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It's the Wealth Nation podcast. I am Yolanda Harry Passad. I am the director of Solomon Wealth and the founder of Financially Fabulous Females. | yolanda | Not supported with pagination yet | |
And this is the Wealth Nation podcast. | yolanda | Not supported with pagination yet | |
And on this podcast, it is my goal to give you easy, actionable tips, | yolanda | Not supported with pagination yet | |
content, and strategies that you can use to manage money well, to live abundantly, and build generational wealth. | yolanda | Not supported with pagination yet | |
And thanks for joining me today. | yolanda | Not supported with pagination yet | |
And every week on this podcast, I try to give you something, some kind of tidbit that you can take away in your financial life. | yolanda | Not supported with pagination yet | |
And today we're talking about the very popular book called The Psychology of Money. | yolanda | Not supported with pagination yet | |
Now, this is a book that's written by Morgan Housell, | yolanda | Not supported with pagination yet | |
and it just provides such a treasure trove of insights and wisdom for anybody that's looking to transform their financial outlook. | yolanda | Not supported with pagination yet | |
And if you can take some of the lessons that we'll talk about that I've picked up in the book when I read it, | yolanda | Not supported with pagination yet | |
you will be able to navigate a very complex world of money with a newfound sense of confidence and purpose. | yolanda | Not supported with pagination yet | |
So, it doesn't matter whether you're South African or not. | yolanda | Not supported with pagination yet | |
I know a lot of the times we talk about South African money and the South African financial system, | yolanda | Not supported with pagination yet | |
but here's some very generic information that can be implemented by anybody. I mean, we're all affected by money, and it touches everybody in every aspect of our lives. | yolanda | Not supported with pagination yet | |
Yet, we struggle to understand this thing. | yolanda | Not supported with pagination yet | |
We struggle to manage it. We struggle to make money work for us. And that's where the psychology of money, the book by Morgan Housell, comes in. | yolanda | Not supported with pagination yet | |
It offers insights that extend beyond traditional financial advice, going deep into the psychology and the behavior aspects. | yolanda | Not supported with pagination yet | |
So, discover some key takeaways from the book that will help you reshape your relationship with money and set you on the path to financial success. | yolanda | Not supported with pagination yet | |
And the first nugget that we can take from the psychology of money is the concept of time is the ultimate currency. | yolanda | Not supported with pagination yet | |
Time is the most valuable asset you have, not money, but time. | yolanda | Not supported with pagination yet | |
So, in every financial decision, it should be viewed through the lens of time. | yolanda | Not supported with pagination yet | |
Investing, savings, spending, it should all be done with an understanding of how time impacts your future self. If you think about it, right? | yolanda | Not supported with pagination yet | |
If you buy a 10,000 Rand handbag and you earn 40,000 Rand after tax, 40,000 Rand a month, | yolanda | Not supported with pagination yet | |
how many hours will it take you to pay off that handbag? Let me do a quick calculation here for you. | yolanda | Not supported with pagination yet | |
Alright, so if you're working for 40,000 Rand a month, that's 40 hours a week times 4, that's 160 hours a month. | yolanda | Not supported with pagination yet | |
40,000 Rand after tax divided by 160 hours a month is 250 rands per hour. That's what you're working for. | yolanda | Not supported with pagination yet | |
So, if you are buying a 5,000 Rand handbag, we divide that by 250, that's 20 hours of your life, right? | yolanda | Not supported with pagination yet | |
So, don't count or calculate the things that you buy in Rand or dollar terms. | yolanda | Not supported with pagination yet | |
Calculate it in terms of time. | yolanda | Not supported with pagination yet | |
I know it's going to take a mental shift on your end. | yolanda | Not supported with pagination yet | |
But remember this: next time in the mall or you're shopping online, | yolanda | Not supported with pagination yet | |
you see something that you like that you may not necessarily need, but I mean, it's fancy, you like it, the nice pair of heels, | yolanda | Not supported with pagination yet | |
a new tech gadget, or something like that. | yolanda | Not supported with pagination yet | |
Calculate the price in terms of time instead of rants. The second thing that we can take away from the psychology of money is to understand the power of compounding. | yolanda | Not supported with pagination yet | |
Compound interest is an amazing phenomenon, and even the greatest minds in the world sing its praises. I mean, think Albert Einstein here. | yolanda | Not supported with pagination yet | |
He said that compound interest was the eighth wonder of the world. | yolanda | Not supported with pagination yet | |
The psychology of money reinforces this idea that we need to understand and appreciate the true power of compounding, which is essential for building wealth. | yolanda | Not supported with pagination yet | |
And when you're consistently investing and reinvesting your earnings, you can let time work its magic, turning small investments into substantial assets. | yolanda | Not supported with pagination yet | |
For example, if you are into paper assets, you have shares, you know, trusts, ETFs, | yolanda | Not supported with pagination yet | |
you should not be directing those returns in terms of dividends and interest to hit your bank account. You need to allow that to reinvest into the same investment. | yolanda | Not supported with pagination yet | |
And if you're a client, I mean, I might have showed you the asset map in terms of planning, | yolanda | Not supported with pagination yet | |
what it really means to have those dividends and those returns go back into your investment and how it really compounds over time. | yolanda | Not supported with pagination yet | |
The next important thing that we can take away from the psychology of money is risk is not one size fits all. | yolanda | Not supported with pagination yet | |
And a risk is something that very, very, very few investors consider when it comes to their money game. | yolanda | Not supported with pagination yet | |
And this is where the financial advisor comes in because we're constantly pointing out the risk. | yolanda | Not supported with pagination yet | |
And it's one of the most crucial lessons in the book is that risk tolerance varies from person to person. | yolanda | Not supported with pagination yet | |
So if you're somebody who's sent me a DM or you commented on one of my posts and saying, you know what, I have 5,000 Rand to invest. | yolanda | Not supported with pagination yet | |
Where can I put it in? | yolanda | Not supported with pagination yet | |
It doesn't work like that. I mean, everybody has a different level of risk tolerance. | yolanda | Not supported with pagination yet | |
So, obviously, when I get a question like that, it's not something that I can answer. | yolanda | Not supported with pagination yet | |
I've got to understand your risk, I got to understand your goals, and I got to understand your priorities, and then come up with a guided solution for you. | yolanda | Not supported with pagination yet | |
Okay, and that's one of the biggest mistakes a lot of people make. | yolanda | Not supported with pagination yet | |
They take financial advice from friends, from family, and say, Hey, this thing worked for me, it can work for you also. | yolanda | Not supported with pagination yet | |
But you might not have the risk for it. Or maybe your risk appetite exceeds this investment risk. | yolanda | Not supported with pagination yet | |
All right, so it's important to match up your risk with your investment expectations. | yolanda | Not supported with pagination yet | |
And in this book, the author encourages readers to assess their risk appetite and tailor their financial strategies accordingly. | yolanda | Not supported with pagination yet | |
And by doing this, you can make decisions that are in line with your comfort levels. | yolanda | Not supported with pagination yet | |
And you know, when clients sit with me, | yolanda | Not supported with pagination yet | |
they like the returns of shares, but really they have no appetite for that up and down and that really volatile environment that equities uh have. | yolanda | Not supported with pagination yet | |
So we have to give them a blend of conservative, of balanced and aggressive to try and meet their risk level. | yolanda | Not supported with pagination yet | |
Okay. And if the client's not happy with the return, they want more aggressive returns, then we take a portion and we be a little bit more aggressive with it. | yolanda | Not supported with pagination yet | |
And if it's taking some heavy losses, I mean, it's not a loss on the entire portfolio, it's just a small bunch. But again, those losses smooth out over time. | yolanda | Not supported with pagination yet | |
The psychology of money stresses the value of learning to say no when it comes to financial temptations and the impulse of spending. | yolanda | Not supported with pagination yet | |
Delayed gratification can lead to more significant rewards down the road. | yolanda | Not supported with pagination yet | |
And this insight is crucial for avoiding the debt trap and building a financially secure future. | yolanda | Not supported with pagination yet | |
Learning to say no for unplanned purchases, especially big purchases, a night out, fancy holidays, something that you haven't planned for, you got to learn to say no to that. | yolanda | Not supported with pagination yet | |
If you want something nice and fancy, you gotta decide, right, I'm gonna buy this thing. | yolanda | Not supported with pagination yet | |
Um I need five months to save and put some money away and then buy it, instead of racking up all of that interest. | yolanda | Not supported with pagination yet | |
But there's incredible power in saying no, | yolanda | Not supported with pagination yet | |
and I know a lot of the times we have kids and managing those expectations when it comes to the kids is very hard. | yolanda | Not supported with pagination yet | |
So, it's important to get off on the right track early o'clock. | yolanda | Not supported with pagination yet | |
Another nugget that I found in the book, and it's something that we speak about a lot on the Wealth Nation podcast and in other content that I create, | yolanda | Not supported with pagination yet | |
is the trap of lifestyle inflation, which means as your income increases, | yolanda | Not supported with pagination yet | |
it's easy to fall into the trap of lifestyle inflation where your spending creeps up to match your earnings. | yolanda | Not supported with pagination yet | |
Now, in this book, The Psychology of Money, it cautions against this tendency and encourages you to save and invest a portion of any income increases. | yolanda | Not supported with pagination yet | |
This practice can significantly boost your long-term financial security. | yolanda | Not supported with pagination yet | |
And one of the guidelines I give to many of my clients is: okay, if you get a 5% increase, | yolanda | Not supported with pagination yet | |
and let's say that 5% increase is 800 Rand, okay, you can take that 400 Rand of that 800 and add it onto your monthly budget, | yolanda | Not supported with pagination yet | |
but allocate the other half of that 800, the balance, that 400, | yolanda | Not supported with pagination yet | |
reinvest that money. We're going to put it away and have that invest. And over time, especially when even young people implement such an idea, over time, | yolanda | Not supported with pagination yet | |
by the time they're in their forties and their fifties, | yolanda | Not supported with pagination yet | |
they're going to really take advantage of not falling into the trap of lifestyle inflation and they're going to take advantage of that compounding as well over time. | yolanda | Not supported with pagination yet | |
So it's important to set this money behavior in early. | yolanda | Not supported with pagination yet | |
And if you were not lucky enough to hear some of this, and you maybe somebody a little bit older, but you can make changes in your life. | yolanda | Not supported with pagination yet | |
And more importantly, you can start teaching your kids, especially teenage kids, young adults, to | yolanda | Not supported with pagination yet | |
put this kind of money behavior and money mindset in place. | yolanda | Not supported with pagination yet | |
And I think the biggest takeaway for me from the book is focusing on what you can control. | yolanda | Not supported with pagination yet | |
Now, you can't control inflation, certain things that you can control. | yolanda | Not supported with pagination yet | |
And this book really emphasizes the importance of concentrating on the aspects of your financial life that you can control. | yolanda | Not supported with pagination yet | |
You can control your savings, you can control your spending, you can control your investment decisions. | yolanda | Not supported with pagination yet | |
And by honing in on what you can influence, you can work towards financial stability and financial success. | yolanda | Not supported with pagination yet | |
So these were just some of the nuggets that I found in the book, The Psychology of Money, | yolanda | Not supported with pagination yet | |
and it prevents a very nice transformative journey into the heart of financial wisdom, far beyond the numbers. | yolanda | Not supported with pagination yet | |
And sometimes, you know, we're really put off when it comes to looking at finances and money because we're not so good with numbers. | yolanda | Not supported with pagination yet | |
But essentially, being good with money and being at financial peace is more about your financial behavior than anything else. And that behavior is driven by your mindset. | yolanda | Not supported with pagination yet | |
This book really reminds us that true financial success doesn't come from understanding interest rates, understanding investment strategies. | yolanda | Not supported with pagination yet | |
All of that is the higher-grade stuff. | yolanda | Not supported with pagination yet | |
But if you can get the basic right, | yolanda | Not supported with pagination yet | |
if you have a deeper comprehension of the behavioral patterns and the psychological nuances that govern our relationship with money, | yolanda | Not supported with pagination yet | |
then you're on your way to financial peace and living in abundance. | yolanda | Not supported with pagination yet |
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