Investors often innocently take cues from other investors who are playing a different game than they are. Being swayed by people playing a different game can also throw off how you think you're supposed to spend your money.It's important to know your own time horizon and not be influenced by those playing a different game. You must go out of your own way to identify what game you're playing. Because once you write that mission statement down, you realize everything that's unrelated to it.Identify your own game, write it down, and focus on it.

16. You and Me

Investing is not a hard science. It involves people making decisions with limited information - on what makes sense to them in that moment. While it's important to understand the history of economics and investing, we must remember that it may not predict the future accurately. Two dangerous things will happen when you rely too much on investment history as a guide to future:<ul><li class="ql-align-justify">You'll likely miss out the outlier events that move the needle the most - the game changing events</li><li class="ql-align-justify">You'll be misled because it doesn't account for structural changes that are relevant to today's world</li></ul>

12. Surprise!

The most important part of every plan is planning on your plan not going according to plan. It's important to leave room for error, as uncertainty and unknowns are a natural part of life.The biggest single point of failure with money is a sole reliance on a paycheck. This is why it's crucial to save for unforeseen circumstances.Margin of safety is the only effective way to safely navigate a world that is governed by odds, not certainties.

13. Room for Error

Buffet has owned 400-500 stocks but made most of his money on just 10 of them. In business, investing and finance, it's normal for lots of things to go wrong, break, fail and fall.No one makes good decisions all the time. For example, Amazon's Fire Phone - a flop. But that's okay, because Amazon Web Services makes up for it by being one of their most successful products out of hundreds.It's not whether you're right or wrong that's important, but how much money you make when you're right and how much money you make when you're wrong. You can be wrong half of the time and still make a fortune.

6. Tails, You Win

People want to become wealthier to become happier. Happiness is a complicated subject because everyone's different. The common denominator in happiness - people want to control their lives. Controlling your time is the highest dividend money pays.<ul><li class="ql-align-justify">Work-life balance is crucial for happiness.</li><li class="ql-align-justify">Success is not defined by comparing our wealth to others, but by our own satisfaction.</li><li class="ql-align-justify">Choosing a career for future earnings does not guarantee happiness.</li></ul>What you must value are things like quality friendships, being part of something bigger than yourselves and spending quality time with loved ones.

7. Freedom

There is a paradox about using wealth to gain respect and admiration from others. While people may initially be impressed by expensive things, they often don't admire the person behind them. In fact, they may only use your wealth as a comparison for their own desire to be liked.Instead of chasing admiration through material possessions, focus on characteristics that will truly garner respect and admiration from others, such as humility, kindness, and empathy. These qualities will bring you more genuine respect than any flashy car ever could.

8. Man in the Car Paradox

Reasons why pessimism is seductive when dealing with money:<ol><li class="ql-align-justify">Money is ubiquitous - something bad happening tends to affect and capture everyone's attention. The stock market rising by 1% is briefly mentioned on the evening news, but a 1% fall is reported in bold, all-caps, red letters.</li><li class="ql-align-justify">Pessimists often extrapolate present trends without accounting for how markets adapt.</li><li class="ql-align-justify">Progress happens too slowly to notice, but setbacks happen too quickly to ignore. Growth is driven by compounding, which always takes time, but destruction is driven by single points of failure that happen in an instant.</li></ol>

17. The Seduction of Pessimism

Few recommendation for better financial decisions:<ol><li>Luck and risk are both real and hard to identify</li><li>Less ego, more wealth</li><li>Manage your money in a way that helps you sleep at night</li><li>Time is the most powerful force in investing</li><li>Become OK with a lot of things going wrong</li><li>Use money to gain control over your time</li><li>Be nicer and less flashy</li><li>Save. Just SAVE</li><li>Uncertainty, doubt, and regret are common costs in the finance world</li><li>Worship room for error</li><li>Avoid extreme ends of financial decisions</li><li>Define the game your playing</li><li>Risk pays off over time</li><li>There is no single right answer, just the answer that works for you</li></ol>

19. All Together Now

People do some crazy things with money. But no one is crazy. Everyone has their own unique experience with how the world works. What seems crazy to you might makes sense to me.One economist found that our willingness to take risks with money is influenced by our personal history.Financial decisions are rarely made based solely on a spreadsheet. Personal history, unique perspectives, ego, pride, marketing, and incentives all play a role in how we make decisions about money.

1. No One is Crazy

We often think that wealth is determined by what we see, but the truth is, wealth is what is not so easily visible.Rich people may have a high income, but true wealth comes from what is left unseen - the money that has been saved and not spent. Saving and restraint allows you to accumulate enough wealth to one day afford things you never could before.<ul><li class="ql-align-justify">Don't be fooled by appearances - true wealth is hidden.</li><li class="ql-align-justify">Saving and restraint are key to building wealth.</li><li class="ql-align-justify">Spending money to show off is the fastest way to have less money.</li></ul>

9. Wealth Is What You Don't See

Keep these 2 things in mind when managing money in a story-driven world:<ol><li>The more we desire something, the more likely we are to believe an overestimated story about it being true.</li><li>Our incomplete views of the world lead us to create complete narratives to fill the gaps. It's human nature to want control, even if it's just an emotional comfort rather than reality.</li></ol>Business, economics and investing, are fields of uncertainty, overwhelmingly driven by decisions that can't easily be explained with clean formulas. We're all tempted to tell ourselves that we are full in control our money.

18. When You'll Believe Anything

When it comes to money, it's better to be reasonable rather than rational. We don't need a perfect investment strategy to succeed, but rather one that allows us to sleep well at night.If you view "do what you love" as a guide to a happier life, it sounds like an empty fortune cookie. However, if you see it as something that gives you the drive and determination to succeed, it becomes the foundation of a strong financial strategy. This motivation can keep you going even when faced with potential losses, and prevent you from giving up and moving on too soon.

11. Reasonable > Rational

Luck and risk are closely intertwined. They remind us that our efforts don't always determine our outcomes in life. With 7 billion people and infinite variables at play, we are just one player in the game.Success is not solely a result of hard work, just as poverty is not always due to laziness. Luck and risk both play a role in shaping our lives. We must acknowledge that success can be deceiving, making us believe we are invincible. And failure can be a harsh teacher, making us believe our good decisions were bad because of uncontrollable risks.We cannot control everything, and that's okay.

2. Luck & Risk

Everything has a price, and the key to a lot of things with money is just figuring out what the price is and being willing to pay for it.The price of investing success is not immediately obvious. Market returns are never free and never will be. The volatility/uncertain fee - the price of returns - is the cost of admission to get returns greater than low-fee parks like cash and bonds. The key is to convince ourselves that this fee is worth it. By accepting the volatility and uncertainty of the market, we are paying the admission fee for success.

15. Nothing's Free

You don't need tremendous force to create tremendous results. Take for example Warren Buffet, his fortune isn't due to just being a good investor but being a good investor for three quarters of century. His skill is investing but his secret is time.There are many books on economics, trading, and betting, but the ultimate guide should be titled: Shut Up and Wait. Good investing isn't about earning the highest returns, but rather consistent and repeated returns that can be sustained over a long period. This is when compounding has the strongest impact and can lead to great wealth.

4. Confounding Compounding

"Enough" is a tricky concept these days, always expanding. It's hard to know when to stop. Ambition can grow faster than satisfaction, often from comparing ourselves to others. An insatiable appetite for more will only lead to regret. Know when Never Enough is truly enough:<ul><li class="ql-align-justify">Know when to stop</li><li class="ql-align-justify">Avoid comparing yourself to others and falling into the never-ending battle of wanting more</li><li class="ql-align-justify">Realize that having less is not too little, it's knowing when to be content</li><li class="ql-align-justify">There are many things not worth risking, no matter the potential gain</li></ul>

3. Never Enough

Getting money is one thing. Keeping it is another. If you want to become rich, you'll have to take risks and be optimistic. But staying rich requires more caution and humilityTo stay wealthy, remember these:<ul><li class="ql-align-justify">Instead of seeking big profits, strive for financial security and stability through wise financial decisions.</li><li class="ql-align-justify">Plan for the unexpected - the future is unpredictable, so have a safety net in case things don't go as planned.</li><li class="ql-align-justify">Be a wise optimist - maintain a positive mindset while being realistic about the risks involved when it comes to money.</li></ul>

5. Getting Wealthy vs. Staying Wealthy

Long term financial planning is essential. But things change - both the world around you and you - we evolve so much over a lifetime that we don't want to keep doing the same thing for decades on end. It's hard to make enduring long-term decisions when your view of what you'll want in the future is likely to shift.Things to keep in mind when making long-term decisions:<ul><li class="ql-align-justify">Avoid the extreme ends of financial planning - Balance in every point of your life is the strategy.</li><li class="ql-align-justify">Accept the reality of change and move on as soon as possible - Don't be a prisoner of your past, different self.</li></ul>

14. You'll change

Building wealth has little to do with your income or investment returns, and lots to do with your savings rate. You have no chance of building wealth without a high savings rate. People's ability to save is more in their control than they might think.<ul><li class="ql-align-justify">Savings can be created by spending less</li><li class="ql-align-justify">You can spend less if you desire less</li><li class="ql-align-justify">You will desire less if you care less about what others think of you</li><li class="ql-align-justify">You don't need a specific reason to save</li></ul>Saving is a hedge against life's inevitable ability to surprise the hell out of you at the worst possible moment.

10. Save Money

 Doing well with money has a little to do with how smart you are and a lot to do with how you behave. In this book, Morgan Housel outlines the 20 of the most important flaws, biases, and causes of bad behavior that affect people when dealing with 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.

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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.