How to become Rich | Money Management Tips
![]() |
Photo by Shane on Unsplash |
i read two books the psychology of money by morgan hausel
and atomic habits by james clear the idea
was that we all want to manage money in
our lives and the only way to do that is
to create the right set of habits early
on in life so if you're a teenager
you'll find this relevant as we explore
money through the lengths of psychology
and also how habits can play this major role in helping us
manage our money as we grow older
spoiler we are not going to talk about
investment choices and techniques but
let's get going we are trying to help you develop
good habits towards money and
investments handling money is a soft skill where
how you behave is more important than
what you know sounds strange but let's
go through the rest of the argument it essentially means that if you know perhaps the exact trade price of a stock
beforehand or you even know the winning lottery ticket while buying it and even if you earn a windfall sum of money you
will ultimately return to your old financial situations if you don't know
how to behave right when you have earned
that money but behavior is tough to teach and here the magic of atomic habits comes into play
so what is right behavior and
perspective with money let's look at five factors one by one at
number one the man in the car paradox imagine you see a person riding a luxury car we turn our head and look and we are
impressed but we don't think wow that person is so great
that person is my role model instead what we think is imagine if i was in that car and how society will respect
and admire me if i ride that car the
fact is we admire the car not the person
and this applies to every show of item
you want to purchase so the desire to buy all the glitter to get admiration and respect from others
is quite a paradox
morgan housel calls this the
man-in-the-car paradox so the first
habit that we need to build to break
this paradox in our head is the habit of
asking why
example why do i want to buy that
expensive jacket when i already have two jackets or
why do i want to buy that branded bag when a regular bag will do the job ask yourself why do i need to buy this thing is it a
necessity or does it satisfy my ego in the book atomic habits james clear explains that one small change in habit
can compound into phenomenal results
this small habit of asking why before
any purchase will substantially cut your
expenses now before we move on to habit
number two drop me a comment below
telling me how you manage your money and
what habits you follow that help you at
number two the relationship of money and
time why should i even bother to earn so much
money if i don't need to buy all the luxury items and fancy cars and houses if this question is buzzing in your head i would say that's a very valid question and the answer is for a very expensive commodity called
time morgan hausell calls it control over
time a stable wealth gives you complete
control over your time this should be your biggest goal of
earning money or creating wealth so that
one day you don't have to work for money
you can spend your time doing things
that matter to you things that add value to your life this can only be possible when you have a stable wealth that can cover all your
financial responsibilities so what atomic habit should we build for
That the habit of savings even a small addition to your savings will eventually become a treasure so save save save like you did in the piggy bank start with about 10 of your monthly income maybe
your pocket money and gradually keep
increasing the amount at this point
overthinking where you're going to
invest it and whether you can double
that money is not that important the
core is the habit of saving and after
that
let the compounding effect take over and
before we move on to strategy number
three i would like to give a shout out
to boyana kirti for leaving this awesome
message under my last video and if you
want a shout out as well then quickly
leave a comment below with the hashtag
chetchatters at number three stop the
goal post
morgan hausel shares a story with this
perspective of money
let's say a party host was a hedge fund
manager that day he had earned more
money than the entire historical earning
of the wildly popular book catch-22 but
the author of the book was also there
responded on a lighter note
yes but i have something
he will never have
enough
the hardest financial skill is getting
the goal post to stop moving
last year you calculated that 500 000
let's say was the minimum wealth you
thought that was enough for you and
maybe you thought i don't have to work
for money now but this year it's become
a million
and next year it'll become 10 million
it's a never-ending race and even after
years of effort you'll feel unfulfilled
and worthless so what atomic habits
should be built to stop running on a
financial treadmill the habit of maybe a
systematic investment plan or
compounding assets this ensures that
you're not focused on the goal post but
the right path choose the right compounding asset like
maybe a mutual fund that's indexed or maybe you want to set an undeteriorating long-term habit of an sip
increase it with 20 to 30 percent every year and your wealth will ultimately blossom in the coming years at number
four reasonable wins over rational money is not some number game that you will play on excel sheets and the
formulae that will give you your returns at least this is not the case with
personal finance
when the financial advisor of morgan
housel asked him to take out a loan for
his house the loan rates were absurdly low at thetime and his
advisers suggested him take advantage of the cheap money and
invest into plans with high returns it made complete sense on paper
and why not who doesn't want to get good returns but
morgan housel rejected the advice was he crazy
not really he was just psychologically reasonable he said the thought that i don't have to pay anything for my house
in the coming months gave me an immense sense of independence i don't want to take on the burden of a loan
so don't fall into the trap of taking financial decisions based on cold
rational numbers but in a state of reasonable awareness
now the atomic habit that we should build to enhance our reasonable
perception towards money is called the sdp
systematic donation plan a habit of donating a certain percentage
of money into different projects every
month will sharpen your perception to see the right use of your money
and what that money means to different people try this out and leave a comment for me below and tell me how that worked
out for you at number five is the luck factor luck is a very important factor for the success of our investments the author gives a number of examples on how luck played major roles in financial success of the most successful people like bill gates and warren buffet
but why is it so important for you to know that luck is a very important
factor in your investments just to break our illusion that we
control every aspect of our money
we think that only our decisions are responsible for the returns we get
this arrogance forces us to take some risky decisions and ultimately drags our wealth to the worst there is a very good standard to measure
your financial decision it's called a sleep test
ask this question to yourself with every
financial decision does this help me sleep at night
no investment is worth your sleep and
definitely not when you know everything
about your money is not under your
control so what atomic habits should we
build for this the habit of reading and listening to
financial news it increases our chances to get lucky as
we get the right knowledge to diversify
our investments into the right assets and hence reducing our risks so keep growing your money
Comments
Post a Comment