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The Savings Expert: “Do Not Buy A House!” Do THIS Instead! - Morgan Housel

The Diary Of A CEO・134 minutes read

The Psychology of Money by Mr. Morgan H highlights the divide between those who struggle to start or stop making money, emphasizing the importance of endurance in investing and introspection on personal values. The book discusses the impact of personal experiences on financial decisions, the value of saving money for independence, and the significance of financial flexibility and taking risks early in one's career.

Insights

The world is divided between those who struggle to start making money and those who struggle to stop making money, showcasing varying financial challenges.
Endurance in investing, not genius, is key to financial success, emphasizing the importance of consistent and long-term investment strategies.
Wealth is defined as the money saved and not spent, offering independence and autonomy for future choices, highlighting the significance of financial prudence.
Personal experiences, like the loss of friends in a ski accident, can significantly impact risk appetite and attitudes towards money, underscoring the emotional complexity of financial decisions.

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Recent questions

How can I achieve financial independence?
By saving money, investing wisely, and prioritizing financial stability.
What is the importance of controlling one's spending?
Controlling spending leads to financial independence and autonomy.
How can I develop a healthy money mindset?
By reflecting on personal values, setting financial goals, and prioritizing saving.
What are the benefits of long-term investing?
Long-term investing leads to enduring wealth growth and financial independence.
How can I prioritize financial decisions for family well-being?
By focusing on stability, preparedness, and long-term security over material possessions.

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Summary

00:00

"The Psychology of Money" reveals wealth secrets.

Mr. Morgan H is the author of "The Psychology of Money," a best-selling business book.
The world is divided between those who struggle to start making money and those who struggle to stop making money.
Opportunities for wealth are available to everyone, regardless of their current income level.
Examples like Ronald Reed, a janitor who amassed an $8 million fortune, showcase unconventional paths to wealth.
Warren Buffett's success secret lies in investing, not flashy spending.
Endurance in investing, not genius, is key to financial success.
The desire to be a millionaire often stems from wanting to spend, not save.
The book "The Psychology of Money" transformed the speaker's financial success and wealth-building strategies.
The book encourages introspection on personal values, goals, and the role of money in one's life.
Wealth is defined as the money saved and not spent, providing independence and autonomy for future choices.

12:27

"Control, Freedom, and Happiness in Life"

Lack of control in life increases stress levels significantly.
Freedom in life, doing what you love on a schedule you control, is crucial for happiness.
Psychologists term the feeling of doing something you love on an uncontrollable schedule as reactance.
CEOs earning millions yearly but lacking control over their time face immense stress.
Warren Buffett, despite immense wealth, maintains total control and autonomy over his time.
The hardest financial skill is halting the constant movement of personal goalposts.
Average American households, despite increased income, are less happy compared to the 1950s.
Stephen Hawking's happiness secret was having zero expectations post his disease diagnosis.
Managing expectations below circumstances is key to lasting happiness.
Not needing to impress others is a valuable financial skill worth more than material possessions.

24:47

Relationships, money, and success: key insights summarized.

Warren Buffett defines success as being loved by the people you want to love you, like parents, spouse, and kids, not by impressing others unnecessarily.
Brent Beshore's theory on marriage emphasizes serving your partner without expecting anything in return, fostering mutual surprise and happiness.
Needy expectations in relationships can lead to breakdowns, as they hinder love and exceed reasonable demands.
Need for validation through external factors, like partners, can be detrimental, emphasizing the importance of focusing on self-love and reducing the need for validation.
Low-income areas often exhibit higher rates of gambling, reflecting a search for hope and a way out of financial struggles.
Poverty can lead to reckless behavior with money, like gambling, as a means of seeking hope and a potential escape from financial constraints.
Saving money is crucial for independence and control over one's future, offering the freedom to make choices and alleviate stress.
Three types of people regarding saving money: savers, those who believe they can't save, and those who think they don't need to save.
Money mindset can be influenced by nature and nurture, with some individuals naturally inclined towards saving and financial prudence.
Personal experiences, like the loss of friends in a ski accident, can significantly impact risk appetite and attitudes towards money, leading to changes in behavior and financial decisions.

36:40

"Life's Fragility: Avalanche, Loss, and Preparedness"

The narrator recalls a skiing incident where they were hit by a small avalanche, losing control as the ground pushed them around.
After the avalanche, the narrator's friends wanted to ski again, but the narrator decided not to join them and offered to pick them up instead.
The friends never showed up at the pickup spot, leading to worry and attempts to locate them.
Eventually, search and rescue found the friends buried under 6 ft of snow, having been killed by a massive avalanche.
The narrator reflects on the impact of this loss, realizing the importance of seemingly insignificant decisions.
The experience taught the narrator the fragility of life and the unpredictability of major events.
The narrator emphasizes the importance of preparedness over prediction, quoting Nassim Taleb on investing in preparedness.
The narrator simplifies their investment strategy to cash, a house, index funds, and shares in a company they are involved with.
The narrator explains their preference for index funds due to the focus on endurance rather than trying to beat the market.
The narrator shares an example of their parents' successful investment strategy of consistently investing in index funds over 40 years, leading to significant returns.

48:44

"Enduring Investments: Dollar Cost Averaging Explained"

Dollar cost averaging involves consistently investing the same dollar amount monthly, regardless of market conditions.
Many individuals unknowingly practice dollar cost averaging through automatic deductions from their paychecks into investment funds.
This method contrasts with actively buying and selling based on market fluctuations.
An index fund comprises a single fund holding numerous stocks, offering diversification and a slice of the global economy.
Long-term wealth creation hinges on sustained returns over time, emphasizing endurance and compounding.
Warren Buffett's wealth accumulation exemplifies the power of enduring investments over time.
Ronald James Reed, a janitor, amassed over $8 million by investing consistently over 70 years.
Endurance in investing surpasses the need for exceptional stock-picking skills, leading to substantial wealth growth.
Financial independence allows individuals to choose meaningful work rather than solely focusing on financial gains.
Reflecting on life's regrets underscores the importance of prioritizing financial decisions that secure family well-being over material possessions.

01:00:10

"Teaching kids financial responsibility through experiences"

Giving kids money when they truly need it, like when raising children, is more beneficial than giving it when they turn 60.
Concerns about kids losing money quickly if given too much without understanding its value.
Personal reflection on future scenarios where children might need financial support for driving lessons, university, or housing.
Debate with partner about whether kids should experience economy class to learn the value of things.
Experience of flying first class with a child leading to a realization about spoiling and entitlement.
Quote from Charlie Munger about the impact of giving kids all money on their ambition.
Importance of endurance and patience in investing, exemplified by Warren Buffett's strategy of waiting for opportunities.
Accessibility of investing through low-cost index funds compared to the past when only the wealthy could invest.
Distinction between skills needed for making money (optimism and risk-taking) and keeping money (conservatism and risk management).
Advice for young individuals to prioritize financial flexibility and take risks early in their careers by choosing unconventional paths for learning and growth.

01:11:58

Embracing risk and challenges for success

Amazon created a cell phone called the Fire Phone, which was a massive failure.
Amazon's success is attributed to their willingness to take risks, knowing most will fail but some will be huge successes.
Netflix CEO believes in taking risks and not having every movie be a hit to show innovation.
Spotify's Daniel X values the company's mistake rate to maintain a startup mentality.
Successful individuals like Jerry Seinfeld and CEOs face challenges when their initial success fades.
Shaquille Khan advised a successful individual to take a break to rediscover hunger for new ventures.
Elon Musk and other successful individuals continue to set big, challenging goals to stay engaged.
Billionaires like Elon Musk and successful CEOs are driven by competition and challenges, not just money.
Successful individuals like Mark Zuckerberg face immense pressure and stress despite their wealth.
The pressure and challenges faced by successful individuals act as a motivating drug to keep them engaged and striving for more significant achievements.

01:24:05

"Success, Humility, and Costs of Achieving Goals"

Bill Gates effectively quit Microsoft in 2000 to focus on philanthropy and solving bigger problems like eradicating malaria.
Successful individuals like Gates are driven by challenges and are unlikely to retire to a life of leisure.
Overconfidence in one's correctness can lead to downfall, as seen in cases of successful investors venturing into unrelated fields.
Jesse Livermore, a successful investor in the 1920s, repeatedly became a billionaire but went bankrupt due to excessive risk-taking.
Success can breed overconfidence, leading individuals to believe they are right in all areas, potentially causing their downfall.
Humility is crucial in success, with examples like Roman warriors having someone remind them of their fallibility.
Partnering with someone like Charlie Munger, who can provide honest feedback, is essential for successful individuals.
The cost of success includes enduring volatility and unknowns, such as in investing, careers, and relationships.
Identifying and being willing to pay the costs associated with success, like volatility in investing or compromise in relationships, is crucial.
Understanding one's time horizons, or the time between now and a goal, is vital for making decisions aligned with personal objectives.

01:36:14

"Choosing Stability Over Profit: Homeownership Considerations"

Moving for school and work was initially easy, but after having a child, the priority shifted to having a stable home base.
The importance of having a standalone house for privacy and stability, especially with kids, became evident.
Personal lifestyle choices should outweigh financial considerations when deciding between renting and buying a house.
Buying a house solely for financial gain may not be the best decision, as it's more about stability and family needs.
The decision to buy a house should be based on emotional and social factors rather than financial gain.
Historically, owning a house has not always been a profitable investment, with flat prices in the US and UK over the years.
Renting has evolved, with luxury apartments now available, challenging the notion that renting means compromising on quality of living.
Borrowing large sums for a historically poor investment like a house should be carefully considered.
The power of storytelling in various aspects of life, such as entrepreneurship, investing, and sales, is emphasized.
Compounding interest, both positively and negatively, impacts our lives slowly over time, with bad news often being more immediate and noticeable than good news.

01:48:31

"Embracing exponential growth and personal challenges"

The concept of exponential growth is illustrated using the example of placing rice grains on a chessboard, showing how our minds struggle with exponential thinking compared to linear thinking.
Exponential thinking, whether in positive or negative aspects, is often underestimated, leading to misconceptions about the impact of events like smoking or investing over time.
The importance of discomfort and challenges in personal growth and societal progress is highlighted, emphasizing how difficult moments can lead to significant advancements and positive changes.
Personal experiences of hardship, like job layoffs or breakups, can often result in unexpected positive outcomes, shaping individuals in ways they may not foresee during the difficult times.
The significance of thinking differently about life and self-reflection is emphasized, with the aim of encouraging readers to contemplate their desires, capabilities, and limitations without prescribing specific advice.
The conversation concludes with a reflection on regrets and the impact of worry on happiness, highlighting the value of accepting uncertainty and finding reassurance in difficult times.
The podcast sponsor, Huel, is promoted for its ready-to-drink meal range as a convenient and nutritious option for maintaining a healthy diet during busy periods, with a link provided for ordering.

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