Money Mindset Shift: These are 20 lessons from the book The Psychology of Money that changed how I think about money, and hopefully, it can change yours too. No one is crazy. Well, I mean, some people are. What we experience makes up about 0. 000001% of what’s actually going on in the world and yet it makes up like 80% of how we think the world works. For instance, when you see this, you might think that, wow, that was magic. You didn’t see that. It took like two and a half minutes to actually make it happen. I had to do a bunch of takes, but finally, it actually worked. You just saw something cool, and even my bracelet changed. Change. Oh, there we go.
So when we see people freak out and sell everything when the market goes down or buy lottery tickets, we might think that that is a crazy, irrational decision. No one’s crazy. If you were in their shoes, you might do the same thing. Luck versus risk. Let’s say that I go out there, I do some research and I buy a stock and five years from now, that stock either didn’t grow at all or lost money. When I bought that stock, I made a bad decision. It’s also possible that I made the right decision and I got some bad luck. There was stuff that was not in my control that happened.
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Like this, stock could have had an 80% chance of making money, and it just so happened that I landed on that 20% chance that it wasn’t going to work out. That doesn’t mean I made a bad decision. Not necessarily, but it could also work the other way where you get some dumb luck where you pick something that was actually a bad decision. And then you’re like, well, it ended up working out for you. This is really important when it comes to listening to financial advice and taking action in your own financial life, for, Bill Gates happenedwasof the only school that had a computer in his state. If that hadn’t happened, he wouldn’t be worth tens of billions of dollars.
You never know how kind of risk and luck are going to be involved in your decisions and how it can completely change everything. Most of us have enough. We have enough to live on, to have food, to drink coffee, to have something to watch. We have enough to do. We have enough to do. We have enough to do. We have a YouTube video on, but we always push for more power, more money, a bigger house, more clothes, and nicer cars. And yes, I fall into that trap as well, where once I hit half a million subscribers, I’m going to get a Tesla. So don’t forget to subscribe. But seriously, we need to realize when we have enough. And right now, I do have enough. That would be a completely unnecessary bonus.
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And sometimes, realizing that and that if we can keep our needs few, then we can have enough a lot sooner than somebody else and be content in our lives. Some things are just never worth risking in order to get more. Things like our reputation, our freedom, our family and friends, and our happiness. The best way to make sure that we can keep all these things is not to risk any of them to have more than we need when we already have enough. Compound interest. I’m going to be honest. This is something that I struggle with when we see somebody who’s at the top of their field, whether that’s on YouTube, in business, in investing, or in a relationship.
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We want that result, but we want it now, and we don’t see all of the work in the years that went into that. For instance, if you look at Warren Buffett, he started investing when he was 10 years old. I don’t know what you were doing at 10, but I wasn’t investing. And by the time he was 30, he hit a million dollars. By the time he was 59, he hit $3. 8 billion. And now he’s worth almost $100 billion. But if he had started investing at 20 instead of at 10, that could have made an enormous difference in how much he’s worth today. A lot of times we look at the results instead of looking at the compound effects that went into it.
Plan on the plan, not going according to plan. As Mike Tyson once said, everybody has a plan until they get punched in the face. So when we’re making plans for our financial lives, we should have plans for if those plans go terribly awry. We should have emergency funds. We should aim for six months to a year’s worth of living expenses in case things go wrong. What happens if there’s a recession and you can’t withdraw your money from the stock market? What happens if there’s a housing crisis? Well, we don’t want to obsess. We don’t want to obsess about all the negative things that could happen in the world. We want to structure our finances to be unbreakable. Be a pilot of your finances.
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There’s an old saying with pilots that being a pilot is hours and hours of boredom punctuated by moments of sheer terror. A good definition of financial genius is doing the average thing when everybody around you is going crazy. Freedom comes first. Honestly, I couldn’t agree with this more. That’s what I talk about in financial minimalism all the time. It’s the idea that even doing something that you love on a schedule that you hate or with people that you hate can make it feel like that’s something that you hate. So even if you love your job right now, focusing on building freedom in your life is what’s really important because what if in a year you get a terrible boss or you hate your job or they try to move you or they do something or you hate your work environment or the schedule they put you on.
We should be focusing on building freedom. That’s why I quit the other jobs that I was at, where I could have made more money, but I didn’t like the hours. I didn’t like what I was doing. So even though for the first couple of years I made way less money, I would rather have the freedom and less money because all I need is enough. No one gives a damn; no one is as impressed by your material stuff as you are. Like let’s be honest, when you see somebody driving that cool car, you don’t think that that person is cool. You think that the car is cool or how cool you would look if you were driving that car.
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This is something that I used to really struggle with, where I would always be focused on my clothes, my car, what people thought about me, my job, whatever it was, and how people perceived me when, in reality, no one really cared. They’re just worried about themselves. So that’s really freeing because you don’t need to spend money on stuff you don’t need to impress people you don’t even like. That’s from Fight Club. Be wealthy, not flashy. When most people say that they want to be a millionaire, what they really mean is they want to spend a million dollars, which is literally the opposite of being a millionaire. But most people judge how successful they are on how much money they spend and how flashy their stuff is.
But true success and true wealth are measured in freedom. Be frugal. Shocker, right? Building wealth really has little to do with how much money you make and almost everything to do with your savings rate. Now, a lot of people only save for specific things. They save for a house, they save up for a car, for a vacation, whatever it is. But he talked about how important it is to save for a house, for a car, for a vacation, just for the sake of saving. You don’t need something that you’re saving up for. You’re saving up because that’s what’s going to buy your freedom. That’s what’s going to buy options. That’s what’s going to buy memories. It’s saving money, not spending it. And because you know that stuff won’t make you happy.
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Never tell me the odds. Actually, the odds are quite interesting. The odds of making money in the stock market are 50-50 over one day, 66% over one year, 88% over 10 years, and 100% over 20 years. So this really shows the importance of being in the market for a long time, taking advantage of that compound interest, and not freaking out when the market goes down or trying to time it, but just trying to be in the market and continually put more and more in over a long period. And that’s how you’re guaranteed to make money. Now, if you guys want to be guaranteed some money, You could sign up for Webull and get up to 12 free stocks when you open and fund a new account.
This is the main app I use to invest, and it’s free money. So, there’s a link down in the description. We suck at telling our future. Now, most people stick with the job that they chose when they were trying to go to school at 18. But the odds of picking a job that’s going to be fulfilling, you’re going to actually care about and enjoy going to work and enjoy every day for the next 40 years are astronomically low. And that’s because we can’t really tell what the future holds. I used to have five-year plans and 10-year plans, and now I really don’t plan past about six months. And if something’s really not fulfilling you and you’re just doing it because that’s what you’ve done in the past, that’s not really a good reason to do it.
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But if you’re doing it for the good of your life, it might be time to make a shift and see what you can change so that you’re not stuck doing this thing you don’t like doing for the rest of your life. Not all prices are on the label. Like I said earlier, there’s a 100% chance of making money if you invest in the stock market over 20 years. And the historical average is around 11% per year. However, that money does not come free. There is a fee that you have to pay, but that fee is not money. It is volatility and uncertainty. And this can be really powerful to understand, especially with everything that’s going on right now.
When you see the market dip 20%, and you lose 20% of your money, that can be really scary unless you look at it as this is the fee. If I can stick through this, this is what’s going to make me money in the long term, as opposed to people who can’t handle it and sell and get out of the market like you have to realize that that stress, that uncertainty, that worry, that is the price for the returns that you’re going to make. You are not me. That’s obvious, and congratulations to you. But we often look at people giving financial advice and a lot of it that even I’ve talked about sometimes is very blanket. This will equal this like this will be a good decision.
If you invest your money this way, it’ll be a good decision. That’s not necessarily true. So we have to be very careful who we listen to. When you’re giving financial advice to an 18-year-old, as opposed to a 30-year-old who’s just starting a family, as opposed to a 50-year-old who’s getting ready for retirement, a decision that would be great for one person, would be a horrible decision for somebody else. To realize that I’m not you and the other people that you listen to, you have to take it with a grain of salt and adapt it to your circumstances because every circumstance is different. So we all have to make slightly different decisions. The Joker was right. Some people want to see the world burn. No, like legit negativity is what sells.
This is why I don’t listen to any news of any sort, and I have no idea what’s going on in the world. If someone writes an article that the market’s going to go up 50 per cent next year, nobody will give a crap. But if that same person writes a very similar article saying that the markets are going to go down 50 per cent next year, everybody will start losing their minds. So, when you’re watching the news or looking at forecasts, realize that negativity sells. So take it all with a grain of salt because you never know who’s just trying to make money off of negative things happening and trying to hype them up so that they can get more clicks. It’s a scam. Beware of your love of stories.
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If you dislike investing in the stock market, or you just like investing in real estate, or dislike starting a business, you’re going to find a story that makes sense with that narrative that you have in your head. You’re going to try to fill in the gap. This is called appealing fiction. If you think that the stock market is going to go down next year, you will find tons of things to support that idea. If it’s going up, you’ll likely find tons of things to support that idea. So it’s actually really important not to go into researching or planning things or even having discussions with people with a story or an idea in mind already that you’re trying to draw things from other places to match that story that you already have going in your head.
This happens in politics all the time where somebody will have one mindset and they will surround themselves with people who agree with that mindset and never take a step back and ask if each side has merits that there is some middle ground with. But honestly, we love our stories. Less ego, more wealth. Saving money is the gap between your ego and your income. So wealth is created by the amount of money you can buy today in order to have more money and options in the future. So, no matter how much you earn, you can’t really start building wealth unless you can practice delayed gratification. It’s important to remember that wealth is what you don’t see. You need to sleep at night.
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Sometimes, getting the highest possible returns is not really what we should be shooting for. We should be shooting for being able to sleep at night and not stress about our finances. So when we’re looking into investment, one of the questions that we should be adding to the list is, will I be able to sleep at night? And if the answer is no, and it’s going to be a big stress on your life, then you should look in a different direction. It’s just it’s just not worth losing sleep over. Investing doesn’t have to be complex. A lot of people get overwhelmed with the options that are out there when it comes to investing. You can do real estate, a business.
You have all these stocks, like thousands and tens of thousands of stocks that you can choose from, and therefore, they don’t do anything because it’s too stressful and it doesn’t really need to be. Be that complex. He talks about one of the simplest ways to start investing, and that is to simply open a Roth IRA and invest in low-cost index funds, something like VTSAX, and just continually put money in it every single month for the long term and not worry about the market. Because again, you’re looking for that 20 years down the road. This might sound really simple, but it actually works. Stats show that 85% of large-cap active managers didn’t beat the S&P 500 over the decade ending in 2019.
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Just putting your money in the S &P 500 and leaving it. Embrace some risk. Some risk is good. In order to make money in the stock market, you have to put money into the stock market and, therefore, take a risk. Yes, it could be safer to keep that money in a savings account. But if you don’t take that risk, you are guaranteeing that you won’t get that reward. So, while it’s important to make sure that we avoid risks that could actually ruin our lives, taking a calculated risk on something that has very good odds of an upside is totally worth it. And we can’t just not take action because there is some risk involved. Now, something that has a very low risk and, hopefully, a very large upside is actually subscribing to this channel. So, if you haven’t subscribed already, don’t forget to do that. And I’ll see you guys next week.
The Christian Narcissist – This is how you spot
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