The Psychology of Money
- 10 Lessons to help you become financially free
// THREAD
- 10 Lessons to help you become financially free
// THREAD
1. Everyone does crazy stuff with money, but no one is crazy
Everyone has their own unique life experiences and a view of how the world works
Because of this, what seems crazy to you might make sense to me
This also explains why we have different views about how money works...
Everyone has their own unique life experiences and a view of how the world works
Because of this, what seems crazy to you might make sense to me
This also explains why we have different views about how money works...
Example:
- If you grew up in poverty, you'll judge risk & reward in ways a child who grew up in riches cannot fathom.
And
- If you grew up when inflation was predominantly high, you'd have experienced something the person who grew up with stable prices never had to
- If you grew up in poverty, you'll judge risk & reward in ways a child who grew up in riches cannot fathom.
And
- If you grew up when inflation was predominantly high, you'd have experienced something the person who grew up with stable prices never had to
We all make financial decisions based on our own unique experiences which may make sense to us in a given moment
Therefore, go out of your own way to find humility when things are going right and forgiveness when they go wrong
Therefore, go out of your own way to find humility when things are going right and forgiveness when they go wrong
2. Wealth is often not on show
I’m not saying a wealthy person doesn’t have flashy things
But the only thing you can be sure of with someone who drives a $90K car is that they have $90K less than they
Possibly even $90K of debt!
Cont...
I’m not saying a wealthy person doesn’t have flashy things
But the only thing you can be sure of with someone who drives a $90K car is that they have $90K less than they
Possibly even $90K of debt!
Cont...
The world is filled with people who look modest but are actually millionaires, and people who look rich but are on the brink of bankruptcy
No matter how much you earn, you will not build wealth unless your income is significantly more than your outgoings
No matter how much you earn, you will not build wealth unless your income is significantly more than your outgoings
3. Tails are the ultimate drivers
We underestimate how normal it is for a lot of things to fail
Particularly as investors
No matter how rough the markets can get, you should be comfortably with things not always working out as you'd hoped
Cont...
We underestimate how normal it is for a lot of things to fail
Particularly as investors
No matter how rough the markets can get, you should be comfortably with things not always working out as you'd hoped
Cont...
It's not about whether you were right or wrong with your financial decision or investment
What's far more important is how much money you made when you got it right vs how much you lost when you got it wrong
Your losses will only define your journey if that's where you quit
What's far more important is how much money you made when you got it right vs how much you lost when you got it wrong
Your losses will only define your journey if that's where you quit
4. Getting wealthy is one thing, staying wealthy is the hard part
- To get money, you have to take risks, be optimistic & put yourself out there. There's a million ways to do it
- To keep money you need to be ready to put up with a combination of frugality and paranoia.
- To get money, you have to take risks, be optimistic & put yourself out there. There's a million ways to do it
- To keep money you need to be ready to put up with a combination of frugality and paranoia.
5. You don’t need tremendous force to create tremendous results
Compounding is the 8th wonder of the world for a reason.
A little growth can serve as the fuel for future, bigger growth that leads to super extraordinary results
Many attribute Warren Buffett's wealth...
Compounding is the 8th wonder of the world for a reason.
A little growth can serve as the fuel for future, bigger growth that leads to super extraordinary results
Many attribute Warren Buffett's wealth...
To his stock picking capabilities
But his real secret is Time
Patience is the silent millionaire-maker.
Increasing your time horizon could be the most powerful decision you make if you want to do better as an investor
But his real secret is Time
Patience is the silent millionaire-maker.
Increasing your time horizon could be the most powerful decision you make if you want to do better as an investor
6. There’s no universal truth
With finance, you have to find what works for YOU
That's why it's called 'Personal' Finance
It's easy to look purely at the maths in a spreadsheet telling you to save more and spend less
Actually doing it is a different thing altogether...
With finance, you have to find what works for YOU
That's why it's called 'Personal' Finance
It's easy to look purely at the maths in a spreadsheet telling you to save more and spend less
Actually doing it is a different thing altogether...
That's where our personal psychology steps in
Both the rational & irrational
You need to find the balance.
There's no one-size-fits-all - There’s only what works for you & your family
You have to find what works for you in a way that leaves helps you sleep well at night
Both the rational & irrational
You need to find the balance.
There's no one-size-fits-all - There’s only what works for you & your family
You have to find what works for you in a way that leaves helps you sleep well at night
7. Controlling your time is the highest dividend money pays
Financial freedom doesn’t mean you need $Millions
It also doesn’t mean you’ll never work again
It means your financial status now affords you the flexibility to spend your time working on the things you love...
Financial freedom doesn’t mean you need $Millions
It also doesn’t mean you’ll never work again
It means your financial status now affords you the flexibility to spend your time working on the things you love...
It's about having the freedom to do what you want, when you want, with whom you want, for as long as you want to do it
8. You’ll Change
We change, and so do our desires
This makes financial planning challenging.
Some may work tirelessly for money to ensure a comfortable and early retirement whilst others enjoy ech day and take it easy at the expense of having comfort in retirement
Cont...
We change, and so do our desires
This makes financial planning challenging.
Some may work tirelessly for money to ensure a comfortable and early retirement whilst others enjoy ech day and take it easy at the expense of having comfort in retirement
Cont...
Both are decisions that may lead to regret
You need to find balance.
Don’t make your future self a prisoner to your past decisions
Avoid the extreme ends of the financial spectrum
This is why...
You need to find balance.
Don’t make your future self a prisoner to your past decisions
Avoid the extreme ends of the financial spectrum
This is why...
My planning & budgeting tools promote monthly check-ins
To provide an accurate reflection of your current circumstances and finances
Financial planning needs to be as fluid as your life is
To provide an accurate reflection of your current circumstances and finances
Financial planning needs to be as fluid as your life is
9. Save Money
First, you need an emergency fund to survive life's ability to scare the hell out of you at the worst possible moment.
The more you have, the more independent you become, the more control you gain over your future.
Savings mean you're always ready...
First, you need an emergency fund to survive life's ability to scare the hell out of you at the worst possible moment.
The more you have, the more independent you become, the more control you gain over your future.
Savings mean you're always ready...
Whether that's being ready for life-changing investment opportunities that may arise
Or, being ready for economic downturns - savings will save you form having to sell your valued investments
Savings is the one aspect of finance you have 100% control over
So, save!
Or, being ready for economic downturns - savings will save you form having to sell your valued investments
Savings is the one aspect of finance you have 100% control over
So, save!
10. Have a sense of enough
The trick with financial success is to not move the goalposts too much.
The taste of having “more” (money or power) can be dangerous when ambition increases faster than satisfaction
One step forward can push the goalpost two steps ahead...
The trick with financial success is to not move the goalposts too much.
The taste of having “more” (money or power) can be dangerous when ambition increases faster than satisfaction
One step forward can push the goalpost two steps ahead...
“if you risk something that is important to you for something that is unimportant to you, it does just not make any sense"
- Warren Buffet
Greed is silent, but very real
Most people only realise they were greedy after the damage has been done
Have a sense of 'enough'
- Warren Buffet
Greed is silent, but very real
Most people only realise they were greedy after the damage has been done
Have a sense of 'enough'
If you found this helpful, please:
- Retweet the original tweet
- Follow @FiSavvy
I'll show you how to manage and invest your money so your 9-5 becomes optional
- Retweet the original tweet
- Follow @FiSavvy
I'll show you how to manage and invest your money so your 9-5 becomes optional
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