Many people question how to get rich without really knowing how the rich people’s heads themselves to get to their achievements. Investments in stocks, mutual funds, crypto, property, there are many ways to choose from. But, remember that not everyone can profit and become rich because of it, in fact, there are also those who actually lose massively. It all starts from the point of view of looking at money. Now related to this, there is an interesting book entitled “The Psychology of Money” by Morgan Housel which states that “wealth has nothing to do with intelligence”.
Is it true? If you are curious, let’s just discuss some valuable lessons that can be taken from the financial capital book entitled “The Psychology of Money”.
Financial Success Is a Soft Skill
In his book he uses a case study of an OB named Ronald Read who can have a fortune of USD 8 million by saving alone. He lives a simple life and manages his finances well. Then this case is compared with someone who has a very strong academic background (from Harvard University) named Richard Funcone who failed because he was too greedy because he lived greedily and extravagantly. Well, from the two case studies, Morgan Housel assesses that we don’t have to be smart to be rich. Financial success is not a hard science (science developed with strict methods and has a high degree of certainty), but it is a soft skill that focuses on habits. In fact, when geniuses lose their cool in managing their finances, this can be fatal. Therefore our behavior in finance is more important than knowledge of money in determining wealth.
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Rich People Mindset About Compounding Effect
The mindset of the rich that we should consider is about compounding. For those who don’t know, the compounding effect is the ability of an asset to multiply profits. You must know Warren Buffet, right? Did you know that most of Warren Buffet’s wealth came after he was 65 years old? Why is that? Because Warren Buffet knows about compounding. When he was in his 30s and 40s, a lot of people were richer than him. He focuses on growing his assets, even though he only gets a return of 10-20% per year. But this went on for years so that his wealth consistently multiplied until finally, Warren Buffet became one of the richest people in the world. From this, we can conclude that wealth can be obtained from a clear understanding of the impact of compounding and consistency.
