Text |Bank Screws **Please obtain my authorization, and indicate the author and source).
Today we introduce a good book that I read recently, called "The Psychology of Money".
The book doesn't introduce much investment expertise.
Rather, it introduces how investors should do a good job from the perspective of psychology and behavior before investing.
This book argues that the success of financial management has little to do with IQ, but is closely related to behavioral habits.
Behavior is hard to teach.
Even those with high IQ and high income, many of them are unable to accumulate wealth because of unhealthy financial management behavior.
Before investing, every family needs to prepare a sum of money.
Enough funds for yourself or your family to live normally for 6-24 months without a job.
This is especially important during the economic downturn.
Because economic downturns are often accompanied by a decline in the employment rate.
Be prepared. In addition, the significance of this fund is that you have the right to choose when you encounter a job that is unhappy and does not meet your values.
It's okay to say "no" to unhappy things without walking on thin ice.
Because you know that even if it takes time to find another way, your life will not be in a quandary.
There is also no need to make risky investments with this fund.
It can be placed in financial management or stable currency**, bonds**.
In the traditional perception, we think that accumulating wealth is either a high income or a strong investment ability.
But in fact, building family wealth, in many cases, is not only related to income and investment returns.
On the contrary, it has a lot to do with the savings rate.
Here's a formula for family wealth accumulation:
Household wealth = income * savings rate * (1 + return on investment).
1) Income is well understood. It's our family's income.
2) Savings rate, for example, if you earn 10,000 yuan a month, after deducting various expenses, you will finally save 2,000 yuan. That's 20 percent savings.
It is possible to deposit in the bank for financial management, and it is also possible to invest in **. But it's all about the savings rate.
3) Return on investment. That is, the return on investment obtained from long-term investment.
A bear market will see short-term floating losses, but over a longer period of time, it will result in a long-term average return on the asset.
So it's easy to think that there are three ways to accumulate family wealth:
Boost revenue
Increase your savings rate
Increase the return on investment
If you want to increase the rate of accumulation of household wealth, increase it by 20%.
That could be a 20% increase in income, or a 20% increase in the savings rate, or a 20% increase in the return on investment.
(1) It is not easy to increase the return on investment.
The long-term annualized yield of A-shares is around 8%-10%.
Excellent managers can increase the annualized rate of return by 3%-4% on this basis.
But very few managers can achieve an annualized rate of return of 20% in the long run.
Increasing the return on investment by 20% is not something that happens overnight.
Sometimes you need to cooperate with the market and wait patiently for the bull market.
(2) It's not easy to increase income.
The income of most office workers will grow faster between the ages of 25 and 35.
The growth rate of 35-45 year olds is gradually slowing down. Growth is slowest in the years leading up to retirement. There will be a decline in income after retirement.
By developing a side hustle and becoming a slash youth, it is possible to increase income, but there are also uncertainties.
(3) It is easiest to increase the savings rate.
For most households, the savings rate is around 10%-20%.
Optimize spending, don't spend unnecessary money, don't spend money to show off your wealth, and use consumer loans sparingly.
It is not difficult to increase the savings rate by 20%.
Some of the top investment gurus can even raise the savings rate to 30%-50%.
For example, when the global investment master Templeton and Warren Buffett were young, the savings rate once reached 50%.
Therefore, the savings rate, that is, the ability to save money, is the core of family wealth accumulation.
Even a middle-income family can accumulate more wealth than a wealthy family by increasing its savings rate.
Of course, the money you save also needs to be a good and prudent investment.
The biggest risk in investment is not the ups and downs of short-term floating losses and floating profits.
Rather, it is necessary to avoid the risk of permanent loss of principal, that is, to avoid the risk of the family's savings for many years going to zero overnight.
Successful investing doesn't require you to make successful decisions all the time.
It's enough that you just don't mess things up all the time.
Find out what happens next, and listen to the next breakdown
Author: Bank Screw**Please obtain my authorization, and indicate the author and source).