57. Unveiling the Psychology of Money for a Financially Empowered Future!

In this episode, Laura Sexton discusses "The Psychology of Money" by Morgan Housel. She shares insights and reflections on the book, emphasizing key concepts related to financial behavior, luck, risk, contentment, and the difference between getting wealthy and staying wealthy. The episode explores the importance of control over one's life, the impact of savings as a hedge against life's surprises, and the potential dangers of leverage and debt. The host also emphasizes listeners managing their money in a way that promotes peace of mind and better sleep.

In this episode we’ll learn:

.      behavior vs. knowledge

.       luck vs. risk

.       moving goal posts vs. contentment

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Transcript

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Laura 0:02

Hello and welcome to the Accelerate Your Legacy podcast. I'm Laura Sexton, your trusted financial coach and money mindset specialist. Join me as we explore the world of money and money mindset while also paving the way for a lasting legacy that extends far beyond money. Together we'll eliminate stress, amplify freedom, and ensure you stop paying for your past so you can start saving for your future. If you're seeking peace in your finances, more margin in your budget, and a legacy that inspires generations to come, you're in the right place. Hello, accelerators. We have a very interesting podcast today. I'm going to start doing book reviews, hopefully once a month, on books that I think would be great reads for you. And this week, I'm going to be talking about The Psychology of Money by Morgan Housel. I loved This book, it was broken up into easy to read chunks, great mindset thoughts that I would love to dive into. And I also want to go ahead and let you know that Morgan Housel now has a podcast. It's called the Morgan Housel podcast, and it is so incredibly good. I originally found Morgan Housel on the Tim Ferriss show, which is also a great podcast. It's very long form. I absolutely have enjoyed Morgan Housel, what he has to say. He's got a very long standing blog. If you like anything that you hear, either pick the book up at your local library, get it on Audible, or go check out his podcast because he talks a lot about these themes I will also let you know, I read this book last year and I took a bunch of notes. So hopefully I get all of this. Correct. And if you hear anything today that you want to discuss further, feel free to reach out to me, jump on Instagram at accelerate your legacy, or shoot me an email. Laura at accelerate your legacy. com. I would love to talk with you because Bye. These things are so interesting to me. If you want to push back on something and say like, I don't agree with that, or if you want to dive deeper, Hey, if you want to be on this podcast and talk about it, we can do that too. Just let me know what you are thinking and let me know how this resonates with you. Okay. So the psychology of money by Morgan Housel, page five. I'm already taking notes So page 5 says it's knowing what to do tells you nothing about what happens in your head when you try to do it. Okay. I'm also reading and I'll be talking about this next month. I'm also reading atomic habits and I can't agree more with what Morgan Housel says here. Knowing what to do tells you nothing about what happens in your head when you try to do it. Dave Ramsey says over and over and over again. Money is 80 percent behavior and 20 percent head knowledge and Morgan Housel saying that again here. Okay. What you think about money, doesn't necessarily translate to how you do it in day to day life. Knowing what to do, I know that I should be putting 15 percent of my money into a savings account every month. I know that I should be investing for the future. I know that I should spend less than I make. But that doesn't necessarily translate to me going into a store and not spending money. Because oftentimes the reward centers in our brain are going spin now, spin now, spin now. It feels good now. Let future you worry about you. Right? So, right off the bat, the psychology of money. Knowing what to do doesn't mean you're going to do it. Morgan Housel then has a chapter on luck and risk, where he tells us to focus less on specific individuals and case studies and more on broad patterns. I don't necessarily believe in luck. I will tell you good luck. I will say, oh, look, this was so lucky that it happened, but I believe that it's not like, I believe it's the hand of God working in my life. But I do understand the sentiment, and I think that sometimes we can get really lucky on things, but I also think that if we are doing the things day to day to cause the luck to happen. It's easy to say, okay, luck, I see you there. Yes, that feels really lucky that that worked out, but is it lucky or is it just that I have put in the work and I've done the same thing over and over and over and over and over again? It's just time that I've hit gold. I also think that risk is a huge factor that sometimes we are so focused in on specific ideas, specific case studies. This can't be risky because But really, if we stop to think about it is really risky. We stop to think about it. We're like, Whoa, all of a sudden, the alarm, the alarm bells in my brain are going off because there's risk here that I wasn't necessarily thinking about. And sometimes when we're looking at money and financial decisions, we need to increase numbers, stay with the same percentages, but increase numbers to make ourselves feel the risk that is involved. And sometimes we have to look at. Okay, if I purchase this thing, what am I putting at risk? Where am I making myself vulnerable? These are things that we don't necessarily think about. Because we're doing things that feel good in the moment, or we're doing things that we think are good ideas because everybody else says that we should be doing them. And just because they're a good idea globally on a large case study basis does not mean that they're good for us. So we need to look at big picture, the big patterns, but also the specific patterns to our lives. We have to look at the luck and the risk. There's another chapter called Never Enough, where the hardest financial skill is getting the goalposts to stop moving. I love this. I talked a little bit, with Chad Hufford, SmartVestor Pro, a couple episodes back, where we talked about this idea of a constantly moving goalpost. Another way to look at this constantly moving goalpost and how to get it to stop moving is contentment. Feeling content with what you have in the situation and the circumstance that you're in, feeling calm and content in that, where you don't constantly need more, more, more, or you're happy with the steady steps that you're taking. And steady steps that you're taking can continue. So, at that point, the goal post doesn't have to keep moving. I was talking to somebody the other day, she was like, well, when I hit that finish line, then I'll. I looked at her and I said, the only finish line you're ever going to touch is when you die until then you're just reaching the next milestone. I think if we can look at it this way, like, it's not a goal post. It's not something to be hit. It's just the next thing that we pass along the way on our ultimate journey. If we can do that, we can increase our contentment and that will decrease our need to accumulate more, more, bigger, better. Another thing that Morgan Housel talks about is the difference between getting wealthy and staying wealthy. This is a concept that we all need to think about because sometimes the things that we do to get wealthy are not the same things we need to be doing to stay wealthy. And sometimes. The getting wealthy is the only thing we do because we can't stay wealthy because every time we get more, we get more, we get more, we spend more, spend more, spend more. And we'll talk about what it looks like to look wealthy, but not actually be wealthy. I was taken aback on page 83 of the book. When Morgan Housel made clear the ability to do what you want, when you want, with who you want, for as long as you want is priceless, but it takes money. It's crazy, right? I want to be able to do what I want, when I want, with who I want, for as long as I want. That's the ultimate dream. That's what quote unquote retirement looks like. That's what freedom looks like. When I talk about wanting financial freedom, that's what I'm talking about. I can do whatever I want. Whenever I want, with whoever I want. That's what I want to do. That's what everybody wants. That's, that's the American dream right there. But it takes money to do that. It takes money to give you options. It takes money to give you flexibility. We have to think about that's what I ultimately want. But how can I set myself up for that? That is the whole point of this financial coaching thing. Later in the book, Morgan Housel will quote Angus Campbell, who wrote The Sense of Wellbeing in America. This writing said, having a strong sense of controlling one's life is more dependable predictor of positive feelings of well being than any of the objective conditions of life we have not considered. You see, not having control leads to hopelessness, leads to despair. That's awful. Right now, if you are a quote unquote, normal American, then you are living a life where you're making car payments. You're making credit card payments. You're making house payment. You're paying other people. Those people control what you do and do not do with your life. Those people control where you do and do not live. Because those people tell your money what to do. You don't get to those people are in control and that can lead to a hopelessness that can lead to a feeling of I'll never get out of this cycle. I'll never get ahead. But if we take a 2nd and look and say, okay, what we ultimately want, we want a strong sense of control that's going to help us have positive feelings. That's going to help us feel good about our money. if we want that positive, good feeling, that priceless feeling that we were talking about earlier with the freedom, then we're going to have to be the ones that take control. We're going to have to be the ones that tell our money what to do. We're going to have to be the ones that control ourselves, the person in the mirror. So that we can have that happiness that joy you see in the sense of well being in America, Campbell recites this, this statistic says Americans felt worry 45 percent of the time versus the global average of only 39 percent of the time and Americans feel a lot of stress. 55 percent of the time versus the global community. Only 35%. The book Die With Zero feels important here and I did a podcast recording, where I discussed Die With Zero last year. Die With Zero talks about enjoying the moment, enjoying your money now when you're young enough to enjoy it. I think there's something to be said there. I think there's something about that that is a positive thing. Bill Perkins in Die With Zero talks about having nothing at the end of your life. So spending it all now and making sure that at the end of life, calculating when you're going to die and making sure that you run out of money before then. I don't necessarily love that. I kind of love the idea of enjoying the money now, but also having more than enough at the end of my life so that I can pass it on to the next generation, but giving them plenty early too. The other thing that we need to remember is we are accumulating money so that we can be where our feet are. We aren't just going out and getting money to have more money. We're going out and getting money so that we can enjoy it. We're going out and getting money so that we can, you know, do what we want when we want with who we want for as long as we want. Right? We're going out and getting money so that. We can enjoy our lives, but we have to be where our feet are. You can't be home and constantly thinking about work and be at work, constantly thinking about home and have any kind of peace. That's why I'm creating a new program where I'm going to be going into companies and as a benefit to their employees, I'm going to help them. Get a better handle of their money so that while they're at work, they can be focused on work and not stressing about how am I going to pay the bills? Not stressing about how am I going to keep the lights on at home? Not stressing about all of the other things they have financially. I'm going to take that worry off their plate. We are constantly worrying about work when we're home and worrying about home when we're at work. We are missing the piece. Be where your feet are. That's going to add it. Joy to your life, that's going to add calm to your life. You're going to be able to get more done. You're going to be more productive and you're going to be happier when you're present and in the moment. One of my favorite chapters. In psychology of money is the chapter. No, 1 sees the man in the car. This 1 blew my mind when I realized how right Morgan house was when he wrote this story. Now, a few years back, I guess, over a decade ago now, I was in a really bad car accident where I don't understand how I didn't get crushed. I honestly do not understand how I made it out with not. I had one scratch on my face and I don't understand it because I was pretty sure the car hit me dead on, but apparently I was wrong. My car was completely totaled and I was like, I shouldn't walk down to this alive. I'm going to go buy a sports car. That's what I was going to do with myself. I was going to buy my dream car because I deserve it, right? Oh, I deserve. I felt like I needed the sports car and everybody's going to think I was so cool when I was driving it and Morgan Housel and no one sees the man in the car says that he was working as a valet and cool cars would come up and he'd be like, man, I wish I could drive that car because people would think I'm cool. But eventually he realized that every time that car came up, he was like, if I drove that car, people would think I'm cool. And he never paid any attention to the man getting out of the car. When you see people driving down the street and you're like, Oh, that car would make me so cool. Do you ever look at the person driving the car? I've started to try, but usually the windows are tinted so I can't even see it anyway. Why are we paying this much money for the cool car that nobody can see us in and nobody's looking at us even if they can see us? The car doesn't make you. The car is not the be all end all. The car is what I'm looking at. I'm not even looking at you. When I take a step back and I realize that and I'm like, Oh, I don't need the manicured lawn because people aren't looking at me. They may see my lawn and go. Oh, wow. That is a beautiful house. Beautiful curb appeal. Wonderful. Whoever lives there must be rich, but they're never looking at the person inside the house. Your stuff does not make you and your stuff will not make you better to someone else. Just something you think about. Investor. Bill man says there's no faster way to feel rich than to spend money on really nice things. But the way to be rich is to spend the money you have and to not spend money you don't have. It's really that simple. Okay. Bill, man, I see you. I see what you're saying here. The best way to feel rich is to spend money on really nice things. Let me tell you, I like to spend money. I am a bit of a spender myself, not as much as my husband, which is probably a good thing. We don't need to both be a spender. I like to spend money on nice things. I like to have nice things, but I never want the nice things to have me. I never want to be beholden to them. I never want to owe somebody something for the things that I have in my house. So as long as I'm spending money that I already have, it's my money. It's not other people's money. I'm not spending other people's money because spending other people's money will make you feel broke. But if you want to feel rich, you spend what you have, what's already in the bank. Not what you're expecting to have later, but what's already in the bank. It really is that simple. In Chapter 10 of the Psychology of Money, the chapter is called Save Money. There are two big takeaways in this chapter. One says you don't need a specific reason to save. I somewhat agree with that. I think that you should be saving just for the idea of saving for the habit of saving. Everybody needs to be saving. My kids need to save money. You need to save money. I need to save money. We all need to be saving money to be in the habit of saving money for the things we want in the future. It's also great if you have a specific goal, your travel fund can just be travel. It doesn't have to be a specific destination, but you should also just be saving money for the habit of saving money with no specific reason. The other thing that I really like that he said in this chapter is saving is a hedge against life's inevitable. Ability to surprise the hell out of you at the worst possible moment. Yes, this is why we have an emergency fund. Life is going to surprise you and you're going to be like, what just happened? I'm sorry. There are things that are happening here and I was not expecting it. They call that Murphy's Law. Anything that can go wrong will go wrong. If I have a hedge in place and life pops up, Murphy pops up and he's the big bad wolf trying to blow my house down. My emergency fund is my brick house. You cannot blow it down no matter how much you huff and puff because I have a barrier between life, that's a big bad wolf, and myself and my security. Be the third pig. Build the brick house. Morgan Housel also goes on to say savings in the bank that earns 0 percent interest might actually generate an extraordinary return if it gives you the flexibility to take a job with a lower salary, but more purpose. Savings in the bank that earns 0 percent interest. Might actually generate an extraordinary return. My emergency fund is in an account right now that gets 0. 05 percent interest. That money is not an investment. It's not supposed to be. That's my hedge against life. That is keeping me safe. That is keeping the wolf at bay. I feel so calm. I feel so at peace because I have that money in the account. I'm extraordinarily calm because I have money getting nearly 0 percent interest, but it allows me the flexibility to continue this job. That I love that allows me to pick my kids up and drop them off at school every day. That allows me to go on fun adventures with them, but it allows me to make a difference as well. We have 2 more things here that we're going to talk about. Chapter 13, Morgan Housel says leverage is the devil here. Leverage taking on debt to make your money go further. Pushes routine risk into something capable of producing ruin. You see, you have to survive to succeed. I love this here. I can almost hear him because I've been listening to the podcast. I can almost hear him saying this. This sounds so much like him. Leverage is the devil here. Leverage taking on debt to make your money go further pushes routine risk into something capable of producing ruin. You have to survive to succeed. Do not let your chasing down of using other people's money, put you at risk. Because then you have alarm bells going off. It makes it harder for you to sleep at night. It puts you at risk. It could possibly take the roof off your head. When you are using other people's money, you are less thoughtful about how you spend it. And in turn, you make your life harder in the future. Easier today, harder in the future. You have to survive to succeed. If you put yourself at too much risk, the bank will call the note and you have just put yourself in jeopardy. The last point is one of my favorite things that Housel says in this whole book. Manage your money in a way that helps you sleep at night. That's what we're doing here, friends. We are making it so that it's easier for you to sleep at night. I'd love to have a conversation with you about any of the things that I said here on this podcast. I want to help you sleep at night. If money is frustrating to you, if you feel stress, let's figure out a way that you can go into 2024. At the end of the year, you feel good about your money. That sounds good to you. All you have to do is click on the money mastery program down here in the show notes. I'll talk to you soon. My friends go out and make a difference. Thank you for investing your time with us today on the Accelerate Your Legacy podcast. Remember, your legacy isn't just measured in dollars and cents, but in the tools, habits, mindset, and reputation you leave behind. Don't just listen to the show, but take action on what you've learned. Share this wisdom with a friend who can benefit and help us spread the word by rating and reviewing the podcast. For questions or encouragement, reach out to me on Instagram at Accelerate Your Legacy or explore the resources listed in the show notes. I will be back with you next week. Until then, build your legacy with intention.