Hi, Guys in this blog I share 6 lessons that I learn from a book called The Psychology of money, So let's start.
01. Being rich is not equal to being wealthy.
Whenever we see a rich person, all we see is richness, but being rich is very different from being wealthy.
For example, if you see anyone driving a very expensive car, then you will be like, Oh! What an expensive car! What a status! you will never say, a big loan! If you go to someone's big house, you will be like WOW! what a magnificent spacious house! you will never say WOW! how many crores of loans they have taken?
You will always equate being rich to what things people have and show off. And because of that, you will fall into the same trap. As you start earning, you will buy an expensive phone, you will buy an expensive car or bike, you will plan and go on big vacations, and start posting Instagram photos of it. Because you want to tell and show people that you have a lot of money that you can spend.
Essentially, when people say that I want to earn lakhs or two crores, they are not saying that I want to earn lakhs or crores and invest them. What they are essentially saying is that I want to earn lakhs or crores and then spend lakhs or crores, which is very different from being wealthy.
Being wealthy means two things:-
01. You earn money without spending your time.
02. You're not doing that show it off.
02. Staying wealthy is very different from getting wealthy
A lot of people can become wealthy. that means every people have a different expectation in their life about money. So many people in America buy lottery tickets. there was a study in which it was said that on average America spends $400 to buy lottery tickets. They don't have this kind of money even for themselves, in case of any emergency, but they will spend it in a hope that somehow that lottery ticket would change their life. And many people win lottery tickets, by many I mean there are of course a few who win lottery tickets, and it has been proven by a study, that whoever wins lottery tickets, most of them very quickly go back to the same financial stage as before winning the lottery. They very quickly become poor. Because it's easy to earn money, but to grow that money is very difficult.
A small example, my favorite example. You earn. ₹ 100 and invest it in your parent's best instrument, Fixed Deposits (FD), Which gives you a "Guaranteed return" of 4-5% every year. WOW! Guaranteed! All people who are gambling with their money in the stock market are so stupid because I get a guaranteed return of 4-5% every year.
What you ignore is that every year, the cost of things is increasing by 5% which is called INFLATION. So the thing which costs ₹ 100 today will cost rupees 105 tomorrow, So the thing your rupees 100 could buy today, You will not to able to buy the same thing tomorrow because its cost would be rupees 105.
Your money would have increased from rupees 100 to rupees 104 but what ultimately has happened is that you have destroyed your money by 1% every year.
Now it is still fine for the short term, but if you keep doing this, You keep investing your money in FD in the hope that it is growing and that too in a "SAFE AND GUARANTEED" manner, then what you are essentially doing is that you are destroying the value your money.
03. Controlling your time is the biggest wealth
In this book, Morgan Housel writes that money's intrinsic value, the greatest intrinsic value, the Solid foundation of money, is its ability to give you control over your time. And a lot of people are not able to understand this. What is the purpose of earning money? What is it that you are earning money for? If you are earning money for the sake of it, because if you are earning it just to spend on things so that people are impressed by your extravaganza and show-off, then you are a part of a treadmill that will never stop.
You will keep running all your life because there will never come a time when somebody will tell you that you look good, and this much richness is good enough. You will never stop! There must be someone you want to be higher than, you want to impress them, you want to show off to them. but if you start making money with the true essence that you can buy your time with money, that in my opinion is the true value of money. Because if you can earn so much money, that now don't have to spend time to earn money, you can spend time doing things that you want to do.
It could be your passion, a project, it could even be your work, but now you all are not doing that work for money, but are doing it because you want to work, and that is the biggest use of money.
04. Use the money to gain control over your time because not having control over your time is such a powerful and universal drag on happiness.
Till you do not have control over your time, you will somehow never be happy in your life.
Morgan Housel, the author of this book says, "Use the money to gain control over your time because not having control over your time is such a powerful and universal drag on happiness.
"Doing something you love on a schedule you can't control, you can feel the same as doing something you hate."
If you are doing something that you want to do, but you are doing it in a manner that you do not have control over your time, then that can be the same as doing something that you hate.
05. Know what is enough
If you will keep chasing money continuously then, believe me, they will never come a time when you will say, That's enough! No more! because we don't know how much we have got to chase, for how much we have got to chase, and for what we have got to chase.
A very important exercise that I will love all of you to do is, right now. It doesn't matter what your age is, how young are you, think of your entire life, think of everything that you want to do, each and everything, that house, or car, or luxuries, all that of all of those things, and the price or the amount that they cost today. and based on that, try to calculate how much money would you need in life.
When you do this exercise for the first time, when I did this exercise for the first time, I was surprised at how small that amount was. I used to think that I would need crores of rupees to live my life comfortably, but what I realized was that I do not need a lot many crores, but just a few crores. If I remove a lot of things which I had written just for the sake of it, then I would not even crores, I would be happy with lakhs also.
And that is something that I realized in life, but when I did, it was liberating, because now I know that I am not running on a treadmill, where all I have to do is keep running and nothing will come through.
"We will spend our day today being happy, as against chasing what we think is happiness."
06. Save as much as you can
Save as much as you can but you will have to change your perspective on saving. We think that saving means INCOME-EXPENSES = SAVINGS. often we say that we got 100 rupees as our salary, as our income, whatever it is, and from that 80 rupees is our expense, and we will invest the remaining 20 rupees.
That is the wrong way. I think of saving as, NEEDS-DESIRE = SAVINGS. Interesting! what does it mean? needs are your essentials which you cannot live without.
Your EMI, your ELECTRICITY BILLS AND WATER BIILS, your FOOD EXPENSE, all your BILLS, these are things that you need to spend on to live your life. But there is another thing that comes after, which is DESIRES. That amazing PHONE, that EXPENSIVE SWEATER, that awesome CAR, those fancy SHOES, each everything that you are buying to fulfill some sort of your desire, your ego so that you feel great about yourself, you feel that you have arrived. When you take out your desired expenses from whatever it is that you have left in your needs, is your savings.
Saving will increase if you reduce your desires.
CONCLUSION:-
So you need to be in a position where you control your needs, reduce your desires, and increase your savings. and if you are then deploying that to create wealth, not be rich, to create wealth, then you are on the right track to be ich my friends
These are the 6 lessons that I have learned from The Psychology of money, Which is a great book and I would highly recommend it to anybody who wants to know and understand money, not in terms of where to invest money. Where to buy and where to sell, is not a technical guide for you to invest money, it is a soft skill that you build by reading this book.
GOOD-BY