Many individuals who have amassed wealth are not graduates of prestigious universities like Stanford or MIT, and some didn’t even complete their education. The truth is, financial success does not hinge on academic credentials.

Regular people have become wealthy by adhering to distinct principles that draw money towards them. Award-winning author Morgan Housel elucidates these principles in his book, The Psychology of Money. Below, I have distilled seven of the most significant lessons from his insights.

Embrace these ideas, reflect on them, and put them into practice. Wealth may be closer than you think; sometimes, all it takes is a slight push to seize it.

1. Be Cautious of Your Aspirations A seasoned investor would never purchase a lottery ticket, viewing it as a poor investment. Conversely, a lottery player might argue, “If I can’t afford a vacation or a luxury car today, at least I can dream about it for tomorrow.”

This fixation on dreams can entrap lottery players, leading them to squander their hard-earned money year after year for slim chances of winning. Entrepreneurs and investors can also fall prey to similar illusions.

Studies show that we are often swayed by our fears and dreams when investing. Some start tech companies due to childhood passions, while others refrain from investing in technology due to past traumas, like losing money during the dot-com collapse. Such emotional ties have no bearing on economic reality.

Money favors those who can assess their investments rationally, sidelining emotions and personal histories. Reflect: Are you investing in a dream or a viable business opportunity? The latter should be your focus.

2. Learn from Millionaires, Not Billionaires Success stories can be incredibly motivating. The biographies of figures like Steve Jobs and Warren Buffet illustrate how they built immense wealth. However, these are often exceptional cases—outliers.

The more extraordinary the success, the less likely its lessons can be applied to your life. Attempting to replicate Jobs’ achievements is statistically less favorable than winning the lottery. Bill Gates wisely noted, “Success is a lousy teacher. It seduces smart people into thinking they can’t lose.”

Morgan Housel recommends observing broader trends rather than focusing solely on individual billionaires. Learn from numerous millionaires instead; their experiences may offer more practical insights.

Explore how they cultivate discipline, resilience, and happiness. Identify traits shared by successful individuals and determine what resonates with you.

3. Avoid the Pursuit of Maximum Returns Warren Buffet, one of the wealthiest individuals globally, amassed a significant portion of his wealth after turning 65—the typical age of retirement. His key to success? Time.

Wealth accumulation resembles a snowball effect; it gathers momentum and grows over time. Investing small amounts today can lead to substantial fortunes decades later.

However, most people seek quick riches. The meteoric rise of Bitcoin from 2020 to 2021 created instant wealth for some. We might assume this is the norm, but such extraordinary returns are rare and often unrepeatable. Chasing rapid gains is akin to gambling.

Successful investing involves securing steady returns over time. Allow compounding to work in your favor.

4. Recognize That Wealth Is Often Concealed Research by Thomas Stanley and William Danko shows that many millionaires don’t exhibit typical signs of wealth. They tend to avoid extravagant spending, opting for modest lifestyles.

Wealthy individuals who maintain their fortunes typically do not fixate on outward displays of success. They invest wisely rather than squandering money to impress others. For instance, an average American millionaire in 1996 would spend just $140 on shoes and $400 on a suit.

To build wealth, financial advisors consistently recommend focusing on asset creation. As Robert Kiyosaki states, “An asset is something that puts money in your pocket whether you work or not.”

This underscores the importance of frugality and reinvesting your earnings into your business and personal growth.

5. You Don’t Need Perfect Grades to Get Rich During my college years, I worked tirelessly to achieve high grades, believing that success came from perfection. Yet, wealth accumulation doesn’t operate this way.

Stock trader Andrew Aziz notes that he only wins 70% of the time. Your investments don’t need to be successful all the time; the goal is to have enough profitable investments to cover your losses.

Mistakes are inevitable in investing. Embrace failure as part of the learning process. Think of losses as entry fees for participating in the investment arena, rather than as punishments for errors.

6. Money Favors Those Who Can Survive Acquiring wealth is one challenge; preserving it is another. While earning money requires optimism and risk-taking, maintaining it demands humility and vigilance.

Recognize that some of your success may stem from luck, which may not be repeatable. Cultivate a healthy fear of losing your hard-earned wealth. Monitor your finances as carefully as a diver watches their oxygen supply.

Money favors those who endure. Safeguard yourself against potential losses. Investor Nassim Taleb emphasizes the need to protect yourself from unforeseen calamities to sustain wealth. Implement stop-loss strategies to limit your losses—this helps prevent significant financial setbacks.

7. Think Differently Than the Crowd People often react emotionally to negative news, which can lead to panic. This tendency to focus on pessimistic narratives can cloud judgment and create opportunities for savvy investors.

In 2008, environmentalist Lester Brown warned of impending oil shortages, projecting doom. However, markets are resilient, and innovators find solutions. History shows that challenges often spur advancements in technology and resourcefulness.

When the crowd panics, take a step back. This can be a prime opportunity to invest in promising markets and technologies.

Final Thoughts to Integrate These Insights Morgan Housel offers a unique perspective to enhance your investing and entrepreneurial skills. Imagine an intelligent alien assessing your business plan or investment portfolio. Would they make the same choices?

If this thought experiment seems absurd, envision a rational observer reviewing your investment decisions. They might suggest the following:

1. Avoid investing in dreams; let go of fears that could hinder profitable ventures.
2. Don’t fixate on extraordinary success stories; instead, seek common traits among successful individuals.
3. Resist the allure of quick riches; prioritize stable investments that compound over time.
4. Maintain a frugal lifestyle and reinvest profits back into your business.
5. Embrace imperfection; focus on achieving enough successful investments to offset losses.
6. Protect your capital; set limits on losses to safeguard against downturns.
7. Stay calm in the face of market panic; use negative news as a potential investment opportunity.

Are you ready to enhance your business, leadership, and productivity skills? Join my free email list curated by an award-winning tech entrepreneur and economist.

All insights and financial opinions presented here stem from my personal experiences and research—they are intended for educational purposes and should not replace professional financial advice.