Saving is the gap between your ego and your income

More than I want big returns, I want to be financially unbreakable

A good rule of thumb for a lot of things in life is that everything that can break will eventually break

Arrange 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

Warren Buffett’s net worth is $84.5 billion. Of that, $84.2 billion was accumulated after his 50th birthday

Doing well with money has a little to do with how smart you are and a lot to do with how you behave

“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 thanfinance

Happiness is just results minus expectations

Modern capitalism is a pro at two things: generating wealth and generating envy

You can build wealth without a high income, but have no chance of building wealth without a high savings rate

There's only one way to stay wealthy: some combination of frugality and paranoia. And that's a topic we don't discuss enough.

Using your money to buy time and options has a lifestyle benefit few luxury goods can compete with

Everything has a price, but not all prices appear on labels

Spending money to show people how much money you have is the fastest way to have less money

It gets dangerous when the taste of having more—more money, more power, more prestige— increases ambition faster than satisfactionYou feel as if you’re falling behind, and the only way to catch up is to take greater and greater amounts of risk

15 Powerful Financial Lessons From the Book "The Psychology of 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.

The Psychology of Money

Studying a specific person can be dangerous because we tend to study extreme examples—the billionaires, the CEOs, or the massive failures that dominate the news—and extreme examples are often the least applicable to other situations, given their complexity. The more extreme the outcome, the less likely you can apply its lessons to your own life, because the more likely the outcome was influenced by extreme ends of luck or risk.

To make money they didn’t have and didn’t need, they risked what they did have and did need. And that’s foolish. It is just plain foolish. If you risk something that is important to you for something that is unimportant to you, it just does not make any sense

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.

Jonah Berger

Freedom of time is what money can give you that makes you happy. Not the ability to buy things

We tend to judge wealth by what we see, because that’s the information we have in front of us. We can’t see people’s bank accounts or brokerage statements. So we rely on outward appearances to gauge financial success. Cars. Homes. Instagram photos.Modern capitalism makes helping people fake it until they make it a cherished industry.But the truth is that wealth is what you don’t see

<ul><li>Pessimism just sounds smarter and more plausible than optimism.</li><li>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.</li><li>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.</li><li>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.</li></ul>

17. The Seduction Of Pessimism

<ul><li>There are many things in life that we think are true because we desperately want them to be true</li><li>Hindsight, the ability to explain the past, gives us the illusion that the world is understandable. It gives us the illusion that the world makes sense, even when it doesn’t make sense. That’s a big deal in producing mistakes in many fields</li></ul>

18. When You'll Believe Anything

<ul><li>Go out of your way to find humility when things are going right and forgiveness/compassion when they go wrong</li><li>Less ego, more wealth. Saving money is the gap between your ego and your income, and wealth is what you don’t see. So wealth is created by suppressing what you could buy today in order to have more stuff or more options in the future</li><li>Manage your money in a way that helps you sleep at night</li><li>If you want to do better as an investor, the single most powerful thing you can do is increase your time horizon. Time is the most powerful force in investing. It makes little things grow big </li></ul>

19. All Together

<ul><li>Become OK with a lot of things going wrong. You can be wrong half the time and still make a fortune, because a small minority of things account for the majority of outcomes</li><li>Use money to gain control over your time</li><li>Be nicer and less flashy. No one is impressed with your possessions as much as you are. You might think you want a fancy car or a nice watch. But what you probably want is respect and admiration. And you’re more likely to gain those things through kindness and humility than horsepower and chrome</li></ul>

19. All Together (continue)

<ul><li>Define the cost of success and be ready to pay it. Because nothing worthwhile is free</li><li>Worship room for error. A gap between what could happen in the future and what you need to happen in the future in order to do well is what gives you endurance</li><li>Avoid the extreme ends of financial decisions</li><li>You should like risk because it pays off over time</li><li>Define the game you’re playing, and make sure your actions are not being influenced by people playing a different game</li><li>Respect the mess. Smart, informed, and reasonable people can disagree in finance, because people have vastly different goals and desires. </li></ul>

<ul><li>But everything I’ve learned about personal finance tells me that everyone—without exception—will eventually face a huge expense they did not expect—and they don’t plan for these expenses specifically because they did not expect them</li><li>Every investor should pick a strategy that has the highest odds of successfully meeting their goals. And I think for most investors, dollar-cost averaging into a low-cost index fund will provide the highest odds of long-term success</li><li>That doesn’t mean index investing will always work. It doesn’t mean it’s for everyone. </li></ul>

20. Confessions

Beating the market should be hard; the odds of success should be low. If they weren’t, everyone would do it, and if everyone did it there would be no opportunity. So no one should be surprised that the majority of those trying to beat the market fail to do so. (The statistics show 85% of large-cap active managers didn’t beat the S&P 500 over the decade ending 2019.

20. Confessions (continue)

<ul><li>Everyone have different financial goal and definition of financial freedom. Be careful when following others advice because we all bound by different circumstances</li><li>Social Media and advertisement made us feel like we're not enough and we need that "shiny object" in order to be happy. That makes us made irrational decision with money and end up with debt</li><li>There's no such thing as overnight success. It is compounded effort that succeed in one night. Observe the effort and process, not the result.</li><li>Be frugal with your money</li></ul>

My Take From This Book

Highly recommended, cause this book is not typical financial advice book. The book explains why we spend money on something we don't need based on emotional decision, not based on mathematical calculation.

Investing

It's true that we have don't understand between LIABILITIES and ASSETS. Liabilities is the thinge which take out money from you.Asset is something which puts money in your pocket

Money Fact

Although we have been successful in our careers, they have not turned out quite as we expected. We both have changed positions several times-for all the right reasons-but there are no pension plans vesting on our behalf. Our retirement funds are growing only through our individual contributions. Michael and I have a wonderful marriage with three great children. As I write this, two are in college and one is just beginning high school. We have spent a fortune making sure our children have received the best education available. One day in 1996, one of my children came home disillusioned with school. He was bored and tired of studying. “Why should I put time into studying subjects I will never use in real life?” he protested. Without thinking, I responded, “Because if you don't get good grades, you won't get into college.” “Regardless of whether I go to college,” he replied, “I'm going to be rich.”

Thought 💭

Rich Dad, Poor Dad

<ul><li>The 50-20-30 (or 50-30-20) budget rule is an intuitive and simple plan to help people reach their financial goals.</li><li>The rule is a template that is intended to help individuals manage their money and save for emergencies and retirement.</li></ul>

What is 50/20/30?

Needs are those bills that you absolutely must pay and are the things necessary for survival. These include rent or <a href="https://www.investopedia.com/terms/m/mortgage.asp">mortgage </a>payments, car payments, groceries, insurance, health care, <a href="https://www.investopedia.com/terms/m/minimum-monthly-payment.asp">minimum debt payment </a>, and utilities. These are your "must-haves." The "needs" category does not include items that are extras, such as HBO, Netflix, Starbucks, and dining out.

50%: Needs

Wants are all the things you spend money on that are not absolutely essential. This includes dinner and movies out, that new handbag, tickets to sporting events, vacations, the latest electronic gadget, and ultra-high-speed Internet. Anything in the "wants" bucket is optional if you boil it down. You can work out at home instead of going to the gym, cook instead of eating out, or watch sports on TV instead of getting tickets to the game.

30%: Wants

Finally, try to allocate 20% of your net income to savings and investments. This includes adding money to an emergency fund in a bank savings account, making <a href="https://www.investopedia.com/retirement/ira-contribution-limits/">IRA contributions </a>to a <a href="https://www.investopedia.com/terms/m/mutualfund.asp">mutual fund </a>account, and investing in the stock market. You should have at least three months of emergency savings on hand in case you lose your job or an unforeseen event occurs. After that, focus on retirement and meeting other financial goals down the road. Savings can also include debt <a href="https://www.investopedia.com/terms/r/repayment.asp">repayment </a>.

20%: Savings

Learn about Elizabeth Warren's 50/20/30 budget rule; a simple and effective plan for personal money management and wealth creation.

Money

What Is the 50/20/30 Budget Rule?

Once a wise man told "you don't need money to be happpy"

Money Is Money

A Beggar Replied

Memories make you happy, not the money.The beggar replied "how to make memories ?"

The Wise Replied

By spending time with your dear ones and self.

How do you have so much time?? If I would do the same, leave alone my family, I can't feed myself.

The Foolish Asked

I have money.

To Which The Wise Replied 

Time's the real money, you need money to earn time or in other words to spend time as you like.

The Psychology of Money

The Psychology of Money

Rich Dad, Poor Dad

What Is the 50/20/30 Budget Rule?

surya heatz on Oct 01

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