Greeting

Good Afternoon Toastmaster…. And all other follow Toastmasters and distinguished guests

Capture audience interest

A lot of things that we do with money is based on our psychology. We all learn about money with
our experiences because as far as I know that in our school there was never a subject on money or
management of money. We have never been taught about how to keep track on our experiences. So
I thought of sharing the learnings from a book called “Psychology of money”. I may take little longer
but surely it will benefit everyone.

I believe if you are with me throughout the session then I guarantee you that I can change your
perspective towards money:

The presentation part and all animation has been prepared by my daughter:

1. Managing money has to do more with the behavioural skills rather than technical skills:

I would like to quote 2 examples to validate the same:

a. Ronald Read was Security guard and saved throughout his life and left $8 million
networth at the time of death while another person Richard Fuscone who was
Harvard educated and Merill lynch executive spent heavily and lavishly. Hw got hit
by 2008 financial crisis and declared bankrupt.

Thus, Financial success is not a hard science. It’s a soft skill, where how you behave is more
important than what you know.”

2. Our current relationships with money are based on our past experiences and every one has
different views with money.
- People who lived through The Great Recession and are now scared of reinvesting.
- You know, Americans spend more money on Lottery tickets than, movies, music e.t.c
and it is the set of poor people who buy these lottery tickets. Low-income households
who spend, on average $400/year. It seems crazy for us but they are justify it by saying
that they blowing up safety net for hit one in million opportunity.
Hence, we must learn to make investment decisions based on our goals and investment
options rather than experiences.

3. Luck & Risk

It is very important to understand as most of us have different views about contribution of
luck and risk in financial success.
Both luck and risk are an integral part of finance. Do not assume that individual effort
alone will allow you or others to be successful.
Bill Gates is perfect example of this…I don’t know, how many of us are aware that Bill
Gate the only School in the world that Computer in 1968 and Gate himself admitted that if
he was not in that school then Microsoft wouldn’t be there.
 On more thing about Bill gates was that there were 3 friends out of which Kent Evans
was brilliant amongst them but he died before graduation. This is the example of bad
luck.

Once, Noble prize winner, Robert Shiller was asked that What do you want to know
about investing.. he told I want quantify the exact role of luck in successful outcomes.

4. Defining Enough
As I have mentioned in my earlier speech also that “Defining enough is very important”. The
hardest financial skill is getting the goalpost to stop moving. Many times, we keep
reputation, freedom, love and happiness at stake just for the purpose of gain.
The great example of this is Rajat Gupta (Ex partner Mc Kinsey)..He came from Kolkatta and
rose up to the level of MD of Mc kinsey and involved in the Boadr of many reputed
Companies. Because of greed, he got indulged in insider trading and sent to Jail. He lost all
his reputation and good will.
I may sound conservative but it is fact that most of keep changing goal post which results in
to not achieving happiness.

5. Getting wealthy and Staying wealthy

There are many ways of getting wealthy but staying wealthy requires fear that what have
made can be taken away from you just as fast. It requires assumption that tomorrow
wouldn’t be like yesterday and you can not be relaxed. You have to be financially
unbreakable.

To give you an example.. Have we ever seen any person who won the lottery remain wealthy
through the life…You can take the example of Sushil Kumar who won Rs.1 Cr. in KBC remain
wealthy for some time but now, he is not rich now because he did not have skills to remain
wealthy.

6. Wealth Is What You Don’t See

In normal scenario, we start judging the people by their visible wealth e.g. if he has big cars,
expensive items , etc. Wealth is what we don’t see.
So if Someone driving a Rs.50 Lacs car might be wealthy. But the only data point you have
about their wealth is that they have Rs.50 Lacs less than they did before they bought the
car.”

We often get confused between Rich and Wealthy…Let me tell you the difference.
People who live in big homes or has fancy Cars are rich while wealth is hidden.. It is actually
the ability to buy certain things, if needed.

People say they want to be millionaires, what it really means is that they want to spend a
million dollars.

7. Saving Rate
It is the most important part of the whole session. Saving is key to generation of wealth.
More than return, it is actually the rate at which we are saving out of our income.
Saving can be defined as gap between our ego and income.
Example of Oil supply crisis in year 1970 was dealt in two way:
- Supply side was increased by 65% while:
 - With the increased fuel efficiency, energy conservation was doubled.

We could tackle that crisis because of saving or conservation of energy because supply side
is also limited.

Finally following are the key points of above session:

o Three keys to be wealthy: a high savings rate, patience, and long-term optimism.

o Live below your means.

o Derive pleasure from free or low cost activities: exercise, reading, podcasts, learning.

o Owns his house without a mortgage. Admits that this is a terrible financial decision
but a great money decision (peace of mind).

o Maintains 20% of his assets in cash (outside of the value of his primary home).

o Never interrupt compounding

This may sound conservation approach but it depends on Individual’s perspective.