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Personal finance: How to save, spend, and think rationally about money | Big Think

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Personal finance: How to save, spend, and think rationally about money | Big Think
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Whether you have a lot of money or a lot of debt, it matters how you handle your personal finances. A crucial step when it comes to saving is to reassess your relationship with money and to learn to adopt a broader, more logical point of view.

In this video, social innovator and activist Vicki Robin, psychologist Daniel Kahneman, Harvard Business School professor Michael Norton, and author Bruce Feiler offer advice on achieving financial independence, learning to control your emotions, spending smarter, and teaching children about money.

It all starts with education and understanding. The more you know about how money works, the better you will be at avoiding mistakes and the easier it will be to take control of your financial circumstances.

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TRANSCRIPT:

VICKI ROBIN: I was leading a session on a relationship with money. I just was curious about where people were with this at this point. This was in 2016. We had 50 people in the room. We circled up and we went around the room, just say something about your relationship with money. And I realized every person in that room was in fear about money. From the 80 year old who I know has millions of dollars to the 20 year old who's like already $20,000 in debt. And it just, honestly it infuriated me like what kind of society requires that everybody participate in something that terrifies them. This feels so amiss to me.

DANIEL KAHNEMAN: People are not fully rational and they make many choices that if they reflected upon them they would do differently. There's no question about that. The major tendency is people tend to frame things very narrowly. They take a narrow view of decision making. They look at the problem at hand and they deal with it as if it were the only problem. Very frequently it's a better idea to look at problems as they will recur throughout your life and then you look at the policy that you're to adopt for a class of problems. Difficult to do would be a better thing. People frame things narrowly in the sense, for example, that they will save and borrow at the same time instead of somehow treating their whole portfolio of assets as one thing. If people were able to take a broader view they would in general make better decisions. So that is certainly one of the weaknesses of human decision making. We call it narrow framing.

Four layers of financial independence

ROBIN: First of all, I'd like to distinguish between independence and freedom. So, financial freedom is like freeing your mind. Financial freedom is understanding that I'm me and there's an economy out there and I have a relationship with it but it doesn't run my life. It's freeing my mind from the messages of the consumer culture, the messages of the economy. The messages that a house is a starter house. No, that's my house. I could die in my house. It's like there's so many presumptions that drive us into waste slavery, debt, and it doesn't matter whether you are at the low end or the high end. If you are engaged in that sort of anxious process of more, more, more, you are not free.

So the first layer of financial independence I talk about is this freedom of the mind. This freeing your mind. Of saying like I am sovereign. The economy is secondary. I will move my sovereign self into the economy for my own purposes rather than I am a schlump, the economy is my mega-boss and I don't know, my boss seems to be as big as the sky and so I will just let my life be run by my boss and the tax system and I'm just going to let myself be run by this thing. No. So you are sovereign beings so that's your first layer of financial independence is your own sovereignty. And then the second layer is to get out of debt. And for some people debt feels endless. And the first step to getting out of debt is stop going into debt. There's many people who have written to us who flatten their debt in a couple of years. Impossible debt. Debt that was going to be endless. They would die with this debt. And once they see what the debt is doing to them in terms of the actual opportunities, the future opportunities of their lives, that's the sort of link that we try to get people to make so that something in the future is more important than the immediate pleasure of buying one more tchotchke that you're never going to use...


💬 Comments on the video
Author

What was your favorite personal finance tip from the video?

Author — Big Think

Author

I’m not actually a graduate and I’m still not proud of it but I have made a fortune invest in Bitcoin. Think smart

Author — Williams Francisco

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I do my best to assess the reward/risk and to invest in names that have significant upside potential. With Egan Hestrel at the helm of affairs of my trades, I have been able to build up a portfolio of shares that has generated a decent return of $500k in profit over a long term on a consistent trading. It’s safe to say that Hestrel is indeed legitimate after a succession of payouts. I have no doubt investing more.

Author — David Bucker

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Having money doesn’t necessarily make you happy but not having money will make you miserable

Author — notbohnhere butcantleave

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I haven’t had debt in 10 years. I save 50% of my check to savings, invest 30% of my gross and live on the rest. 35 and independent!

Author — nameunselected

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Such an educative and Nice content!…
The difference in succeeding and falling is consistency, but in being consistent you need a right information to be able to win, because having information on investing is one thing, knowing what to do with your information, is another thing entirely that is why I believe in trading with an experienced and professional trader first, CONS. Peter Lang has guided me through trading and helped me turn over profit.

Author — Robertson Collado

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“Too many people spend money they haven't earned, to buy things they don't want, to impress people that they don't like.”
― Will Rogers

Author — Question Everything — Thought Provoking Ideas

Author

it's amazing how the education system doesn't talk about these topics.

Author — Loafy Fishy

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Use cash. It activates the pain sensors in your brain. You’re giving a tangible thing away instead of a card

Author — Jeramithehuman

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"Advertising has us chasing cars and clothes, working jobs we hate so we can buy shit we don't need"
― Tyler Durden

Author — The Credible Hulk

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“Every time you borrow money, you're robbing your future self.”
--Nathan W. Morris

Author — Question Everything — Thought Provoking Ideas

Author

School doesn't prepare you for life, it prepares you for employment.

Author — Justin Hardy

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Wealth gained hastily will dwindle, but whoever gathers little by little will increase it.
- Proverbs 13:11

Author — Txx Rxxx

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1. Pay yourself first · 2. Save for emergencies · 3. Spend less, save more · 4. Lose a habit, gain some savings

Author — Talking life

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We need to be teaching personal finance in schools and the idea that “enough is enough” needs to spread like wildfire.

Author — KT Sterlin

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Alternate Video Title: "Shit Your Parents Should Have Taught You"

Author — Bushkill Blades

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"Turns out the kids would only do the chores for the money" yeah... Welcome to corporate america

Author — J M

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I have a relationship with money, but it doesn't run my life. Nice! Smashed the like button.

Author — Nick Finance

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Freeing your mind from consumerism is so important. We're literally trained from young to always want more, to never be satisfied to compare ourselves to our neighbors and what they have. I was always a natural saver, but struggled a bit in not comparing myself to others. It's still something I work on, but over time have gotten better. It definitely helped that I realized the image others put forward, the majority of the time is financed by debt! That's not something I'm interested in at all. I hope more people learn this concept and actively practice it. I'll definitely talk about it on my channel as well.

Author — Mary Ralladi

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You cannot have happiness without safety. At the most fundamental level, financial security helps with happiness.

Author — Julianna Holmes