The psychology of money
Success is a lousy teacher. It seduces smart people into thinking they can’t lose” Bill gates
- The hardest financial skill is getting the goalpost to stop moving
Life isn’t any fun without a sense of enough. Happiness, as it’s said, is just results minus expectations. - Social comparison is the problem here
The ceiling of social comparison is so high that virtually no one will ever hit it. which means it’s a battle that can never be won, or that the only way to win is to not fight to begin with, to accept that you might have enough, even if it’s less than those around you. - “enough” is not too little
Enough is realizing that the opposite, 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
Don’t get too attached to anything, your reputation, your accomplishments, or any of it. I think about it now, what does it matter? OK, this thing unjustly destroyed my reputation. That’s only troubling if i am so attached to my reputation.
Applying the survival mindset in the real world comes down to appreciating 3 things :
- More than I want big returns, I want to be financially unbreakable. and if i’m unbreakable i actually think I’ll get the biggest returns, because I’ll be able to stick around long enough for compounding to work wonders.
- Planning is important, but the most important part of every plan is to plan on the plan not going according to plan.
- A plan is only useful if it can survive reality. And a future filled with unknowns is everyone’s reality.
- A good plan doesn’t pretend this weren’t true, it embraces it and emphasizes room for error. The more you need specific elements of a plan to be true. - A barbelled personality, optimistic about the future, but paranoid about what will prevent you from getting to the future is vital.
Investment returns can make you rich. But whether an investing strategy will work and how long it will work for. and whether markets will cooperate, is always in doubt. Results are shrouded in uncertainty.
Personal savings and frugality, finance’s conservation and efficiency, are parts of the money equation that are more in your control and have a 100% chance of being as effective in the future as they are today.
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.
Saving without a spending goal gives you options and flexibility, the ability to wait and the opportunity to pounce. It gives you time to think. It lets you change course on your own terms
Intelligence is not a reliable advantage in a world that’s become as connected as ours has. but flexibility is. If you have flexibility you can wait for good opportunities, both in your career and for your investments. You’ll have a better chance of being able to learn a new skill when it’s necessary. Having more control over your time and options is becoming one of the most valuable currencies in the world..
Aiming to be reasonable instead of rational, is one more people should consider when making decisions with their money.
There’s never a moment when you’re so right that you can bet every chip in front of you. The world isn’t that kind to anyone, not consistently. You have to give yourself room for error. You have to plan on your plan not going according to plan.
A good rule of thumb for a lot of things in life is that everything that can break will eventually break. So if many things rely on one thing working. and that thing breaks, you are counting the days to catastrophe. That’s a single point of failure. The biggest single point of failure with money is a sole reliance on a paycheck to fund short-term spending needs, with no savings to create a gap between what you think your expenses are and what they might be in the future.
Growth is driven by compounding, which always takes time. Destruction is driven by single points of failure, which can happen in seconds, and loss of confidence, which can happen in an instant.