The Savings Expert: “Do Not Buy A House!” Do THIS Instead! - Morgan Housel

Morgan Housel, author of "The Psychology of Money," discusses the dual challenges of making and keeping money, emphasizing the importance of endurance and humility in financial success. He highlights the stories of Ronald Reed, a janitor who amassed $8 million, and Warren Buffett, whose wealth is largely due to his long-term investment strategy. Housel also stresses the significance of understanding one's relationship with money, managing expectations, and the psychological aspects of financial decisions. He advocates for simple, consistent investment approaches like index funds and underscores the value of independence over material wealth.

• Morgan Housel is introduced as the author of "The Psychology of Money," a bestselling business book.
• The book is credited with changing lives by helping people understand wealth and finance.

"The world is split between people who don't know how to start making money and people who don't know when to stop making money."

• Emphasizes the dichotomy in financial understanding and behavior.

• Morgan writes primarily for himself, solving his own problems and hoping it resonates with others.
• He avoids pandering to an audience, aiming for authenticity.

"I write what I'm interested in and I write it in a way that I think is interesting and I try to solve my own problems."

• Highlights his personal and introspective approach to writing.

• The book encourages introspection about one's relationship with money.
• It aims to spark curiosity and a deeper understanding of personal financial behavior.

"If you become more introspective about who you are and what you want out of life and what money can do for you and cannot do for you, I hope that when you're done with the book, that's kind of when the learning begins."

• The goal is to foster ongoing learning and self-reflection about money.

• Rich: Having enough money to cover expenses and enjoy some luxuries.
• Wealth: Money that is saved and not spent, providing independence and autonomy.

"Wealth is hidden. It's the money that you didn't spend on a car, it's the money that you didn't spend on a big house, you didn't spend on jewelry."

• Differentiates between visible riches and hidden wealth, emphasizing the importance of savings.

• Financial independence is crucial for personal happiness and autonomy.
• Independence allows one to make life choices freely without financial constraints.

"Every bit of savings that you have is a piece of your future that you own. You're just buying your time in the future so that it's yours and you can do whatever you want with it."

• Savings are seen as purchasing future freedom and time.

• Housel shares stories from his own life and family to illustrate financial principles.
• His father's frugality and eventual financial independence are highlighted as key lessons.

"My dad is an ER doctor... he said he had had enough... and the reason he could do that is because he had saved up so much money."

• Illustrates the long-term benefits of frugality and saving.

• Lack of control over one's life and schedule can lead to significant stress and health issues.
• Autonomy is linked to happiness and well-being.

"People who work jobs where they had low autonomy and control had physiological consequences... more likely to have cardiovascular problems and heart disease."

• Emphasizes the health impacts of job-related stress and the importance of autonomy.

• Keeping expectations low can lead to greater happiness.
• High expectations often lead to disappointment and dissatisfaction.

"If your expectations rise faster than your income, you're never going to be happy with your money."

• Managing expectations is crucial for maintaining happiness regardless of financial status.

• Comparison with others often leads to unhappiness.
• Societal wealth does not necessarily correlate with increased happiness.

"The average household adjusted for inflation is making twice as much money than they were in the 1950s... and we're less happy."

• Highlights the paradox of increased wealth but decreased happiness due to societal comparisons.

• Recognizing that others are not as focused on you as you think can reduce the desire to show off.
• Understanding the true motivations behind wanting material possessions can help manage financial behavior.

"Nobody cares about your stuff as much as you do because to the extent that they're even looking at them, they're looking at your car, looking at your house, really what they're doing is imagining themselves with that nice car."

• Encourages a shift in perspective to reduce materialistic tendencies.

• True success and happiness come from meaningful relationships, not material possessions.
• Serving others selflessly in relationships leads to greater fulfillment.

"The definition of success is when the people who you want to love you do love you."

• Emphasizes the value of personal relationships over financial success.

• People in low-income areas often engage in behaviors like gambling due to a lack of financial opportunities.
• Recklessness with money is common when financial resources are scarce.

"The poorest 10% of Americans buy like 80% of the lottery tickets in America... buying a lottery ticket might be the only thing in life that gives you a little bit of hope."

• Explores the psychological and social factors contributing to financial behavior in low-income areas.

• People in lower socioeconomic positions often view gambling as a rare opportunity for a significant change in their lives.
• The sense of hope, even if statistically negligible, provides emotional relief and a sense of possibility.
• The relationship between poverty, crime, health, and poor lifestyle choices can often be attributed to the lack of hope and opportunities.

"If you feel the world is unfair then it's very natural to think I might as well cheat too if the world's unfair why not might as well cheat."

• This quote highlights the mindset where perceived unfairness in society can lead to justifying unethical behavior.

"If it's the only thing in your day that made you smile a little bit made you feel like you had a little bit of hope then I get why they do it."

• It underscores how even minimal hope can significantly impact daily life and decision-making.

• Financial stress often comes from a lack of control over one's financial situation.
• Savings are viewed as a path to independence, allowing for better career choices, health security, and overall happiness.
• There are three types of people regarding savings: those who save, those who think they can't save, and those who think they don't need to save.

"The ticket out is not a nicer car it's not a bigger house it's not better clothes the ticket out is Independence."

• This quote emphasizes that true financial freedom comes from savings, not material possessions.

"Save money that's it that's the the title of that chapter in the book is save money because you can't put it any clearer or Starker like that's that's it."

• It stresses the simplicity and importance of saving money as a fundamental financial strategy.

• Financial behavior may be influenced more by inherent traits (nature) than by learned behaviors (nurture).
• Some people naturally understand and value saving, while others may never grasp it, regardless of education or effort.

"Warren Buffett talks about the people who have the money mind which means like either they get it or they don't and if they get it they get it instantly and if they don't they'll get it never at all."

• This quote discusses Warren Buffett's view on the innate understanding of financial matters.

• Significant life events, such as the loss of friends, can drastically alter one's risk appetite and financial attitudes.
• These events can lead to a deeper understanding of the unpredictability and fragility of life.

"The world hangs by a thread and there are tiny little no nothing decisions maybe that you made today of maybe it was when to cross the street maybe it was when to leave to get in your car that can utterly change the course of your life."

• This quote illustrates how minor decisions can have profound impacts on life, emphasizing the unpredictability of life events.

• Successful investing is more about endurance and less about high returns in the short term.
• Dollar-cost averaging and investing in index funds are recommended for long-term wealth accumulation.
• The power of compounding over time is the key to significant wealth.

"If I can just earn average returns for an above average period of time it's going to lead to amount of success that will literally put you in the top 5% of investors."

• This quote highlights the importance of consistent, long-term investing over seeking high returns.

"99% of Warren Buffett's net worth was accumulated after his 60th birthday after he turned 60 years old."

• It underscores how long-term investing and the power of compounding have contributed to Warren Buffett's immense wealth.

• Understanding and defining what "enough" means is crucial for financial and personal satisfaction.
• Financial independence allows for the freedom to choose work that is fulfilling rather than necessary for survival.

"Having enough doesn't necessarily mean that you're going to stop working it just means you're going to keep doing only the work that you want to do."

• This quote explains that financial independence provides the luxury of choice in one's professional life.

"If you won a billion dollars in the lottery but you had to stay at this job you're a billionaire but you can't quit what if this company would you want to do and what would you get rid of."

• It encourages reflection on what aspects of one's job are genuinely fulfilling and which are merely tolerated.

• The relentless pursuit of more can lead to significant personal costs, including health and relationships.
• Reflecting on potential regrets can help prioritize what truly matters in life.

"If I were on my deathbed tomorrow would I regret working hard and saving a lot of money and my answer is absolutely not it would give me so much pleasure to know that my wife and my two young kids are going to be fine."

• This quote emphasizes the peace of mind that comes from knowing one's family is financially secure, even at the expense of personal sacrifices.

• High savings rates often lead to greater happiness and security, especially in family care.
• Regret is less likely to stem from not purchasing luxury items.
• Prioritizing family and future security over material possessions.

"What makes me gives me so much happiness and pleasure is taking care of my family and if I were to go to tomorrow I wouldn't regret for one second the car that I didn't buy the big house I didn't buy the nice clothes I didn't buy not for a second would I regret not doing those."

• Explanation: Emphasizes the value of family care over material possessions, suggesting that financial decisions should focus on long-term security rather than short-term luxury.

• The concept of giving inheritance early, when it can make a significant impact.
• Risks associated with giving large sums of money to children.

"Give it to them when it really matters which for most people is in their 30s and 40s if you wait until you die at age 90 and your kids are 60 and then they get your money like what's the purpose of that."

• Explanation: Advocates for distributing inheritance when it can be most beneficial, rather than waiting until later in life.

"Charlie says because if you don't your kids will hate you."

• Explanation: Highlights the potential emotional consequences of withholding wealth from children, even if it might affect their ambition.

• Importance of teaching children the value of money through experiences.
• Balancing financial support with fostering independence.

"We flew first class and we explained to him that this was not normal this was not going to be the way it is as soon as he did it he went home he told all of our neighbors told all of his friends told everybody at school and that was when my like can't can't do this never again."

• Explanation: Demonstrates how luxury experiences can alter children's perceptions and expectations, necessitating a balance in upbringing.

• Different skills are required for making money (optimism, risk-taking) versus keeping money (conservatism, patience).
• Importance of endurance and patience in investing.

"The hardest thing to be a great investor is to be able to sit on your hands and do nothing sit on your ass and do nothing."

• Explanation: Highlights the importance of patience and restraint in successful investing, as demonstrated by Warren Buffett's approach.

"Endurance and patience is 99% of what you need as an investor because the opportunities there to invest in a low-cost Index Fund are available for everybody."

• Explanation: Emphasizes that endurance and patience are crucial for long-term investment success, accessible to everyone through low-cost index funds.

• Young adults should maintain financial flexibility due to life uncertainties.
• Taking risks in career choices early on can lead to greater learning and opportunities.

"When you graduate college and you looking at your career don't take the safe job which is usually like the big company the blue chick company go for the weird company."

• Explanation: Encourages young adults to pursue unconventional career paths early, which can offer unique learning experiences and opportunities.

• A few significant successes often drive the majority of returns in investments.
• This principle applies broadly to life and business.

"For every 50 Investments That Venture capitalists make statistically half of them will completely fail 10 will do okay and one or two will make huge profits that drive 100% of the funds returns."

• Explanation: Illustrates how venture capital relies on a few major successes to drive overall returns, a concept that applies to various aspects of life.

"All of this is a case for humility."

• Explanation: Stresses the importance of humility and recognizing the role of luck and unpredictability in success.

• Success can lead to complacency, which can be detrimental.
• The need to keep striving and taking risks to maintain a competitive edge.

"Competitive advantages tend to be short-lived often because their success plants the seeds of their own decline."

• Explanation: Success can lead to complacency and a decline in competitive advantage, necessitating continuous effort and innovation.

"The reason you're successful is because you work so hard to get to where you were and now that you feel like you've made it now that you feel like you're on the top of the mountain top you get lazy."

• Explanation: Warns against the dangers of complacency following success, emphasizing the need to maintain the effort that led to success.

• Failure is an integral part of innovation and success.
• Companies and individuals must be willing to take risks and accept failures to achieve significant breakthroughs.

"If you think that was a big failure just wait you've seen nothing yet and like that's why Amazon's successful they're willing to try a thousand things with the idea that they know 990 of them are going to fail but the 10 that work are going to be massive."

• Explanation: Illustrates how Amazon's willingness to accept failures is key to its success, emphasizing the importance of taking risks.

"You want your failure rate to be at least some that that's when you know you're at least trying something new."

• Explanation: Suggests that a certain level of failure indicates that an organization is taking sufficient risks and innovating.

• Insatiable hunger and drive characterize highly successful individuals.
• Success often leads to the pursuit of even greater challenges.

"The reason that they are successful is because they have that complete swing for the fences."

• Explanation: Highlights the relentless drive and risk-taking mentality that fuels the success of highly accomplished individuals.

"If Elon Must List till he's 97 he's going to be starting new rocket companies for sure."

• Explanation: Emphasizes that highly driven individuals like Elon Musk continue to pursue ambitious goals regardless of their existing success.

• Extreme success often comes with significant personal sacrifices and stress.
• Many highly successful individuals lead difficult and stressful lives despite their achievements.

"I think most people in that situation the word that I would use is tortured I think they wake up every morning tortured at the problems that they are aspiring to solve that they haven't solved yet."

• Explanation: Describes the intense pressure and stress experienced by highly successful individuals, often leading to a sense of being tortured by their ambitions.

"If you were to ask me which one of those lives would I take would I rather be someone with $50 million who was traveling around the world hiking in Bali with my wife or would I be worth a hundred billion dollars and wake up every morning scared shitless with so much pressure on my shoulders for me it's obvious I'd much rather be Tom than Mark."

• Explanation: Contrasts the stressful life of a billionaire with the more relaxed and fulfilling life of someone with a moderate level of wealth, highlighting the trade-offs of extreme success.

• A certain level of stress and challenge is necessary for motivation and engagement.
• Successful individuals often seek out new challenges to maintain their drive.

"Everyone needs to have some sort of conflict Strife challenge stress in their life and for I think for a lot of people if they don't get it from real places they just make up fake problems in their life."

• Explanation: Suggests that some level of stress and challenge is essential for motivation, and people may create problems if they lack real challenges.

• Success can lead to overconfidence, which can result in poor decision-making in other areas.
• Recognizing the role of luck in success is crucial to maintaining humility.

"You were right on this topic and then therefore you assume that you're going to be right on another topic and you didn't know the role luck might have played."

• Explanation: Warns against the dangers of overconfidence stemming from success in one area, emphasizing the need to recognize the role of luck.

"Their success increases their confidence more than their ability and they don't even know that that's a problem."

• Explanation: Highlights how success can lead to overconfidence, which can ultimately result in failure if not recognized and managed.

• Success can create blind spots due to overconfidence and lack of critical feedback.
• Roman warriors hired individuals to remind them of their fallibility during victory parades.
• Great entrepreneurs and investors often have partners who provide honest feedback.

"When you have some level of success in your life, whatever that level is, just always remind yourself."

• Success requires maintaining humility and being aware of one's fallibility.

"They would have someone by their side whispering in their ear something along the lines of you're not that great."

• Historical examples show the importance of having someone to ground you, such as Charlie Munger for Warren Buffett.

"A big part of Charlie Munger's job is to tell him when he's being an idiot."

• Success can lead to financial imprudence if not checked by humility.
• Saving money is crucial to ensure stability when success wanes.

"I just go just save loads of money Steve because the day you're wrong you don't want to go broke."

• Humility involves recognizing the temporary nature of success and preparing for downturns.

"Whenever the curtain comes down on my career, I want to make sure that I can say like hey thank you for for letting me have this."

• Success in any field comes with inherent costs, such as volatility in investing or long hours in a career.
• Identifying and accepting these costs is crucial for sustainable success.

"The price you pay to be wealthy is the volatility you have to incur along the way."

• Success requires enduring uncertainties and sacrifices in various aspects of life.

"The cost of a successful career might be long hours where you were pulled away from your family."

• Understanding one's time horizon is critical for setting and achieving financial goals.
• Time horizons vary based on individual goals and life stages.

"It's the amount of time between now and whatever your goal is which is very different for everybody."

• Personal examples illustrate different time horizons for career, family, and retirement planning.

"I want to get to a point or maybe I'm nearing a point in my career where I'm just doing things because I enjoy them."

• The decision to buy or rent a house should be based on lifestyle needs rather than financial gain.
• Stability becomes more important with family, while renting offers flexibility for mobility.

"Once we had our son, our first kid, then very quickly nothing became more valuable to me than having an established secure home base."

• Financial returns from buying a house are often overestimated; historical data shows minimal real growth.

"Robert Schiller won the Nobel Prize about a decade ago for his work in showing that over the last 150 years in the United States adjusted for inflation most home prices have been flat as a pancake."

• The best story often wins in convincing people, not necessarily the most accurate or rational argument.
• Storytelling is a powerful tool in various fields, including entrepreneurship and investing.

"It's always the case that it's not the right answer or the best answer or the mathematically accurate answer; it's just whoever gets people to nod their heads in the right direction."

• Examples from Ken Burns and comedy illustrate the effectiveness of storytelling in engaging and persuading audiences.

"Ken Burns... is massively successful because he's probably the greatest Storyteller of our time."

• Compounding interest can significantly impact wealth over time, but its effects are often underestimated.
• Bad habits and negative behaviors can also compound, leading to detrimental outcomes.

"Most good news happens slowly and most bad news happens very fast."

• Understanding and leveraging the power of compounding is crucial for long-term success.

"99% of Warren Buffett's net worth came after he was 60 years old."

• Discomfort and challenges often lead to significant personal and societal growth.
• Difficult experiences can result in positive changes and innovations.

"Stress, pain, discomfort, shock, and disgust for all its tragic downsides, it's also when the magic happens."

• Historical and personal examples show how adversity can drive progress and improvement.

"Nothing has been more technologically Progressive for the world than World War II."

• Wealth creation involves understanding personal goals and values rather than following generic advice.
• Reflecting on one's life and decisions is more valuable than seeking specific financial advice.

"I hope they get you to think about your life in a different way."

• The importance of personal reflection and self-awareness in achieving financial and personal success.

"If it gets you thinking about your life, then I think I've been successful doing this."

• Reflecting on past regrets can provide insights and lead to personal growth.
• Managing anxiety and worry can improve overall happiness and well-being.

"I wish I could go back to different periods of my life in a time machine and just say it's going to be okay."

• Recognizing the impact of worry and anxiety on life and learning to manage them better.

"I could have been happier than I was if I had accepted a certain level of just telling myself it's going to be okay."