictable world. But ours isn’t. Saving is a hedge against life’s inevitable ability to surprise the hell out of you at the worst possible moment.

We should avoid the extreme ends of financial planning. Assuming you’ll be happy with a very low income, or choosing to work endless hours in pursuit of a high one, increases the odds that you’ll one day find yourself at a point of regret. People change their goal all the time, and so are what they're willing to do. Embracing the idea that financial goals made when you were a different person should be abandoned without mercy versus put on life support and dragged on can be a good strategy to minimize future regret.

Plan In The Middle 

Pessimism just sounds smarter and more plausible than optimism. Tell someone that everything will be great and they’re likely to either shrug you off or offer a skeptical eye. Tell someone they’re in danger and you have their undivided attention. If a smart person tells me they have a stock pick that’s going to rise 10-fold in the next year, I will immediately write them off as full of nonsense.If someone who’s full of nonsense tells me that a stock I own is about to collapse because it’s an accounting fraud, I will clear my calendar and listen to their every word.

I can’t tell you what to do with your money, because I don’t know you.I don’t know what you want. I don’t know when you want it. I don’t know why you want it.So I’m not going to tell you what to do with your money. But, there are universal truths in money, even if people come to different conclusions about how they want to apply those truths to their own finances.Respect the mess. Smart, informed, and reasonable people can disagree in finance, because people have vastly different goals and desires. There is no single right answer; just the answer that works for you.

But more important is that as much as we recognize the role of luck in success, the role of risk means we should forgive ourselves and leave room for understanding when judging failures.Nothing is as good or as bad as it seems.

Be Kind To Yourself 

When you accept that tails drive everything in business, investing, and finance you realize that it’s normal for lots of things to go wrong, break, fail, and fall.If you’re a good stock picker you’ll be right maybe half the time.If you’re a good business leader maybe half of your product and strategy ideas will work.If you’re a good investor most years will be just OK, and plenty will be bad.If you’re a good worker you’ll find the right company in the right field after several attempts and trials.And that’s if you’re good.

When you see someone driving a nice car, you rarely think, “Wow, the guy driving that car is cool.” Instead, you think, “Wow, if I had that car people would think I’m cool.” Subconscious or not, this is how people think.There is a paradox here: people tend to want wealth to signal to others that they should be liked and admired. But in reality those other people often bypass admiring you, not because they don’t think wealth is admirable, but because they use your wealth as a benchmark for their own desire to be liked and admired.

It is not to abandon the pursuit of wealth. Or even fancy cars.It’s a subtle recognition that people generally aspire to be respected and admired by others, and using money to buy fancy things may bring less of it than you imagine. If respect and admiration are your goal, be careful how you seek it. Humility, kindness, and empathy will bring you more respect than horsepower ever will.

Understanding Priority

One study was blunt:“Treatment of fever is common in the ICU setting and likely related to standard dogma rather than evidence-based practice.”Why does this happen? If fevers are beneficial, why do we fight them so universally?Well, fevers hurt. And people don’t want to hurt.It may be rational to want a fever if you have an infection. But it’s not reasonable.That philosophy—aiming to be reasonable instead of rational—is one more people should consider when making decisions with their money.

Doing well with money isn’t necessarily about what you know. It’s about how you behave. And behavior is hard to teach, even to really smart people. Money—investing, personal finance, and business decisions—is typically taught as a math-based field, where data and formulas tell us exactly what to do. But in the real world people don’t make financial decisions on a spreadsheet. They make them at the dinner table, or in a meeting room, where personal history, your own unique view of the world, ego, pride, marketing, and odd incentives are scrambled together. In The Psychology of Money, award-winning author Morgan Housel shares 19 short stories exploring the strange ways people think about money and teaches you how to make better sense of one of life’s most important topics.

Understand yourself and those around you.

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Morgan Housel is a partner at The Collaborative Fund. He is a two-time winner of the Best in Business Award from the Society of American Business Editors and Writers, winner of the New York Times Sidney Award, and a two-time finalist for the Gerald Loeb Award for Distinguished Business and Financial Journalism. He lives in Seattle with his wife and two kids.

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Nothing is Ever Enough