The main understanding we have of filters is that it is different sorting methods that we use for a computer when searching things up It can apply to real life as well when making a decision we can automically cancel the options that don’t fit in our filter For example when thinking of a company to work for we can cancel all the companies that don't treat their employees fair. This mental model can also apply to investing as well

Filters  

The fat pitch strategy is mostly used in investing but can be used in other ways as well it states the value in deliberating waiting and thinking of things before you make a decision For instance imagine if you had only 20 investments in your whole lifetime you would think about every single investment you made to make sure it was right?

The Fat Pitch Strategy 

Dont just want things deserve things. If you want money don’t just want to be rich deserve to be rich.This is a mental model that will help you put in the work needed to succeed it will make sure you deserve the things you get. To deserve something you must meet the opportunity while being prepared

Because You Are Worth It 

For most of your decisions you can follow a probability mindset everything has a probability of success and a probability of failure make sure you are deliberating your decisions making sure you have the best option of success

Probablity Mindset 

They are 7 parts of this series make sure you follow my profile so you don’t miss any of these mental model it helped me get a new job in this recession that I love

Follow Me For The Rest Of The Mental Models 

These mental models have been improving my life drastically 

Charlie Munger, the vice chairman of Berkshire Hathaway and one of the most successful investors ever, is said to have the best 30-second mind in the world. He goes from A to Z in one move. He sees the essence of everything before you can even finish the sentence. How does he do it? Through observing reality and running it against his mental models. In this series of videos, you’ll learn some of the most important models which Charlie Munger uses, which he has talked about publicly. These mental models have helped Munger to conquer the stock market, but they are so diverse that they have applications within many other areas too. For example, they have allowed Munger to be a successful Chairman at a large hospital, and they have allowed him to overcome devastating personal losses. The series will cover a total of 35 of Charlie’s mental models. He says he has some 100 models in his head at all times, but he also says that a few of them carry most of the freight. I think that we’ll cover the most important ones in this series, which will be divided into 7 parts, will 5 models in each one. The models will primarily be related to investing, but also to associated subjects such as economics, entrepreneurship & career. Hope you enjoy. Part 5: https://youtu.be/InCSo-A033Q The mental models covered in this episode are: 00:00 Intro 01:02 Filters 04:34 The Fat-Pitch Strategy 07:30 Because You are Worth it 09:35 Probability Mindset 12:55 The Bell Curve The mental models that were covered in part 1 (https://youtu.be/ywyQ_eNNCJU ): - The Swiss Army Knife Approach - Make Friends With the Eminent Dead - Invert, Always Invert - Compounding - Crush Your Cherished Beliefs Part 2 (https://youtu.be/cgfuEEnsuAc ): - Opportunity Costs - Parimutuel Betting - Survival of the Fittest - Margin of Safety - The Superpower of Incentives Part 3 (https://youtu.be/p8VK5iajWyw ): - Independent Thinking - Simplicity - Technology as a Problem - The World’s Most Intelligent Question - Circle of Competence My goal with this channel is to help you make more money and improve your personal finances. How to become a millionaire? There are many ways to get there – investing in the stock market, becoming a stock trader, doing real estate investing, or why not becoming an entrepreneur? But whether you are interested in how to invest in stocks or investing strategies for creating passive income with rental properties – I hope to be able to provide you with a solution (or at least an idea) here. Warren Buffett - the greatest investor of our time - says that you should fill your mind with competing ideas and then see what makes sense to you. This channel is about filling your mind with those ideas. And in the process – upgrading your money-making toolbox.

personaldevelopment

Personal Development

moneyandinvestments

Money & Investments

problemsolving

Problem Solving

Charlie Munger, the vice chairman of Berkshire Hathaway and one of the most successful investors ever, is said to have the best 30-second mind in the world. He goes from A to Z in one move. He sees the essence of everything before you can even finish the sentence.

How does he do it? Through observing reality and running it against his mental models. In this series of videos, you’ll learn some of the most important models which Charlie Munger uses, which he has talked about publicly. These mental models have helped Munger to conquer the stock market, but they are so diverse that they have applications within many other areas too. For example, they have allowed Munger to be a successful Chairman at a large hospital, and they have allowed him to overcome devastating personal losses.

The series will cover a total of 35 of Charlie’s mental models. He says he has some 100 models in his head at all times, but he also says that a few of them carry most of the freight. I think that we’ll cover the most important ones in this series, which will be divided into 7 parts, will 5 models in each one. The models will primarily be related to investing, but also to associated subjects such as economics, entrepreneurship & career. Hope you enjoy.

Part 5: https://youtu.be/InCSo-A033Q 

The mental models covered in this episode are:
00:00 Intro
01:02 Filters
04:34 The Fat-Pitch Strategy
07:30 Because You are Worth it
09:35 Probability Mindset
12:55 The Bell Curve

The mental models that were covered in part 1 (https://youtu.be/ywyQ_eNNCJU ):
- The Swiss Army Knife Approach
- Make Friends With the Eminent Dead
- Invert, Always Invert
- Compounding
- Crush Your Cherished Beliefs

Part 2 (https://youtu.be/cgfuEEnsuAc ):
- Opportunity Costs
- Parimutuel Betting
- Survival of the Fittest 
- Margin of Safety
- The Superpower of Incentives

Part 3 (https://youtu.be/p8VK5iajWyw ):
- Independent Thinking
- Simplicity
- Technology as a Problem
- The World’s Most Intelligent Question
- Circle of Competence

My goal with this channel is to help you make more money and improve your personal finances. How to become a millionaire? There are many ways to get there – investing in the stock market, becoming a stock trader, doing real estate investing, or why not becoming an entrepreneur? But whether you are interested in how to invest in stocks or investing strategies for creating passive income with rental properties – I hope to be able to provide you with a solution (or at least an idea) here. Warren Buffett - the greatest investor of our time - says that you should fill your mind with competing ideas and then see what makes sense to you. This channel is about filling your mind with those ideas. And in the process – upgrading your money-making toolbox.

Thank you for checking out The Swedish Investor. My name is Erik Abrahamsson, and on this channel, I will share with you the most successful strategies for taking your personal finances to the next level, in (well, hopefully) a simple and enjoyable way. Here, you will find time-tested investing advice from the most successful money managers and investors of our time.

About me:
-- Been investing in the stock market since 08/06/2013, and since then, I've beaten the S&P 500 by a fair margin
-- My CAGR on invested stock market capital is 19.5% as of July 2023 (after taxes and brokerage fees)
-- Read about 100 books on the topic of personal finance and investing

For my private stock portfolio & revealing insights into my investment strategy: https://www.patreon.com/TheSwedishInvestor 

I wish you all good fortune in your stock market investing!

Feel free to contact me on: theswedishinvestoryt@gmail.com

The Swedish Investor

Charlie Munger: Mental Models for the Rest of Your Life (PART 4)

Truly thoughts are things and powerful things when they are mixed with definiteness of purpose, persistence, and a Burning Desire for their translation into riches, or other material objectives.

The Power of Thought

One of the most common causes of failure is the habit of quitting when one is overtaken by temporary defeat. Every person is guilty of this mistake at one time or another. More than five hundred of the most successful men this country has ever known told the author their greatest success came just one step beyond the point at which defeat had overtaken them.

Three Feet From Gold

Failure is a trickster with a keen sense of irony and cunning.

One sound idea is all that one needs to achieve success.When riches begin to come they come so quickly, in such great abundance, that one wonders where they have been hiding during all those lean years.One of the main weaknesses of mankind is the average man's familiarity with the word "impossible." He knows all the rules which will not work. He knows all the things which cannot be done.

Lesson In Persistence

<ul><li>Success comes to those who become Success Conscious.</li><li>Failure comes to those who indifferently allow themselves to become Failure Conscious.</li></ul>

Success-Failure

Desire: Knowing what one wants. We can accumulate riches in great abundance, we must magnetize our minds with an intense desire for riches, and we must become "money conscious" until the Desire for money drives us to create definite plans for acquiring it.

Desire

You are "the master of your fate, the captain of your soul."

The money-making secret book Think & Grow Rich learnings in one place (Chapter 1)

Offers the secrets of super achievers, such as Henry Ford, Andrew Carnegie, and John Rockefeller, and explains how to use their secrets for success.

Understand yourself and those around you.

psychology

Psychology

writing

Reading & Writing

books

Books

Ever wondered how life would be if we could condition our minds to Think and Grow Rich? Author Napoleon Hill claims to have based this book on twenty years of rigorous research on the lives of those who had amassed great wealth and made a fortune. Observing their habits, their ways of working and the principles they followed, Hill put together laws and philosophies that can be practiced in everyday life to achieve all-round success. The narrative is rich with stories and anecdotes, which not only inspire, but also show a way forward to take action. After all, riches are not just material, but also pertaining to the mind, body and spirit.  Having sold more than fifteen million copies across the world, this book remains the most read self-improvement book of all times!

Oliver Napoleon Hill was an American self-help author. He is best known for his book Think and Grow Rich, which is among the best-selling self-help books of all time. Hill's works insisted that fervid expectations are essential to improving one's life.

Napoleon Hill

Think and Grow Rich

<ul><li>The American dream the middle class keeps chasing is dead.</li><li>You have to make yourself the only person who controls your dreams.</li><li>Choosing yourself begins with a daily practice of good habits in 4 areas:</li></ul><ol><li>Mental health</li><li>Physical health</li><li>Emotional health</li><li>Spiritual health</li></ol>

Some Key Points From This Unusual Book

In 2008 the American dream bubble abruptly burst. The world’s biggest financial crisis lead to companies ruthlessly cutting costs – mostly in the form of people.Almost everything can now either be outsourced or done by technology, which is why thousands of college graduates now find themselves unemployed or underpaid – the end of jobs is here.But what should you do if your fancy college degree now only gets you a job at McDonalds? Is it all bad? No. Here’s what to do.

The American Dream Is Dead

Remember this: You have to make yourself the only person who controls your dreams.If financial freedom is your dream, then you have to control your income, which means creating products, freelancing, making passive income from affiliate marketing, selling books, courses, teaching seminars – do any one, or even better, all of these.Why aren’t you the only one who controls your dreams already? Because you’re afraid.<ul><li>Afraid of what our family will think if we leave our “stable job”.</li><li>Afraid of what friends might say.</li><li>Afraid of our customers rejecting us.</li></ul>

The Only Person Who Controls Your Dreams

Rejection—and the fear of rejection—is the biggest impediment we face to choosing ourselves.Avoiding rejection is a powerful motivator. But it makes us miserable.As long as you choose to live with that fear, instead of acting in spite of it, you are giving others the power to make your choices for you.

We Usually Avoid Conflict And Rejection

There’s a saying, ‘The learned man aims for more. But the wise man decreases. And then decreases again’.This is about a new phase in history where art, science, business, and spirit will join together, both externally and internally, in the pursuit of true wealth.What you need to do is build the house you will live in. You build that house by laying a solid foundation: by building physical, emotional, mental, and spiritual health

A New Way Of Living

I have to count the things that are abundant in my life. Literally count them. If I don’t they will begin to disappear.

Only think about the people you enjoy. Only read the books you enjoy, that make you happy to be human. Only go to the events that actually make you laugh or fall in love. Only deal with the people who love you back, who are winners and want you to win too.The only skills you need to be an entrepreneur are the ability to fail, to have ideas, to sell those ideas, to execute on them, and to be persistent so even as you fail you learn and move onto the next adventure.

The Focus On The Joyful LIfe

Pretend everyone was sent to this planet to teach you.

The only truly safe thing you can do is to try over and over again. To go for it, to get rejected, to repeat, to strive, to wish. Without rejection there is no frontier, there is no passion, and there is no magic.Every time you say yes to something you don’t want to do, this will happen: you will resent people, you will do a bad job, you will have less energy for the things you were doing a good job on, you will make less money, and yet another small percentage of your life will be used up, burned up, a smoke signal to the future saying, “I did it again

Do What You Love To Do Even If You Get Rejected

Success comes from continually expanding your frontiers in every direction—creatively, financially, spiritually, and physically. Always ask yourself, what can I improve? Who else can I talk to? Where else can I look?Every time you say yes to something you don’t want to do, this will happen: you will resent people, you will do a bad job, you will have less energy for the things you were doing a good job on, you will make less money, and yet another small percentage of your life will be used up, burned up, a smoke signal to the future saying, “I did it again’.

Keep Digging

I don’t like the word purpose. It implies that somewhere in the future I will find something that will make me happy, and that until then, I will be unhappy

<ul><li>Rodney Dangerfield didn’t succeed in comedy until his forties.</li><li>Ray Kroc was a milkshake salesman into his fifties. Then he stumbled onto a clean restaurant that served a good hamburger run by two brothers with the last name McDonald. He bought McDonald’s when he was fifty-two.</li><li>Raymond Chandler, the most successful noir novelist of all time, wrote his first novel at age fifty-two.</li></ul>

Stories: Success Has No Age

Think of two people in your network who don’t know each other but you think can add value to each other’s lives. Introduce them. Do this every day. Get better and better at it. The more value you bring to the people in your network (even if it doesn’t directly bring value to you in an immediate way), the greater the value of your network. And then the greater value you will have

Be A Connector

<ul><li>If you have an idea, don’t focus on the money. Don’t focus on how you will make a living. Do this: Build your product. Sell it to a customer. Start shipping. Then quit your job.</li><li>Often the real reason someone buys from you is not for your product, but for you</li><li>If you want to be successful, you need to study success, not hate it or be envious of it. If you are envious, then you will distance yourself from success and make it that much harder to get there.</li><li>As yourself: What’s the lifetime value of the customer? What are the ancillary benefits of having this customer?</li></ul>

Success And Your Customers

What to do when struggling with idea topics:Search phrases on social media like: ‘I wish I had’, ‘I just paid someone to’, ‘is the worst product’, ‘is a horrible company’, ‘has a terrible website’, ‘is my favourite website’, ‘does anyone know how...' This will expand your thinking and provide you with puzzle pieces to connect.

Finding New Ideas: Mental LEGO

Honesty is the only way to make money in today’s world.

A holistic book on improving every part of your life.

The world is changing. Markets have crashed. Jobs have disappeared. Industries have been disrupted and are being remade before our eyes. Everything we aspired to for “security,” everything we thought was “safe,” no longer is: College. Employment. Retirement. Government. It's all crumbling down. In every part of society, the middlemen are being pushed out of the picture. No longer is someone coming to hire you, to invest in your company, to sign you, to pick you. It's on you to make the most important decision in your life: Choose Yourself. New tools and economic forces have emerged to make it possible for individuals to create art, make millions of dollars and change the world without “help.” More and more opportunities are rising out of the ashes of the broken system to generate real inward success (personal happiness and health) and outward success (fulfilling work and wealth). This book will teach you to do just that. With dozens of case studies, interviews and examples–including the author, investor and entrepreneur James Altucher's own heartbreaking and inspiring story–Choose Yourself illuminates your personal path to building a bright, new world out of the wreckage of the old.

The world is changing. Markets have crashed. Jobs have disappeared. Industries have been disrupted and are being remade before our eyes. Everything we aspired to for "security," everything we thought was "safe," no longer is: College. Employment. Retirement. Government. It's all crumbling down. In every part of society, the middlemen are being pushed out of the picture. No longer is someone coming to hire you, to invest in your company, to sign you, to pick you. It's on you to make the most important decision in your life: Choose Yourself. New tools and economic forces have emerged to make it possible for individuals to create art, make millions of dollars and change the world without "help." More and more opportunities are rising out of the ashes of the broken system to generate real inward success (personal happiness and health) and outward success (fulfilling work and wealth). This book will teach you to do just that. With dozens of case studies, interviews and examples-including the author, investor and entrepreneur James Altucher's own heartbreaking and inspiring story-Choose Yourself illuminates your personal path to building a bright, new world out of the wreckage of the old.

James Altucher

Choose Yourself

Choose Yourself!

Science increasingly shows that there is a right amount of money for happiness, but that countless variables make the amount change for little reason. The problem must be approached another way.Philosophers have asked the same question. Every thinker who has tried to answer the question of how to live has had to wonder how much money was right to have. Here, we have the ideas on how money affects happiness from ten philosophers that might help you decide how much money is enough.

The Right Amount Of Riches

In Aristotelian philosophy, virtue is the key requirement for a life well lived. But while his stoic contemporaries thought virtue alone would assure a good life, Aristotle knew that a few other things would be needed. Among them are <a href="https://bigthink.com/scotty-hendricks/do-you-have-true-friendships-why-aristotle-thinks-you-dont">friendship</a>, good luck, and money.While he saw money as merely a tool to promote other goals, he is open about the fact that the good life requires that you have a fair amount of it. One of the items on his list of virtues needed to live a full life is magnificence, which involves the donation of large sums to charity.

Aristotle

The life of money-making is one undertaken under compulsion, and wealth is evidently not the good we are seeking; for it is merely useful and for the sake of something else.

Henry David Thoreau is famous for retreating to a cabin near Walden pound and writing a book about his experiment of living a simple, self-sufficient life in the wilderness. While his experiment is often presented as more than it was, <a href="https://www.newyorker.com/magazine/2015/10/19/pond-scum">his cabin wasn’t that far from a town and his mother usually cooked and cleaned for him</a>, his ideas on the simple life are still worth considering.His time in the woods showed him the benefits of living simply; such as how much humanity can gain by spending more time in nature and how getting away from material pleasures can help us live a fuller life.

Thoreau

To have done anything by which you earned money merely is to have been truly idle or worse

Epicurus was a philosopher with some bold ideas on how to make people happy. He lived in the countryside in a large house with a dozen other people where they all lived communally. He argued that the path to happiness was moderation, strong friendships, and philosophy.Rather than accumulating wealth, one should try and live a simple life and find joy in things like friends, the pleasures of work, and philosophy. The moderate life, however, didn’t require much money at all.

Epicurus

If you wish to make Pythocles wealthy, don’t give him more money; rather, reduce his desires.

Nietzsche argued that the morality of the gospels was a slave morality which was based on a sort of sour grapes approach to things. Since the authors of the gospels didn’t have money or power they declared those things to be evil and the poverty and weakness they had to be good. Nietzsche sees this reactionary morality to be unbecoming of great people.This doesn’t mean that he thought hoarding cash was good, but he does warn us to be wary of the poor man who derides money as evil and useless to our happiness.

Nietzsche

Kierkegaard strikes out against how people are increasingly dispassionate, conforming, and detached. He blames, among other things, money for causing some of this. As the abstraction of real value, it tends to make us desire of it rather than the things it can buy or represents.Kierkegaard implores us to dive headfirst into life and live it fully and desiring too much money is a symptom of not doing so.

Kierkegaard

Schopenhauer was a pessimistic thinker who felt that most people were doomed to rather unpleasant lives. He was so convinced of this that he was one of the first prominent anti-natalists and wrote that most people were better off not being born. His advice on how to be happy is fittingly strange.Schopenhauer’s great solution to the endless miseries of life is to withdraw from them and live ascetically. Money then, that cause of infinite desire, labor, and strife, is to be avoided. The worst part of his solution is his understanding of how few people could hope to carry it out.

Schopenhauer

Wealth is like sea-water: The more we drink the thirstier we become; and the same is true of fame.

Franklin was independently wealthy. After a lifetime of wise investments, hard work, and a fair share of luck, Franklin was able to turn his attention to his social projects and not have to worry about money again.His ideas on wealth were similar to Aristotle’s in many ways. He wrote a book on <a href="http://www.swarthmore.edu/SocSci/bdorsey1/41docs/52-fra.html">how to earn and save money</a> and associated having wealth with having a least a few virtues. He also agrees that, while good to have, money is at best a tool for getting other things. Unlike Aristotle, however, <a href="https://bigthink.com/scotty-hendricks/ben-franklins-13-guidelines-for-living-a-good-life">his list of virtues</a> does not require wealth to live life to the fullest.

Ben Franklin

The use of money is all the advantage there is in having money

Marx reminds us that money, for all the bad things philosophers often say about it, is extremely useful. It drives history, grants the ability to accomplish great things, and often consumes too much of our time. His philosophy of communism isn’t so much against wealth as it is an attempt to tame it and make it the servant of humanity rather than the problem it frequently can be. The results have been mixed at best.

Karl Marx

His life story and later dedication to intellectual pleasures speak against a life of chasing money as the path to Nirvana. However, extreme poverty is no solution either. While many Buddhist monks are supposed to avoid even touching money, the rest of us are encouraged to have the “right livelihood” and earn it virtuously. This also includes not having more than we need.We are warned that there is too much of a good thing and that we should not suppose that more money is the solution to suffering. Having nothing isn’t too much fun either though.

The Buddha

Faith is the best wealth for a man in this world. Righteousness when well practiced brings happiness.

Needleman has spent decades <a href="https://www.fastcompany.com/28699/money-and-meaning-life">helping people navigate life</a>. He is often sought out as a consultant on how to handle money at the conceptual level and has a lifetime of advice on how money affects us to give out.One of his realizations is that money doesn’t solve problems or provide answers. While it might assure that we have access to necessities, it won’t cure us of worrying about having them. He reminds us that there are things that money can’t buy, like happiness, that we must never lose sight of; even if it is nice to be able to buy that trip to Hawaii without saving for it.

Jacob Needleman

Those who criticize the wealthy don’t realize that money is needed to do good things.

philosophy

Philosophy

motivationandinspiration

Motivation & Inspiration

10 philosophers on whether money can make you happy

Doing well with money has little to do with how smart you are and a lot to do with how you behave. And behavior is hard to teach.A genius who loses control of their emotions can be a financial disaster. The opposite is also true.

The Greatest Show on Earth.

Our personal experiences with money are very little of what happened in the world and maybe 80% of how we think the world works.We all make decisions based on our own unique experiences that seem to make sense to us in a given moment.So no one is crazy.

No One's Crazy

Luck & Risk are siblings. They are both the reality that every outcome in life is guided by forces other than individual effort.Focus less on specific individuals and more on broad patterns. Nothing is as good or bad as it seems.

Luck & Risk

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 is getting the goalpost to stop moving. (Happiness = Results - Expectations)Social comparison is the problem here.The ceiling of social comparison is so high that virtually no one will ever hit it.

Never Enough

"Enough" is not too little but it is realizing that an insatiable appetite for more will push you to the point of regret.There are many things never worth risking, no matter the potential gain:- Family & Friends- Reputation- Freedom- Being loved by those who you want to love you- Happinessall are invaluable. Keeping these things is knowing when it's time to stop taking risks.

Lessons from one field can teach us something about unrelated fields.Take the billion-year history of ice ages, and the lesson about growing our money - "It is not necessarily the amount of snow that causes ice sheets but the snow, however little, lasts".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.A small starting base can lead to results so extraordinary they seem to defy logic.

Confounding Compounding

Good investing isn't about making good decisions it's about consistently not screwing up.The ability to stay around for a long time without wiping out or being forced to give up is what makes the biggest difference.

Getting Wealth v/s Staying Wealthy

The great investors bought vast quantities of art, a subset of the collections turned out to be great investments, and they were held for a long period of time to allow the portfolio return to converge upon the return of the best elements in the portfolio.It's not whether you're right or wrong that's important but how much money you make when you are right and how much you lose when you're wrong.Investing genius: A person who can do the average things when all those around them are going crazy.

Tails, You Win!

The ability to do what you want, when you want, with whom you want, for as long as you want, is priceless.It is the highest dividend money pays.Reactance: Doing something you love on a schedule you can't control can feel the same as doing something you hate.

Freedom

When we see someone driving a luxury car, people rarely think, "Wow, the guy driving the car is cool."Instead, "Wow, if I had that car people would think I'm cool."No one is impressed with your possession as much as you're.

Man In The Car Paradox

Spending money to show people how much money you have is the fastest way to have less money.Wealth is financial assets that haven't yet been converted into the stuff you see. It's income not spent.Rich is a current income.

Wealth is What You Don't See

Building wealth has little to do with your income or investment returns and a lot with your saving rate.Wealth is just the accumulated leftovers after you spend what you take in.You don't need a specific reason to save.

Save Money

Aiming to be mostly reasonable works better than trying to be coldly rational. We are humans.Reasonable is more realistic and you have a better chance of sticking with it for the long run, which is what matters most when managing money.

Reasonable >> Rational

History is the study of change, ironically used as the map of the future.We can't just make the decisions just by looking at history. Life is full of unexpected surprises.

Surprise

"Things that had never happened before happen all the time."

The most important part of every plan is planning on your plan not going according to plan. The odds are in your favor when playing Rusian Roulette. But the downside is not worth the potential upside.

Room For Error

Long-term planning is harder than it seems because people's goals and desires change over time.Compounding works best when you can give a plan years or decades to grow.That is true for careers and relationships as well.

You'll Change

Every job looks easy when you are not the one doing it.Market returns are never free and never will be. They demand you a price. But if you view the admission fee as a fine you'll never enjoy the magic.

Nothings Free

Everything has a price, not all appear on labels.

"Beware of taking financial cues from people playing a different game than you are."

You and Me

Optimism sounds like a sales pitch. Pessimism sounds like someone trying to help you.Pessimism is so seductive because it reduces expectations, narrowing the gap b/w possible outcomes and outcomes you feel great about.

Seduction of Pessimism

Stories are more powerful than statistics.There are many things in life that we think are true because we desperately want them to be true.Everyone has an incomplete view of the world. But we form a complete narrative to fill in the gaps.

When You'll Believe Anything

This book is one of the best books for the financial knowledge you'll read among the others. Get to know the real Psychology of Money by reading this.

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.

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.

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.

Morgan Housel

The Psychology of Money

It's a complex question with a complex answer, but at its core is a simple truth: To be financially responsible, you need to live within your means. And to live within your means, you must spend less than you make.

The Basics Of Financial Responsibility

If you're really looking to be financially responsible, just being able to make your minimum monthly <a href="https://www.investopedia.com/terms/c/creditcard.asp">credit card</a> payment doesn't cut it. In fact, the fact that you aren't able to pay your <a href="https://www.investopedia.com/terms/a/accountbalance.asp">balance</a> in full shows that you already spend more than you earn. Responsible use of credit means paying the balance on your account in full each month.Also, credit cards should be used for convenience, not to make ends meet. Credit cards are handy because they eliminate the need to carry cash. Plus, you can generate reward points. Credit cards can be very helpful in an emergency.

Credit Cards and Debt

Paying interest on anything means that you are spending more on that item than the purchase price. Does that sound like the most responsible choice or just the most convenient? When the interest payments are factored into the purchase price, you are spending more to obtain the item than even the item's manufacturer thought it was worth. As such, avoiding paying interest on anything should be a major objective.

Consider the Interest

For many people, cutting down on interest and borrowing is easier said than done, but in practice, it really comes down to knowing the difference between necessities and luxuries. you might need a place to live, but you don't need a <a href="https://www.investopedia.com/articles/insights/052416/top-10-wealthiest-families-world.asp">mansion</a>. And while most of us must have a <a href="https://www.investopedia.com/terms/m/mortgage.asp">mortgage</a> in order to afford a home, purchasing a home in a financially responsible manner means that you should purchase one that won't break the bank.  Another healthy estimate is that your monthly mortgage payment should not cost more than 30% of your monthly <a href="https://www.investopedia.com/terms/t/take-home-pay.asp">take-home pay</a>.

Acting in Your Own Best Interest

Spending every dime that you earn is simply irresponsible unless you have a massive <a href="https://www.investopedia.com/terms/t/trust-fund.asp">trust fund</a> that is so flush with cash that you will never outlive the earnings. For most people, especially those of us hoping to retire someday, saving is an activity that must be taken seriously. A great way to do this is when you get your paycheck – and before you pay your bills – <a href="https://www.investopedia.com/terms/p/payyourselffirst.asp">pay yourself first</a>. A good goal to save is 10%.

Paying Yourself First—Saving

When it comes to saving, investing in the stock market might be the most profitable choice available. Sure, investing involves risk, but taking calculated risks is sometimes a necessity. The responsible way to go about it is to have a plan.Start by examining asset allocation strategies to learn how to choose the right mix of securities for your investing strategy. Contribute to your employer-sponsored savings plan if such a plan is available.

The Stock Market

Financial responsibility means being prepared for the unexpected. Most experts agree that you need to be able to support yourself financially for at least six months without an income. If you are married and used to living on dual paychecks, this means being able to pay the necessary bills such as the mortgage, food and <a href="https://www.investopedia.com/terms/u/utilities_sector.asp">utilities</a> on one income – or even neither income. If a missed paycheck would ruin you financially, it's time to create a financial escape hatch to prevent this.

Emergency Fund

Financial responsibly means doing what you have to do to take care of your needs and the needs of your family. To make this happen, your focus should be internal. The neighbors aren't paying your bills, so their spending habits shouldn't dictate yours or set the bar for your <a href="https://www.investopedia.com/terms/s/standard-of-living.asp">standard of living</a>.

Don't Keep Up with the Joneses

Having a budget is one of the core pillars of financial responsibility. You should know where your money is going. <a href="https://www.investopedia.com/terms/b/business.asp">Business</a> owners know the importance of understanding their <a href="https://www.investopedia.com/terms/c/cashflow.asp">cash flows</a> and <a href="https://www.investopedia.com/terms/b/balancesheet.asp">balance sheets</a>; as a result, no successful business exists without a budget. Neither should you.

Budgeting

Does being financially responsible mean that you have to scrimp and save? Maybe, but only if that is what it takes to stay out of debt. On the other hand, if you are the Sultan of Brunei, you may easily be able to afford a jet, a mega-yacht, a mansion in the South of France and a few palaces. Although those of us with lesser means might frown on this extravagance, it shouldn't be confused with a lack of financial responsibility. After all, there's nothing irresponsible about buying things you can afford to pay for.

A Very Personal Definition

Ultimately, financial responsibility means living within your means, regardless of the level of those means. So take a close look at your financial situation, evaluate your earning and spending habits, and make the necessary adjustments to put yourself on responsible financial footing.

The Bottom Line: Arriving at "Responsible"

Just being able to make your credit card payments isn't enough. Here are some tips on how to become more financially responsible.

The Basics of Financial Responsibility

The Wealth of Nations described the industrialised capitalist system that overthrew the mercantilist system. Mercantilism stated that wealth was fixed and the only way to prosper was to hoard gold and tariff products from abroad. The essence of Smith's thesis was that people's natural tendency for self-interest leads to prosperity. By giving people the freedom to produce and exchange goods and opening the markets to competition, people's natural self-interest would create greater wealth than with strict government regulations.

Adam Smith's The Wealth of Nations had a huge global impact

The central thesis of Smith's The Wealth of Nations is that people's individual need to fulfil self-interest results in societal benefit. This free-market force became known as the "invisible hand". However, the market that emerged from an increasing division of labour created inter-dependencies and promoted social welfare through individual profit motives. For example, the baker only produced bread and relied on one person for clothes, another for meat, and yet another for beer. The people specialising in clothes depended on the baker for their bread, and so on.

The invisible hand

The invisible hand is not actually a distinguishable entity but the sum of many phenomena that occur when consumers and producers engage in commerce. <ul><li>The invisible hand theorem suggests that the means of production and distribution should be privately owned and that trade will flourish organically without regulation.</li><li>The government affects the invisible hand, not the other way around. It is prescriptive and intentional and pursues defined goals through coercion.</li></ul>

The invisible hand versus the government

The lack of market mechanisms frustrates government planning. This is also known as the economic calculation problem. When people and businesses make their own decisions based on their willingness to pay money for a good or service, the information is captured. In turn, resources are automatically allocated toward the most valued ends. Governments' interference causes unwanted shortages and surpluses. However, the forces that guide voluntary economic activity toward the benefit of societies are the same forces that curb the effectiveness of government intervention.

Government response to the Invisible Hand

Smith believed a nation needed three elements to bring about universal prosperity.<ol><li>Enlightened self-interest. He thought most people would naturally practice thrift, hard work, and enlightened self-interest.</li><li>Limited government. Smith viewed the government's responsibilities as being limited to the defence of the nation, universal education, public works, the enforcement of legal rights and the punishment of crime.</li><li>Solid currency and a free-market economy. Smith hoped backing the currency with hard metals would prevent the government from depreciating the currency.</li></ol>

The elements of prosperity

The Wealth of Nations is an influential book that started free-market economics but has some weaknesses. For example, <ul><li>it is lacking proper explanations for pricing or a theory of value</li><li>Smith failed to notice the importance of the entrepreneur in breaking up inefficiencies and creating new markets</li></ul> However, both opponents and beliers in Adam Smith's free-market capitalism have added to the framework. The theory gets stronger with each reformulation and continues to be a powerful force today.

Smith's theories overthrow mercantilism

Adam Smith's 1776 classic "The Wealth of Nations" may have had the largest global impact on economic thought.

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