“The Psychology of Money”: 5 Lessons About Wealth & Investing
Recently, our SJS Book Club sat down to discuss behavioral finance and insights from Morgan Housel’s The Psychology of Money. While I had read this book before, many of the twenty money lessons Housel shares are timeless.
We know that money doesn’t come with instructions. But rather, our collective human experience with money and investing is relatively new and shaped by our life experiences. Housel notes that “people aren’t crazy,” but rather, their life journey impacts how they think about investing. For example, someone born during the Depression is likely to live frugally while twenty-somethings might think it’s normal for the stock market to earn double digit returns annually.
As financial planners and professionals, the following money lessons resonated most:
Answering the question, “How much is enough?” Money is not the end goal, but what it can provide is what matters – the ability to pursue a new career, more time to spend with loved ones, security, joyful giving. There is an amount that is enough for each of us, more is not always the answer.
Keeping up with the Joneses’ is a fallacy; nobody is impressed with your possessions except you. Housel shared the story of working as a valet – he didn’t care about the driver of a luxury car. He simply focused on envisioning himself behind the wheel.
Buying material things doesn’t add wealth; it subtracts wealth. Spending money to show people what you have is the best way to have less money.
Purchases require spending down savings and perhaps taking on more debt.
Options are everything, or “it’s always a good time to save.” Saving gives you freedom of choice. For example, having enough saved means you can live life on your terms. You aren’t beholden to an employer, or a lender. Educating young people about the value of saving and living within their means may be one of the most important life lessons!
Wealth is what you don’t see. Wealth is more than just a portfolio balance; it includes good health, strong relationships, and time spent doing the things you enjoy with the people you care about.
At SJS, we spent our time guiding our clients to live their best life – aligned with the values that are important to you. We want to empower you to build a better life, and to make financial decisions that provide peace of mind.
We are here for you – get in touch with our SJS team today and let us know how we can help you and your families thrive!
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