Winters will always come, and again | The Psychology of Money by Morgan Housel
Book-1 | Lesson-3
“History is littered with good ideas taken too far, which are indistinguishable from bad ideas. The wisdom in having room for error is acknowledging that uncertainty, randomness, and chance—’unknowns’—are an ever-present part of life. The only way to deal with them is by increasing the gap between what you think will happen and what can happen while still leaving you capable of fighting another day.”
“Worship room for error. A gap between what could happen in the future and what you need to happen in the future in order to do well is what gives you endurance, and endurance is what makes compounding magic over time.”
“The biggest single point of failure with money is a sole reliance on a paycheck to fund short-term spending needs, with no savings to create a gap between what you think your expenses are and what they might be in the future.”
The world is always filled with uncertainty, and the good days don’t last. The key secret to managing money is to take into account these ‘bad times’ and ensure you have enough stock for the winters.
COVID is a great example to make you understand why maintaining ‘emergency funds’ is very crucial.
Read the next lesson: People change, so will you
We share 1 lesson from a book of the week from Monday - Friday. Short notes, no spam. Invite your friends to subscribe:
An initiative by merrative.com - a community to discuss ideas from literature like books, news, articles, and research papers, together.