3 takeaways from the book "The Psychology of Money"

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I recently read a book called the psychology of money by Morgan Housel and I want to share 3 takeaways from it that I thought were really important for having financial success.

1. Having enough.

The book told a few stories of different people who had it all. Great life, great families, luxury, fame, etc. but yet even after amassing great amounts of wealth they continued to take greater amounts of risks.

This eventually led them to ruin their life and some ending in jail, others dead, and some others bankrupt.

The book also illustrates a few stories of people who “had enough.” Meaning they were conscious of their goals in life and once they attained them they stopped taking unnecessary risks.

I think many of us may struggle with this from time because we may compare our income or status with someone else.

But we must not forget we are all playing different games.?

If you are an airline pilot you can’t compare your yearly earnings with those of the top 7 hedge fund managers in the world.

Those are 2 different games that yield different results.?

2. The 8th wonder of the world - Compound interest

Morgan Housel, the author of the book, goes on to compare Warren Buffett net worth throughout his entire life and demonstrates how he is actually not the investor with the BEST returns out there.

There are people who far exceed his average annual returns but yet they don’t have nearly the amount of wealth that Warren does.

Why?

Because Warren has something most of those other people don’t.

Time.

Warren started investing at such a young age and let compound interest work for him.

It also explains how we have a tough time comprehending compound interest because it is easier to think in a linear form.

For example, if I asked you to add 8 + 8 + 8 + 8 + 8 + 8 + 8 + 8 + 8 = ….

You will probably figure out the math in your head quickly and say “72”

But if I asked you to multiply 8 x 8 x 8 x 8 x 8 x 8 x 8 x 8 x 8 = …

You will look at me cross eyed..?

Which is what happens with compound interest.

It is hard for us to comprehend the magnitude of its force.

That’s why the old saying “Buy Real Estate and wait."

Buy Real Estate and let time do its job!

3. Focus on freedom.

Something I love about the book is that it defines the new “wealthy” not as in having expensive cars, yachts, and mansions, but as in having freedom.

Freedom to do as you please.

Don’t get me wrong, having nice cars, a yacht, and a mansion is cool but one must think of the game we are playing and define whether those material items are even necessary.

Putting financial freedom at the forefront and focusing on using the time that we bought back for ourselves to spend nourishing our bodies and enjoying our families and loved ones should be our priority.?

Satch Bernhardt

CEO | V1 Capital

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