Develop a strong resistance to the Fear Of Missing Out (FOMO) in financial decisions. This is identified as the single most important financial skill for accumulating significant wealth over a lifetime, especially in modern markets influenced by social media.
Clearly define your personal investment game and time horizon (e.g., 20, 30, or 50 years). Avoid taking cues or advice from those playing a different game, such as short-term trading, to prevent dangerous and misaligned decisions.
Ensure your financial expectations grow slower than your net worth. Maintaining a gap between increasing wealth and controlled expectations is crucial to avoid financial trouble and allow for both a better material life and continued savings.
Shift your perspective on money from merely optimizing a spreadsheet to seeing it as a tool for living a better, happier life. This enables decisions that prioritize personal well-being and independence, even if they appear financially suboptimal on paper.
Focus on using money to gain independence and spend quality time with loved ones. Money serves as the ‘oxygen of independence,’ enabling you to choose how you spend your time and with whom, leading to deeper satisfaction than accumulating more things.
Realize that personal finance is deeply personal, so be cautious about adopting financial strategies or cues directly from other people. Be introspective and determine what works for yourself and your family, even if others disagree.
Cultivate a high savings rate not just for wealth accumulation, but to gain the independence and autonomy to make life choices, such as early retirement or career changes, when you desire. This provides freedom from being tied to work out of necessity.
Define wealth as the money you don’t spend, which provides independence and autonomy. Focus on saving and investing this unspent money to achieve true wealth, rather than just acquiring possessions (being ‘rich’).
Prioritize financial endurance by capping downside risk, allowing you to stay in the game longer than others. This long-term persistence, combined with a psychological drive to continue, plays a massive role in success.
Understand that most financial debates (investing, saving, spending) are not actual disagreements but rather people with different personalities talking over each other. There is not one right answer for everyone, as financial decisions are deeply personal.
Adopt a long-term investing strategy by owning index funds for as long as possible. This approach aims to achieve above-average results by being ‘average for an above average period of time,’ which can lead to incredible outcomes and financial goals.
Recognize that investing, particularly with index funds, is one of the few endeavors where the harder you try, the worse you are likely to do. The ’leave-it-alone’ aspect of index funds is very important, as any activity tends to be detrimental over time.
Do not aspire to have 100% of your net worth growth accrue to savings; allow your lifestyle to improve somewhat. The goal is to have a great life with material possessions and travel, ensuring a gap between your net worth and your expectations.
Do not fall for the lie that more money automatically solves all life’s problems or guarantees happiness. While money can enable independence and time with loved ones, it’s not a direct path to happiness and can even remove hope if not managed with realistic expectations.
Be discerning when choosing financial role models, as true wealth (independence and autonomy) is often hidden, unlike visible displays of richness. Seek out individuals who embody the financial freedom you desire, even if they live modestly.
Be aware that success can lead to complacency and degrade the drive that initially made you great. Continuously cultivate motivation and a sense of inadequacy to maintain the habits and efforts that led to your achievements.
Actively seek out honest, unvarnished feedback, especially as you become more successful. The higher you are on the totem pole, the less likely people are to tell you what you’re doing wrong, which can degrade the thing that made you great.
Define risk in personal terms as anything that prevents you from achieving your specific goals. This personal definition is crucial because what is risky for one person (e.g., market volatility for a day trader) may not be for another (e.g., a long-term investor).
Recognize that getting rich and staying rich require distinct skill sets. Strive to develop both the audacious risk-taking needed for wealth creation and the conservative, paranoid approach necessary for wealth preservation.
If passing on wealth, aim to leave your children enough money so they can do anything, but not so much that they can do nothing. This provides them with leverage and tools to find out who they want to be, without burdening them into a specific lifestyle.
Be mindful that increased money can lead to a more complicated life, and complication can lead to unhappiness. Actively work to keep life simple, as managing too many assets or responsibilities can become a burden.
Guard against ’expectation inflation,’ where increased wealth or improved circumstances lead to higher expectations, making you more sensitive to minor inconveniences. Maintain realistic expectations to preserve contentment and avoid feeling upset by small things.
Do not think that all poverty is due to laziness, nor that all wealth is due to hard work. Avoid using net worth as a yardstick to measure people’s value, as this is a profoundly wrong and dangerous takeaway from money.
Focus on understanding how money can genuinely contribute to your happiness, rather than just accumulating more for the sake of it. There is no other purpose for money than to make you happier, and understanding this value is crucial.
To better understand money and decision-making, read widely across diverse fields like politics, military history, biology, and sociology. These subjects offer insights into human behavior under uncertainty, risk, and imperfect information, which are crucial for financial understanding.
When observing successful individuals, identify and focus on their repeatable skills and frameworks (e.g., patience, risk management) rather than non-replicable conditions (e.g., market timing). These are the actionable elements you should pay the most attention to.
As success grows and requests for your time increase, the only way to manage it is to say ’no’ to virtually everyone. This protects your focus and prevents you from being overwhelmed, even if it feels uncomfortable.
For reading, adopt a ‘wide funnel and tight filter’ approach: start reading any book on any topic that looks even mildly interesting, but be merciless in abandoning it if it’s not working for you. This helps discover unexpected interests and avoids forcing yourself through unhelpful material.
Use a tool like Readwise to consolidate and review all your highlights from books, articles, and social media. This creates a personalized ‘smart feed’ of valuable insights and anecdotes for future reference and learning.
Recognize that ’the best story wins’ because stories are easier to remember, contextualize within one’s own life, and evoke emotion compared to statistics. Use compelling narratives as leverage for statistics to make complex ideas accessible and memorable.
When writing, prioritize writing for an audience of one: yourself. Focus on crafting sentences that genuinely move or satisfy you, rather than pandering to perceived audience preferences, to create more authentic and emotionally resonant stories.
Always remember the reader’s impatience: get to your point quickly and clearly, then move on. Ask yourself, ‘What is the point I’m trying to make?’ and then ‘get the hell out of people’s way’ after making it.
Apply Mark Twain’s advice to writing: mercilessly cut out any parts that readers are likely to skip. This ensures conciseness and keeps the audience engaged with only the most impactful information.
Test your ideas, as your own judgment about what will resonate with an audience can be inaccurate. Embrace vulnerability and share personal experiences, as these often connect deeply with readers, even if you initially feel they are too obvious or personal.
Practice writing concisely, similar to the character limitations of platforms like Twitter. This discipline forces you to distill ideas into their most essential form, improving clarity and succinctness in all your writing.
As a parent, focus on the long-term goal of raising well-balanced, self-sufficient, polite, and happy adults, rather than just ‘good kids.’ This perspective guides parenting decisions towards fostering independence and character that lasts into adulthood.