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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, 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, you will be able to navigate a very complex world of money with 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. | yolanda | Not supported with pagination yet | |
I mean, we're all affected by money. | yolanda | Not supported with pagination yet | |
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. | yolanda | Not supported with pagination yet | |
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, saving, spending, it should all be done with an understanding of how time impacts your future self. | yolanda | Not supported with pagination yet | |
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, how many hours will it take you to pay off that handbag? | yolanda | Not supported with pagination yet | |
Let me do a quick calculation here for you. | yolanda | Not supported with pagination yet | |
All right, so if you're working for 40,000 Rand a month, all right, that's 40 hours a week times four. | yolanda | Not supported with pagination yet | |
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. | yolanda | Not supported with pagination yet | |
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. | 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, 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, a new tech gadget or something like that. | yolanda | Not supported with pagination yet | |
Calculate the price in terms of time instead of rands. | yolanda | Not supported with pagination yet | |
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. | yolanda | Not supported with pagination yet | |
I mean, think Albert Einstein here. | yolanda | Not supported with pagination yet | |
He said that the 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 | |
Example: if you are into paper assets, you have shares, you know, trusts, ETFs, you should not be directing those returns in terms of dividends and interest to hit your bank account. | yolanda | Not supported with pagination yet | |
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, 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: 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? It doesn't work like that. | yolanda | Not supported with pagination yet | |
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 got to understand your risk. | yolanda | Not supported with pagination yet | |
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. | yolanda | Not supported with pagination yet | |
It can work for you also. But you might not have the risk for it. | yolanda | Not supported with pagination yet | |
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, they like the returns of shares. | yolanda | Not supported with pagination yet | |
But really, they have no appetite for that up and down and that really volatile environment that equities have. | yolanda | Not supported with pagination yet | |
So we have to give them a blend. | yolanda | Not supported with pagination yet | |
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. | yolanda | Not supported with pagination yet | |
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've got to decide, right, I'm going to buy this thing. | yolanda | Not supported with pagination yet | |
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, 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, 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, and let's say that 5% increase is 800 Rand, | yolanda | Not supported with pagination yet | |
okay, you can take that 400 Rand of that 800 and add it onto your monthly budget, but allocate the other half of that 800, the balance, that 400, reinvest that money. | yolanda | Not supported with pagination yet | |
We're going to put it away and have that invest. | yolanda | Not supported with pagination yet | |
And over time, especially when even young people implement such an idea, over time, by the time they're in their 40s and their 50s, | 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, 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 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. There are 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. | yolanda | Not supported with pagination yet | |
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. | yolanda | Not supported with pagination yet | |
And that behavior is driven by your mindset. | yolanda | Not supported with pagination yet |
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