How To Become Wealthy, My review of the book is going to be very different from other reviews. I’m not going to be summarizing the book in any way. I’m not going to address all the contents or everything that was covered in the book for How To Become Wealthy. I’m just going to talk about some of the lessons that I have personally learned from reading the book.
Again, the lessons that I’ve taken away can be very different from the ones that you have taken away. But I want to do this series where I’ll be sharing with you some of the lessons that I learned from each and every book that I’m reading for those that have informed me for a while now, you know that I’m a part-time teacher.
I teach etiquette as well as business to high school students, and as such, I firmly believe in the importance of financial literacy. And I believe that it’s so important to educate the young generation about money and finances and equip them with the knowledge that they need to have once they are out after school and dealing with real life. So, without further ado, I want to introduce you to the book that I recently read for How To Become Wealthy.
It’s called The Psychology of Money. It’s an international best seller. It’s by Morgan Hosel. And the reason I actually bought this book, caught my attention while on the shelf is because the word The Psychology of Money is what actually made me interested in the book before going into the lessons that I’ve learned for How To Become Wealthy.
The first thing I want to point out is the reason it’s called The Psychology of Money is that the author believes that being financially successful actually doesn’t require you to have technical knowledge about finances, but it’s more so requires you to have the wide set of soft skills.
And to support his point, he says that oftentimes the reason people go into debt is not that they didn’t have enough education or knowledge about the interest rates, but it was rather the feeling of greed and desire to make more money that led them to get into that debt. So it’s interesting to understand how accumulating wealth has to do a lot with our soft skills rather than with our technical knowledge.
So here are the six lessons that I have personally learned from reading this book for How To Become Wealthy. I want to reread this. The points that I’ve taken away might be very different from the points that you’re taking away from reading the same book.
But these are just the six lessons that I have decided to take away from reading this book for How To Become Wealthy.
Contents
How To Become Wealthy Everyone Has A Unique Experience With Money
Lesson number one for How To Become Wealthy is understanding that every single one of us has a very different unique experience with money, therefore a very unique relationship with money. And when I read this, I was like, this is so true. It is interesting how our relationship or our experience with money actually defines or forms our mindset about earning money and accumulating wealth and spending money.
He argues that our relationship and experience with money are based on our upbringing, background, the country where we grew up, the economic situation of the country, the financial situation of our family, and perhaps even sometimes the profession of our parents.
And their mindsets can influence us as well for How To Become Wealthy. It’s interesting because when I was reading this, I thought of my parents who grew up in Soviet times and they saw the Soviet Union fall apart and the money that was worth a lot overnight became worthless. It was just a piece of paper where someone of the same generation who grew up in the US where things have been more or less stable and they’ve had dollars forever.
So obviously it would have influenced their general attitude towards money. And understanding what kind of relationship you have with money is crucial in the way you are handling your money for How To Become Wealthy.
Luck And Risk Are Siblings
The second lesson that I’ve learned for How To Become Wealthy is that luck and risk are siblings. What he means by that is that let’s say you’re taking on a project and you have a couple of negotiations to make. You make a bad negotiation, one bad negotiation, it doesn’t have to define the whole project altogether. So it might be a very successful project in the long run, but maybe you didn’t get lucky. It was risky or it wasn’t really a good little negotiation that you had there or the other way around for How To Become Wealthy.
You might get a successful deal, but then, in the long run, it might be a very lousy project. So understanding that is very important. And what I like is when he tells that not a single investor or anyone successful that, you know, in this world has done everything right, every single one of us has done one bad decision or maybe multiple bad decisions for How To Become Wealthy.
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But again, that one bad decision doesn’t have to define your whole life or your whole project, or your whole work. And I actually thought about Amazon and how they launched their phones. That was such a bad project. But you can say that Amazon altogether is a bad project idea and business altogether for How To Become Wealthy.
And distinguishing between being successful in something and failing long run or failing in little steps, but then succeeding, in the long run, is crucial. He says that investors can make wrong decisions half of the time, but still make a fortune for How To Become Wealthy.
If you’re doing whatever project you’re taking on, just because you made a couple of bad projects or a couple of bad deals doesn’t mean that in the long run, you’re not going to be successful. And that’s important to remember. To support this point, Morgan brings an example of Walt Disney.
And I want you to remember this example forever. Walt Disney actually produced so many expensive cartoons that their first studio went bankrupt. By mid-1930, they produced over 400 cartoons. All of them were super expensive. And actually, it was only one cartoon.
And can you guess which one? I’m going to take a little pause. Maybe you can write in the comment section below. What is the one cartoon that saved Walt Disney?
And the answer is snow White and Seven Dwarfs. That cartoon was the one that earned them 8 million in the first six months and basically took what they say from here to there for How To Become Wealthy.
Feeling And Knowing When Enough Is Enough
Lesson number three for How To Become Wealthy which I think is so important and so relevant for today is feeling and knowing when enough is enough. And that applies actually to everything in life. I don’t think it’s only about money for How To Become Wealthy.
It’s just about anything in life. It’s about our relationship with food. It’s about relationships with things, materials, and things that we surround ourselves with. Houses, cars, and all of that. And what he says is that modern capitalism has been amazing at generating wealth, but also at generating envy.
This is a point where things get very dangerous for us on How To Become Wealthy. And literally, I mean dangerous because it can push us to a point where we never wanted to start in the first place. So he says that sometimes the desire to get more and more our will to get more increases our ambition faster than our sense of satisfaction.
What he means by that, and I want to emphasize this point again because I think it’s so important, it’s such a thin line between when your desire to get more things makes you a lot more ambitious, or faster increases your ambition a lot faster than your sense of satisfaction from what you have achieved. So for example, you get yourself a new car.
Instead of feeling and sensing that satisfaction for months and years of using it, you feel that instant satisfaction. And then you’re off to get a new car, a different car. And I think it gets into such a negative loophole, it brings us into such a negative mentality for How To Become Wealthy.
It deteriorates not only our physical health, but also our mental health, because we’re not stopping and appreciating what we have, and whether we’re just running and running to make sure that we get more and more and more without ever feeling gratitude or satisfaction from what we have achieved. So understanding when enough is when you stop before you regret it.
So there’s a point in everyone’s life when they reach a pinnacle, and then when you reach that pinnacle, if you push harder, you’re going to fall down. And it’s actually interesting to observe that and then a lot of graphs in economics as well. There’s always an alternate, a storyline in any story. There’s always a top, the pinnacle, the pinnacle point. And then if you push more, you’re going to fall down.
So understand when you’ve reached that pinnacle point and always remember to be grateful and remember to be satisfied with what you have achieved and actually compliment yourself on your achievements. And understand when enough is enough.
Compounding
Lesson number four for How To Become Wealthy is about compounding. And a similar idea to that is that drop by drop an ocean is formed and it’s necessary. It doesn’t only apply to money for How To Become Wealthy, but also to anything in life.
So if you, let’s say, you want to become a good pianist, you have to play every single day. If you want to learn a language, you need to practice it every day. So the same goes with compounding, but it’s more about saving. And it means saving on a regular basis for a really long period of time. So here an important element in being able to accumulate wealth is to save money and do so consistently for How To Become Wealthy.
Morgan argues that you have to resist the temptations of spending money on something that you have to resist the temptations of spending money on something that you like or whatever is going on in the economic market at the moment with the money that you’re meant to save. You have to save it and put it aside and not be tempted to spend it regardless of what’s going on for How To Become Wealthy.
An interesting example that he brings to support this point is the example of Warren Buffett, who actually started investing his money only when he was ten years old and by the age of 30 for How To Become Wealthy, he’s a net worth of 1 million.
And Morgan argues, that if we were just an average kid spending money on going out, eating out, buying coffee, yes, that adds up to your monthly bill and all the other luxury items you’d be purchasing, then he wouldn’t be able to accumulate that much for How To Become Wealthy. And actually, he argues that by the age of 30, his net worth would have been $25,000 only.
He also notes that a good investment is not the one that gives you the highest possible return in a short period of time because that happens rarely once in a lifetime for How To Become Wealthy. And usually, such high earnings in a short period of time lead to strategic stories. And when I was reading this, I thought about all the kinds of lottery winners that win a large sum of money in a short period of time for How To Become Wealthy.
So overnight they become billionaires. Usually, these people spend that money so fast on things that they’ve always desired to get that they’re left with nothing. So I’ve never heard of any lottery winner who became a millionaire or a billionaire in the long run.
So usually those stories lead to tragic endings. So what truly matters is earning a decent return on your investment over a period of time and saving that repeatedly and consistently for How To Become Wealthy. That is what is going to bring you wealth.
Know The Difference Between Making Vs Keeping Money
Lesson number five for How To Become Wealthy is understanding the difference between making money and keeping it. These are completely different notions. And when I read it, I was like, whoa, this is so true. He says that in order to be able to make money, you have to be able to take risks.
As we know, entrepreneurs and business people have to be able to take risks and be able to go out and believe in their idea. But they also have to remain optimistic about their adventure, their idea, about their business. But keeping the money actually involves everything.
The opposite. You have to be frugal, so you have to be very careful with your money, but you also have to be fearful that the money that you have earned is going to be taken away from you.
So basically making it involves you being taking risks and being very optimistic and then keeping it involves you being frugal and you being fearful and kind of pessimistic about what’s going to happen. I think everyone in a while, everyone is given an opportunity in their lifetime to be able to earn money.
And some people were able to earn it and some were not. And some were able to earn it but not keep it, whereas others were able to earn and keep it. So what I’m trying to say is almost everyone is given an opportunity once in their lifetime to earn money, but not a lot of people can actually keep it.
You also probably know examples from the people that you know that we’re very well off and earned so much money and then lost everything. And that is such an important lesson to remember because we tend to believe when we’re making money that we’re going to be successful like that all our lives.
We’re going to be making a lot of money all the time. It’s always going to be up and up and up. But the truth is life and everything has its ups and downs.
And sometimes when the ups are really high, the downs can be really low as well. So understanding this is important because when you’re making money, remember that one day it can all be taken away from you. Therefore it’s important to compound in order to not lose what you have been earning while you’re earning it. So to be able to save is an important element in accumulating wealth.
Rich And Wealth Are Different Things
The final and the 6th lesson for How To Become Wealthy today from this book is that understand the difference between the term rich and the term wealth, it’s two different, completely opposite understandings, which is something that everyone gets to see.
It’s the car that you buy, the houses that you buy, the luxury items that you wear, it’s everything out there in people’s faces. They can see that you’re rich. But wealth is everything hidden. It’s something no one knows about. It’s the money that you haven’t still spent.
It’s the money that is in your savings account. It’s the money that is in the bank that you haven’t touched. The value of wealth is that it gives you an opportunity to buy things that are bigger than what you could afford at the moment.
And what I mean by that is say you have $50,000 extra instead of spending it on all the luxury items and showing people that you’re rich, you could have actually put into your bank account and accumulated saved it. And in five years, if you continue accumulating like that, you can afford to buy a plane, let’s say, or a yacht or something bigger.
So it gives you the opportunity to buy something bigger than you rather than if you were to spend it right now at this moment. This is why I think it’s so difficult for people to understand what wealth means because it’s so hidden. We don’t get to see what people’s wealth is because it’s on the bank accounts and we don’t get to see it.
Whereas people that are sharing themselves with luxury items, buying cars and houses and things like that, we get to see that they are rich and we want to be like them, we want to be rich. But oftentimes actually the wealthiest people are the ones that you would never be able to tell by the way they are dressed, by the way, that they are carrying themselves and things that they’re wearing, and the things that they’re driving and living.
Sometimes it’s so hidden that’s very difficult to understand and it’s important to know the difference between the two. In order to be wealthy, you have to be able to save and compound consistently.
To be rich, you have to be able to earn money and spend it right away. So this was my takeaway lesson from the book The Psychology of Money. I really recommend you to read it on your own as well because I think the lessons that I’ve learned are going to be very different from the things that you are probably going to be learning.
And I want to reread this book a couple of years again to see if it’s the same way that I’m taking away the same lessons or if it’s going to be different this time.
