This Easter weekend I started reading Morgan Housel’s book on the Psychology of Money. I have not yet gone too far, but am intrigued by it basic concept that keeping money is not the same as making money.
I have shared this severally on this page before. But in this article, I want to demystify the role of education or lack of it in the world of money. As Morgan Housel correctly identifies, personal financial management is one area where there seems to be no direct correlation between the level of education and the ability to make and keep the money to grow into wealth.
Making money, investing and turning this into wealth is one area where one’s education does not really matter much. It also does not relate to one’s professional background. This is one field where the educated and learned can be taught by the uneducated and even those without any professional background.
Here are five reasons that explain this:
- Making money and keeping it is not just about the science behind it but also about our habits – how we behave when we get money makes all the difference as to whether we are going to keep it or not. This is never taught in any class but is influenced by the environment we were born and brought up; the people we interact with regularly; our own individual worldview; individual goals and value systems; personal discipline; and life choices like a spouse and friends;
- The environment in which we make & invest money is constantly changing but the basic rules on money and wealth remain the same – while we live in a completely different world than those of our grandfathers, the basic rules of money have never changed. They did not have the privileges of education, information and technology that we have today, but some like is for our case today made it through into financial freedom. That means there is something different from education or technology that determines who wins money games and who does not. It thus becomes a personal responsibility to find out what is this that works for the few minorities who make it that the majority do not seem to know;
- There are clear trade-offs between pleasure now and financial freedom in the days ahead – your individual ability to live a fruitful and productive life today as you balance your future goals and financial interest is the key to mastery of money. This balance is the most difficult for most people to master. Saving for rainy days in future or enjoying quality life in your latter years does not mean sacrificing living your life today. As I have always said, life happens every single day and there is no way of rewinding every single day that passes;
- Learn to think future while you act and live today –this is one skill that separates boys and girls from men and women when it comes to money. We all desire to improve the quality of our lives in the future without postponing living today. This is never taught in any formal academic set-up but is learned in the streets of real life. You can look for those who have done it before to get titbits here and there –it is a MUST-have skill if you truly desire money and wealth; and
- Do not look for sophistication because the true money process is simple, easy to understand and act –if you ever find something is difficult or looks complicated for you to understand or follow, then it is most likely not good for you. For example, the rule of thumb for me when am making investment decisions is whether what am about to put money into is simple and easy for me to understand and follow how my money will come back. If this cannot be explained in simple terms, then am not going to put my money there. You can never go wrong with this simple approach to evaluating where you put your money.
As my concluding thought, we are now firmly in the 2nd quarter of 2023, it is good practice to check if you are on target towards your 2023 targets. If you have not set any so far, it is still not too late to get started.