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Book Review: ‘The Psychology of Money,’ by Morgan Housel

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“The Psychology of Money” is a compelling, quick read that shows how the ability to achieve wealth often depends more on healthy behavioral skills than on intelligence — and that behavior is often hard to teach. Author Morgan Housel illustrates his points through a series of short stories about people’s money-making decisions.

Housel says the book is a deeper dive into the topics he covered in his widely read 2018 report that bears the same name. Formerly a writer for The Wall Street Journal and The Motley Fool, Housel is currently a partner at venture capital firm Collaborative Fund.

Through the book’s 20 easily digestible chapters, Housel gives examples of people who succeeded — and those who failed — at accumulating wealth , holding onto that wealth, and making long-term, lucrative investments. He shows how financial decisions are made based on factors like personal history, worldview, fear and pride.

Keys to a money-saving mindset

In a chapter devoted to saving money, Housel delves into the benefits of frugality, the importance of building up a nest egg, and the notion that you don’t need to earn a lot of money to accumulate significant savings over time.

It’s all about frugality and humility

The ability to save a large chunk of one’s income is related to having a frugal lifestyle , Housel writes — which takes some humility. Case in point: The less you care about keeping up with your friends and neighbors, the less you’ll feel compelled to spend your money on things.

When it comes to increasing your savings, raising your humility is often a more powerful driver than raising your income, Housel writes.

Cash in the bank has unseen returns

While saving for a big purchase is important, Housel stresses that it’s also vital to set aside money just for saving’s sake — since money in the bank gives you options and flexibility. For instance, a sudden job loss will feel much less traumatic if you have savings to carry you through it.

The combination of flexibility and control over your time that you’ll gain by having a significant nest egg are an “unseen return on wealth,” Housel writes.

Low-earners can save money, too

Housel makes the point that building wealth often has little to do with your income and lots to do with your personal savings rate.

In the book’s introduction, Housel tells the story of Ronald Read, a gas station attendant and janitor who eventually went on to become an investor and philanthropist. Throughout his life, Read gradually accumulated a fortune by saving what he could and investing in blue chip stocks. When he died at 92, he made headlines for being worth more than $8 million dollars — much of which was accumulated through the power of compound interest.

Housel contrasts Read’s story with that of a highly educated, well-paid Merrill Lynch executive who retired in his 40s to become a philanthropist. Heavy spending on a lavish lifestyle that included two luxury homes eventually led him to file for bankruptcy.

Through the two men’s stories, Housel makes the point that financial success is often more a matter of how you behave than what you know.

Behaviors and beliefs for successful investing

Your success at investing, as Housel sees it, is affected by how well you hold onto the wealth you’ve earned. It also hinges on your ability to earn pretty good returns over time rather than aiming for one-off big hits.

Success comes from survival mode

Housel gives examples of investors who were good at getting wealthy but not as good at staying wealthy. Building wealth can involve optimism and risk taking, Housel writes, whereas retaining wealth requires humility and a fear of losing it all.

He goes on to explain that the survival mindset necessary to hold onto wealth comes down to a desire to be financially unbreakable, planning for the unexpected and maintaining sensible optimism.

The power of compound interest

Essentially, compound interest is the interest you earn on interest over time. In the book, Housel gives the example of renowned investor Warren Buffett — whose net worth is around $110 billion — as someone whose investments have benefited enormously from the effects of compound interest. He attributes much of the 92-year-old Buffett’s success to the fact that he’s been investing since the young age of 10.

While high investment returns often result from one-time hits that can’t be repeated, earning more realistic, pretty good returns consistently over a long period of time is when you benefit from compound interest, Housel writes.

No one’s crazy when it comes to money

In the book’s first chapter, titled “No One’s Crazy,” Housel states that while people may do crazy things with their money, no one’s actually crazy. Rather, everyone’s unique money habits and beliefs come from their own personal experiences — including when and where they were born as well as what their parents were like. For instance, a person who grew up during high inflation or a bad recession may handle money differently from someone who grew up during healthy financial times.

As such, personal background affects how one goes about saving, investing and spending, Housel writes, which can help explain why one person’s choices may seem wrong — or even crazy — to another.

True wealth is often hidden

Housel stresses throughout the book the importance of frugality and humility when it comes to saving money, and he points out that wealth is something you don’t see: Someone with plenty of money in the bank may choose not to drive a luxury car, live in a mansion or wear expensive clothes. Conversely, a person paying for a lavish lifestyle may not have much, if anything, in savings.

While nice cars and big houses are things people notice and admire, Housel points out, someone’s savings, retirement accounts and investment portfolios aren’t things we see.

Bottom line

“The Psychology of Money” is a worthwhile read that may open your eyes to beliefs about saving money and investing that could be holding you back from having healthier money habits . It makes its points through bite-sized chapters, charts and personal stories, and it would be a strong addition to any shelf of personal finance books.

To explore more personal finance books, check out Bankrate’s 12 best investing books for beginners .

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When it comes to money, your mindset has a big impact on the way you spend, save, and invest.
Reading Morgan Housel's book "The Psychology of Money" helped me shift my mindset.
I've moved from a mindset of scarcity to "enoughness," and I'm investing more than ever.

When it comes to money, many people focus on hard numbers and simple truths, but they ignore one key point — the way you think about money matters.

I've always been interested in learning how to shift my money mindset and examine the relationship between money and mental health, so when I heard about the book "The Psychology of Money'' by Morgan Housel, I devoured it.

The book is broken up nicely into tangible lessons you can apply to your own finances. For me, four lessons from the book helped me improve my money mindset and invest more.

1. The magic ingredient in compounding is time

Compound interest helps investors build wealth by generating returns on investments over time. These returns then continue to compound and help grow assets. Compounding is sometimes referred to as "earning interest on interest."

Many of us know that compounding works, but we can't really understand it on a huge scale. Housel delivers some perspective by taking a look at Warren Buffett.

Buffett is well known as one of the wealthiest investors of all time, but it's not all because of his skill as an investor.

Buffett started investing when he was a kid, at the young age of 10, so his money has had decades to compound. Most of us can't go back in time and fill up brokerage accounts we never had, but we can start investing now. The longer your money stays in the market, the more it will grow.

Housel writes, "Warren Buffett is a phenomenal investor. But you miss a key point if you attach all of his success to investing acumen. The real key to his success is that he's been a phenomenal investor for three quarters of a century."

What I got from this is that time is our best friend, and getting started today — and staying the course for the long-term — is the best way to build wealth.

2. You want to focus on being reasonable with money over being rational

One of my favorite parts of the book is when Housel writes that being reasonable with your money is more powerful than being rational.

He admits that we're humans with emotions, which will inevitably affect how we feel and manage our money. He writes, "You're not a spreadsheet. You're a person. A screwed up, emotional person. It took me a while to figure this out, but once it clicked I realized it's one of the most important parts of finance."

In other words, even though something may look good on paper based solely on the numbers, it may not be the best strategy in the long term.

He shares an example of how having a fever is actually good to fight an infection. It's what rationally makes sense. But no one wants to suffer with the pain and shivers or hot flashes of a fever. It's reasonable to take medicine to feel better.

Housel writes, "My own theory is that, in the real world, people do not want the mathematically optimal strategy. They want the strategy that maximizes how well they sleep at night."

This is in line with some advice I've offered in my book "Dear Debt," regarding debt repayment. Many people recommend the debt snowball or debt avalanche methods, focusing on paying off the smallest balance or highest-interest debt first. But I also recommend paying down the debt that will help you sleep better at night or the debt that makes you angry. We're emotional creatures, so making money decisions that make us feel better isn't so bad, even if it's not the "right" option on paper. As long as you're doing something , it makes a difference.

Housel suggests that opting for reasonable over rational helps us stay the course. He writes, "The reasonable investors who love their technically imperfect strategies have an edge, because they're more likely to stick with those strategies."

Focusing on our own risk tolerance and what is reasonable for you can be your compass when guiding your finances.

3. Finding out what 'enough' is

For many people, it feels like there's never enough money. Housel notes that the goal post always seems to be moving, and that we compare ourselves all the time to other people.

I think of myself and how the old me would have loved to make the income I do now. Yet, I still feel it's not "enough," and now the goal has shifted (you could call it lifestyle creep ).

In the book, Housel shares stories of greed and risk and how they can turn progress upside down and be the downfall of any success, and notes that finding what "enough" is for you is important when managing money and investing.

Housel writes, "If expectations rise with results, there is no logic in striving for more because you'll feel the same after putting in extra effort. It gets dangerous when the taste of having more — more money, more power, more prestige — increases ambition faster than satisfaction."

4. Luck and risk affect everything

In personal finance, it's easy to focus on our individual actions and forget about how our privilege — or our luck and risk, as Housel describes it — can affect our financial outcomes.

Housel shares a story about Bill Gates. Gates went to a high school with one of the very first computers, altering the course of his life and career. One of his friends, Kent Evans, was his classmate and also was talented with computers. Unfortunately, he died in a mountaineering accident.

In this example, we see luck and risk very clearly. They are the invisible puppet strings that can affect our lives, careers, and money.

Housel writes, "Luck and risk are both the reality that every outcome in life is guided by forces other than individual effort. They are so similar that you can't believe in one without equally respecting the other. They both happen because the world is too complex to allow 100% of your actions to dictate 100% of your outcomes."

By acknowledging the role of luck and risk, we can remove ourselves from the temptation to put everything on ourselves when it comes to managing money and investments.

Reading "The Psychology of Money" was so fulfilling for me and helped me shift my money mindset out of anxiety and scarcity to feelings of "enoughness." The book inspired me to save and invest more according to what makes me feel good and sleep best at night, while also sticking to it for the long term so I can let compounding do its magic. It also conveyed the importance of playing your own money game and not getting too caught up with what everyone else is doing. After all, it's your life, your money.

This article was originally published in February 2021.

Main content

Book Review: “The Psychology of Money” by Morgan Housel

by Jon Sevenker | Sep 23, 2020 | Book Reviews , P&A Articles |

In my opinion, Morgan Housel is the best behavioral financial writer today. I learn something from every article of his that I read. So when I found out he was releasing a book, I preordered a copy. The Psychology of Money includes some of Housel’s existing blog posts, plus new insights and information about people’s relationship with money. Here are 10 of my favorite passages from the book:

Happiness is just results minus expectations.
(On the power of compounding) $81.5 billion of Warren Buffett’s $84.5 billion net worth came after his 65th birthday.
Money’s greatest intrinsic value is its ability to give you control over your time.
Wealth is what you don’t see.
Building wealth has little to do with your income or investment returns, and lots to do with your savings rate.
Saving is a hedge against life’s inevitable ability to surprise the hell out of you at the worst possible moment.
The odds are in your favor when playing Russian roulette. But the downside is not worth the potential upside.
Beware taking financial cues from people playing a different game than you are.
Optimism sounds like a sales pitch. Pessimism sounds like someone trying to help you. Tell someone that everything will be great, and they’re likely to either shrug you off or offer a skeptical eye. Tell someone they’re in danger, and you have their undivided attention.
The illusion of control is more persuasive than the reality of uncertainty.

Back in March 2018, I wrote about my “ 5 all-time favorite money books .” If I were to rewrite that post today, I would take out The Behavior Gap and replace it with The Psychology of Money . This book is that good. If you are interested in personal finance, investing, or understanding the forces at work as you make money decisions, I’d highly recommend The Psychology of Money .

If you want to check out more of Morgan Housel’s writings, start with these five blog posts:

Save Like a Pessimist, Invest Like an Optimist
The Laws of Investing
Common Plots of Economic History
Financial Advice for My New Daughter
Short Money Rules

We’ve also written about “ 7 investment biases to watch out for ” and “ 7 investment rules it pays to remember ,” the latter of which is a shortened version of a Morgan Housel blog post.

Clicking on the links above may result in you leaving the Pittenger & Anderson, Inc. website. The opinions and ideas expressed on these external websites are those of third-party vendors and Pittenger & Anderson, Inc. has not approved or endorsed any of this third-party content. For the full Terms & Conditions of using the Pittenger & Anderson, Inc. website, click on this link .

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Book Review: ‘The Psychology of Money,’ by Morgan Housel

Keys to a money-saving mindset

It’s all about frugality and humility

When it comes to increasing your savings, raising your humility is often a more powerful driver than raising your income, Housel writes.

Cash in the bank has unseen returns

The combination of flexibility and control over your time that you’ll gain by having a significant nest egg are an “unseen return on wealth,” Housel writes.

Low-earners can save money, too

Housel makes the point that building wealth often has little to do with your income and lots to do with your personal savings rate.

Through the two men’s stories, Housel makes the point that financial success is often more a matter of how you behave than what you know.

Behaviors and beliefs for successful investing

Success comes from survival mode

He goes on to explain that the survival mindset necessary to hold onto wealth comes down to a desire to be financially unbreakable, planning for the unexpected and maintaining sensible optimism.

The power of compound interest

No one’s crazy when it comes to money

True wealth is often hidden

While nice cars and big houses are things people notice and admire, Housel points out, someone’s savings, retirement accounts and investment portfolios aren’t things we see.

Bottom line

To explore more personal finance books, check out Bankrate’s 12 best investing books for beginners .

Book Review: ‘The Psychology of Money,’ by Morgan Housel

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The Psychology of Money

Book review.

Morgan Housel’s 2020 book, The Psychology of Money, looks beyond the spreadsheets and finance textbooks and into how emotions and intuition influence the way people interact with money. Unlike highly theoretical fields like physics or medicine, human psychology plays an inherent role in the world of investing, and this book explores how biases have tangible effects on both the global markets and one’s personal finances.

Through a mix of anecdotes, research, examples, and advice, Housel presents 19 chapters that each explore a different aspect of how people think about money. These chapters blend to present one fundamental idea to investors: “Financial success is not science-based, but a soft skill. How you behave is more important than what you know.”

The book focuses on demonstrating how wealth is not created through the study of theoretical concepts such as interest rates, but instead, by understanding what drives people to do what in different financial market conditions.

The Psychology of Money starts by introducing the stories of Ronald James Read and Richard Fuscone. Read spent 25 years working at a gas station and 17 years as a janitor. With his modest earnings, he saved and invested in the stocks of blue-chip companies. Upon his death, he left behind $8 million for his kids as well as the local hospital and library. In contrast, Fuscone was a top executive at Merrill Lynch who retired early to invest on his own and pursue charitable causes. He ended up going bankrupt in 2000 and losing almost everything. This story, and many others throughout the book, have a common theme: Time is the greatest force in investing and compounding is deceptively powerful.

While every chapter has its own stories and lessons, the concept of time as being the most powerful investing tool is emphasized throughout. After all, time allows small investment wins to grow exponentially, and big losses to fade over time. Read understood his time horizon and invested accordingly, eventually amassing significant wealth. Fuscone, on the other hand, made money through his successful career, but failed to keep it. He lacked the humility and fear that is required to understand that the money you make can be lost far more quickly than most can make it back. The Psychology of Money is a great read that will help anyone deepen their understanding of how humans interact with money and, more importantly, inspire self-reflection into their own investing habits and views on the financial markets.

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Strategy Boffins

Book reviews, adapting financial strategies for an unpredictable world, embracing change, understanding compounding, questioning historical data, adopting flexible investment strategies, and preparing for economic unpredictability for financial success., subjects: investing.

When it comes to financial planning, the complexities often boil down to two fundamental aspects: setting your goals and figuring out the steps to achieve them. Morgan Housel’s “ The Psychology of Money ” offers a unique lens through which to view this process, focusing less on the ‘how-to’ and more on the ‘why.’

Housel’s book is not your typical financial guide filled with investment tips or budgeting tricks. Instead, it delves into the behavioral aspects of dealing with money. The central premise is that succeeding financially isn’t necessarily a function of how smart you are but is deeply tied to your behavior, which can be incredibly hard to manage or change.

Key Takeaways

– Long-term Thinking: Housel emphasizes the importance of a long-term perspective. He argues that time is the most potent force in investing, allowing small gains to accumulate into significant wealth and making big mistakes less impactful over the long run.

– Behavior Over Intelligence: The Psychology of Money stresses that your behavior—how you manage risk, how you save, how you approach your financial goals—is far more crucial than your financial acumen.

– Common-Sense Management: Housel advocates for a common-sense approach to money management. He suggests that you should manage your finances in a way that lets you sleep peacefully at night. This involves saving not just for specific goals like a car or a house but also for the unpredictable, undefined future events that are bound to occur.

– The Importance of Saving: One of the most straightforward yet powerful pieces of advice Housel offers is to “Save, just save.” He argues that saving for things that are impossible to predict or define is one of the best reasons to save.

Important sections

Sunk costs and change.

The book starts by discussing the concept of “sunk costs,” which are past efforts that can’t be refunded. It argues that clinging to sunk costs can make our future selves prisoners to our past decisions. The key takeaway is to embrace change and adapt your financial goals as you evolve as a person.

Compounding and Its Price

The book then moves on to the concept of compounding, emphasizing that everything has a price, including financial success. It suggests that the price of many things is not obvious until you’ve experienced them firsthand. The idea is to understand the price you’re willing to pay for financial growth and to be prepared for the unexpected.

The Role of Experience and History

The book also delves into the limitations of relying on past experiences and historical data for making future financial decisions. It argues that the most impactful economic events are often unprecedented and therefore unpredictable. The book warns against the “historians as prophets” fallacy, which is an overreliance on past data as a guide to future conditions.

Personal Finance and Investment Strategy

The book shares personal finance strategies, such as investing in low-cost index funds and saving for unexpected expenses. It argues that for most people, dollar-cost averaging into a low-cost index fund will provide the highest odds of long-term success.

The Unpredictability of Economic Events

Finally, the book emphasizes that the world is full of surprises, especially in economics and investing. It suggests that the most important economic events of the future will be things that are unprecedented and therefore not prepared for, making them highly impactful.

Why It Matters

Housel’s book serves as a cautionary tale against self-sabotage. It’s easy to get caught up in the complexities of financial instruments, investment strategies, and economic forecasts. However, Housel reminds us that the most significant financial pitfalls are often behavioral, not informational. He advises that you don’t have to be a genius to succeed financially; you just have to be reasonable and disciplined.

In summary, “ The Psychology of Money ” doesn’t offer a step-by-step guide to riches but provides something potentially more valuable: a fundamental understanding of how to avoid the behavioral traps that can divert you from your financial goals. It’s a book that complements any financial strategy by focusing on the often overlooked but crucial aspect of financial planning—your behavior.

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The Psychology of Money: A Comprehensive Review

In the days of yore, you might have thought that money was a simple matter of arithmetic, but today's financial landscape demands a keener understanding of the psychological forces at play.

You're about to embark on a journey that will not only reveal the hidden facets of your own financial psyche but also equip you with the insights to navigate the often irrational world of money.

This comprehensive review will illuminate how your cognitive biases and emotional reactions can shape your financial destiny, often in ways you might not expect. You'll uncover the subtle ways in which money intertwines with your sense of self and impacts your decisions, sometimes to your detriment.

As you consider the strategies that can lead to wiser financial choices, ask yourself if you're truly aware of the psychological barriers that could be hindering your path to wealth.

The answers await as you explore the depths of these concepts, compelling you to confront the question: are you master of your money, or is it master of you?

Key Takeaways

Financial behaviors are influenced by personal experiences, biases, and cognitive shortcuts.
Recognizing and overcoming cognitive biases is important in making sound financial decisions.
Emotions play a significant role in financial choices and managing wealth.
Understanding the complex relationship between money and self is crucial for financial happiness and success.

Understanding Financial Behaviors

Your financial choices are often deeply rooted in personal life experiences and inherent biases, rather than just raw numbers and logical calculations. Authors like Morgan Housel in 'The Psychology of Money: Timeless lessons on wealth, greed, and happiness' argue that understanding financial behaviors is crucial for wealth building and financial success. As you delve into personal finance books and seek financial education, you'll learn that your relationship with money is more complex than it seems.

When you make financial decisions, it's not just about the facts and figures; it's also about your behavioral skills. These include how you manage the influence of luck and risk, how you save diligently for stability and future opportunities, and how you plan with both ambition and realism. Financial education must therefore encompass both the technical aspects of money management and the psychological elements that drive your decisions.

Your journey toward financial success involves recognizing how life's unpredictability demands flexibility and adaptability. It's about resilience in the face of change. By understanding financial behaviors, you're better equipped to set goals that aren't only reasonable and attainable but also align with your unique financial narrative.

Cognitive Biases and Money

As you explore the complexities of financial behaviors, it's important to acknowledge how cognitive biases can silently steer your money choices astray. These mental shortcuts are deeply rooted in psychology and often bypass the rational, analytical part of your brain.

You've probably noticed how personal experiences can color your decisions, leading to actions that mightn't align with your long-term goals, like achieving financial independence or gaining peace of mind.

Cognitive biases like anchoring, where you rely too heavily on the first piece of information you receive, or confirmation bias, where you seek out information that supports your preconceptions, can cloud your judgment. Even loss aversion, the fear of losing money, can be so powerful that it stops you from taking calculated risks that could pay off in the long run.

Overcoming these biases isn't just about having the right information; it's about developing behavioral skills that help you make decisions in a more balanced way. As Morgan Housel puts it, mastering the financial game isn't just about how much you know, it's about how you behave. And to truly win, you'll need to exercise control over your time and the biases that can lead you off course.

Emotional Aspects of Finance

You know that your mood can sway your financial choices, often leading to a dance between money and emotions.

Stress plays a key role in your financial decisions, sometimes pushing you towards choices you might later question.

Recognizing the ups and downs of your emotional relationship with wealth is essential for steering towards long-term financial stability.

Money and Mood Dynamics

Understanding how emotions like joy or fear intertwine with your financial decisions is key to mastering personal finance. The link between money and mood is complex; your emotions can greatly influence how you handle wealth. People often overlook how fear and greed can drive financial choices, leading to impulsive behavior that deviates from rational strategies.

Morgan Housel, in 'The Psychology of Money,' highlights the importance of behavioral skills, such as managing your emotions, to achieve financial happiness. Your background shapes these skills, affecting your money habits and attitudes. Ronald Read's story illustrates that a deep understanding of the psychology of money, combined with emotional control, can lead to surprising success.

Financial Decisions and Stress

Navigating the emotional minefield of financial decisions often triggers stress and anxiety, even when the stakes are high. You're not alone if you feel overwhelmed by choices related to saving money or chasing good returns.

In 'Money: Timeless Lessons,' Morgan Housel emphasizes the importance of behavioral skills in achieving wealth. It's not just about what you know; it's how you cope with the stress of luck and risk. Building financial freedom isn't solely a numbers game—it's also about managing your emotions.

Your financial decisions are influenced by your unique life experiences, which can make rationality elusive. Remember, stress can cloud judgment, so it's vital to understand the emotional aspects that drive your financial behavior.

Wealth's Emotional Rollercoaster

Wealth's journey often resembles an emotional rollercoaster, where every rise in financial status can bring a surge of euphoria, and each dip, a corresponding pang of anxiety. In 'The Psychology of Money,' Morgan Housel explores how your behavioral skills often dictate financial success more than raw intelligence. Getting wealthy might be fueled by optimism and risk-taking, but retaining wealth requires a margin of safety, humility, and a healthy fear of loss.

Your financial unbreakable nature isn't just about the numbers; it's deeply rooted in psychology. Emotions like fear, greed, pride, and envy can hijack your money decisions, demonstrating that the emotional rollercoaster of wealth isn't just a metaphor—it's a critical, lived reality. Understanding this can help you navigate the highs and lows with grace.

Money and Personal Identity

Your financial choices are often a reflection of your life's narrative, revealing how deeply money is entwined with your personal identity. The decisions you make, whether you're saving for retirement or splurging on a luxury item, aren't just about the numbers in your bank account; they're about who you are.

Your personal history plays a significant role in shaping your financial mindset. The way you perceive wealth, and your quest to become wealthy, is influenced by the lessons you've absorbed over time, some of which are hard to teach.

If you come from a background where resources were scarce, you might prioritize making good financial decisions to feel financially unbreakable. Conversely, if you grew up with abundance, your needs and desires might steer you towards a more relaxed approach to money. It's crucial to recognize that your background affects your financial behaviour and net worth, but it doesn't define your capacity to develop sound behavioural skills.

Understanding this link between personal identity and money can be enlightening. It helps you grasp why you might cling to certain habits or resist others. As you navigate your financial journey, remember that your choices are unique to you, just as you're to the world.

Strategies for Better Decisions

As you navigate your financial journey, it's crucial to adopt rational spending habits that align with your long-term goals.

You'll need to be wary of emotional investment biases that can cloud your judgment and steer you off course.

Embrace Rational Spending Habits

To cultivate rational spending habits, it's essential to start by establishing clear, achievable financial goals that reflect both your needs and desires. Balancing your personal aspirations with realistic expectations is key to maintaining motivation and the ability to achieve long-term success.

Think about money not just as a means to spend, but as a tool to save money and ensure staying wealthy over time.

Developing behavioral skills that have nothing to do with impulse buying but everything to do with making sense of your financial situation is crucial. This means understanding how a rational Consumer Thinks, plans, and adjusts to life's uncertainties. By doing so, you'll infuse resilience and adaptability into your spending habits, ensuring that your approach to money aligns with evolving personal goals.

Understand Emotional Investment Biases

Grasping the subtle ways that emotions skew your investment decisions is the first step toward honing a sharper, more disciplined financial strategy. Emotional investment biases often cloud the judgment required for wealth building.

Writers like Morgan Housel have shed light on how people make financial choices, emphasizing that developing strong behavioral skills is key to overcoming these biases. By acknowledging the psychology of money, you'll start to identify patterns that may have previously led to irrational decisions, particularly in the throes of a volatile market.

Focusing on long-term investment returns, rather than short-term fluctuations, will guide you towards more rational decisions. It's not just about what you know, but how you apply that knowledge to avoid the emotional pitfalls that can derail a sound investment approach.

Harness Long-Term Financial Planning

Recognizing the impact of emotional biases, it's crucial to master long-term financial planning to make better, more calculated decisions. Morgan Housel emphasizes the importance of behavioral skills in building wealth.

Unlike just getting wealthy, good investing requires understanding Warren Buffett's approach—focusing on tail events and maintaining a smart asset allocation.

Long-term financial planning isn't just about setting goals; it's about balancing aspirations with realistic expectations, ensuring flexibility, and including room for error. You'll need to regularly reassess your plans, making adjustments that align with your evolving dreams.

Psychological Barriers to Wealth

Understanding the psychological barriers to wealth is crucial as they often silently derail our best efforts to build financial security. Behavioral biases such as overconfidence can cloud your judgment, leading you to make risky investments or spend beyond your means. Loss aversion might paralyze you from taking necessary financial risks, hindering your wealth growth.

Think of Ronald Read, an ordinary man who amassed a fortune. He wasn't a financial genius, but he had the behavioral skills needed to grow wealthy. He didn't let psychological barriers stop him, unlike many smart people who struggle financially despite having more knowledge. Wealth isn't just about how much money you make, but also how you manage it.

Mental accounting can trick you into treating money differently based on its source or intended use, which might lead you to irrational spending or saving behaviors. Social comparison can spur you to chase a lifestyle you can't afford, setting back your wealth-building.

Morgan Housel emphasizes in 'The Psychology of Money' that understanding money goes beyond financial education. It's about overcoming the psychological barriers that even the smartest, wealthiest individuals face. To join the ranks of wealthy ordinary folks, you'll need to conquer these barriers and cultivate sound behavioral skills.

Improving Financial Well-being

While overcoming psychological barriers is vital for wealth accumulation, actively improving your financial well-being demands setting tangible savings goals and preparing for life's unpredictability. Morgan Housel, in his book 'The Psychology of Money,' emphasizes that it isn't just about how much money you make, but your behavioral skills in managing it that contribute to your wealth. Even someone like Ronald Read, who wasn't traditionally wealthy, amassed a fortune through prudent saving and investing habits.

To enhance your financial education and take control of your money, consider the following steps:

Educate Yourself on Investment Vehicles : Understanding tools like index funds can simplify your investment strategy, making it easier to grow your wealth over time.
Set Realistic Financial Milestones : Establish specific, measurable goals that keep you motivated and on track, rather than comparing yourself to rich people whose circumstances may be vastly different.
Develop Resilience to Financial Shocks : An emergency fund acts as a buffer against unforeseen events, ensuring that your financial well-being isn't severely impacted by life's inevitable surprises.

You're at the helm of your financial ship, navigating through the fog of biases and emotional waves. Remember, wealth isn't just what's in your wallet—it's the freedom to sail your own course.

By understanding the psychological currents and steering clear of behavioral reefs, you'll chart a path to a richer life.

So trim your sails, trust your compass of rationality, and you'll find the treasure of financial well-being isn't buried—it's within you.

Derek Horton is a licensed clinical psychologist with over 15 years of experience treating anxiety and mood disorders. Derek Horton brings a wealth of experience to the field. With a background in clinical psychology, his passion lies in bridging the gap between research and accessible mental health resources, fostering a supportive online community for individuals seeking psychological well-being.

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The Psychology of Money: Book Review & Lessons Learned

I love to read, and particularly enjoy reading nonfiction personal finance and health books. Every once in a while, I read a book that’s a bit different and worth sharing. Morgan Housel ’s book, “ The Psychology of Money: Timeless lessons on wealth, greed, and happiness ” is one of those books.

Unlike most finance books, this one is not full of numbers and statistics. Rather, the Psychology of Money is about our emotional biases and the psychology behind the way we think about money and the financial decisions we make.

In the Psychology of Money, Housel shares 19 short stories exploring these concepts so that we can be more mindful as to what’s driving us, and change course (if we so choose). He also shares his own financial strategy at the end, for those interested.

Overall, I found this book to be well-written, concise, and an interesting read. Although not a technical investing resource, the book is chocked full of life lessons and quotable quotes.

I recommend this book if you’re interested in behavioral studies, have ever struggled with making bad financial decisions, or are pursuing financial independence.

Check out your library first to see if they carry the book (FREE). Or if they don’t, feel free to use my Amazon affiliate link below (and thank you).

MY FAVORITE TAKAWAYS FROM THE PSYCHOLOGY OF MONEY

Our financial decisions are heavily biased by our personal experiences..

Our viewpoints of the World, including money, are both fueled and limited by what we’ve personally experienced , particularly during our formative young adult years. When we make decisions about how to invest, or how much risk to take on, our mind uses these guideposts as our basis of what’s “normal”.

People who grew up during the great depression are more likely to view bonds favorably. Whereas, those who grew up during periods of high inflation are less likely to invest heavily in bonds. This bias is the reason why equally smart people can vehemently disagree about investment strategies, such whether to pay down the mortgage or invest excess cash or whether it’s better to invest lump sums or dollar-cost average .

Nothing is as good or as bad as it seems.

Luck and risk go hand and hand, but how we view them is incredibly biased. If you’re not careful, these biases can lead you to make poor financial (or life) decisions in the future.

What does this mean? We are hard-wired to defend our own failings, attributing them to external factors (i.e. bad luck). For example, if I didn’t get a promotion I’m seeking, I’m more likely to believe that I was unfairly passed over for [fill in the blank] reason. However, if you didn’t get a promotion, I’d revert back to internal factors, such as a lack of skills or effort. The reverse is also true. We minimize the impact of luck in evaluating our own successes, but will view luck as a much more significant factor in someone else’s.

It also means that our failings and successes won’t make us as sad or as happy as we expect they will… or for as long as we expect they will.

Learning to have “enough” is the key to wealth.

Morgan Housel points out that, “Modern Capitalism is a pro at two things: generating wealth & generating envy.”

While there are many people who are good a generating wealth, few of these people are also good at keeping it. Getting wealthy and staying wealthy are two separate skill sets. One requires taking risks and optimism, while the other requires frugality, fear, and humility.

Staying wealthy is made harder by the fact that we live in a society that emphasizes achieving that next level of everything, and where social comparison is as easy as opening up your phone.

Although we typically define wealth by a number, such as net worth, that’s not really the best measure for of its value. An investment banker who makes $500,000 a year but spends it all on his large house, luxury cars, and other things, is living with much less abundance and more financial stress than someone making $80,000 who is content with a life that costs just $40,000 a year. Building wealth has more to do with your savings rate than your income or investment returns.

How wealthy we feel is driven almost entirely by how close we are to having “enough”. If you can stop lifestyle inflation, your income will keep growing, but what it costs to maintain your quality of life will not. Eventually, you’ll reach a level of wealth where you have “enough” … and that is where you’ll find financial freedom.

Wealth is what you don’t see.

Wealth is the money you don’t spend. It’s the fancy car or watch that you didn’t buy. Once you spend money, it’s no longer wealth…it’s an object or experience.

This message is very similar to that from The Millionaire Next Door , but I always find it powerful. We tend to look around at our neighbors and friends, seeing all the stuff they’ve accumulated and view it as normal. It makes us feel like we should have those things too.

The reality is that people who have achieved financial freedom live within their means. They don’t spend as much of their wealth on things . Trying to keep up with the Jones’s will only slow down your journey to financial independence.

Slow and steady wins the race

Small changes add up over time, whether you’re talking about climate change or investing. That’s the power of compounding.

You don’t need to earn the highest returns to make a killing in the market. Warren Buffet didn’t and he’s one of the most famous investors of our time. What Buffett did do was start investing wisely at a young age, let his money grow in the market, and continue to earn and invest well into his 80’s. As if you needed another excuse to start investing as early as you can!

Good investing is about consistently earning good returns that you can repeat over the longest period of time. Beating the market once or twice may feel nice, but no one can do it consistently. As the saying goes: “Time in the market, beats timing the market.”

Expect the Unexpected

The most important part of the best laid plans is the contingency for when things don’t go as planned. This is especially true when it comes to our finances.

While history can guide our expectations, it cannot predict the future. There are always at least a few known unknowns that we can try build into our plans. But what about the things we can’t even comprehend yet?

These can be financial or other events that have never occurred (or occurred to that severity), or an unexpected change in our wants, needs or goals down the road. Because there are so many unknowns, it’s wise to include room for error in your forecasts when estimating future costs or market returns , and to always have a back-up plan.

You are not a spreadsheet; You are a person.

Okay, this one isn’t new… I say it a lot on this blog. Math up a situation all you want. I love a good nerdy analysis. But at the end of the day, the right decision for you is the one that helps you sleep at night. It’s not worth worrying about money to gain an extra percent or two. The whole point of trying to build up wealth is for the freedom it can provide… and that includes freedom from worry.

If you’ve read the Psychology of Money, what was your favorite takeaway?

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allen @ freedomJarFire

> Learning to have “enough” is the key to wealth.

Absolutely. Jack Bogle’s book “Enough” really got me fired up about appreciating what I have and not trying to just accumulate/spend for the sake of the spreadsheet/dopamine.

Although I currently have 2 books on my “personal finance” shelf, I had to click through and order this one. I feel like the numbers are taking care of themselves at this point, but the psychology of it fascinates me (it might help that Mrs Jarhead is a behavioral psychologist and I’ve slowly learned how susceptible I am to influence 😀

Maybe before this order arrives Wednesday I’ll pick up one of the unread books so I don’t develop a backlog that stresses me out. Thanks for the rec, looking forward to it! (and the short-stories format makes it less overwhelming to start, I hope)

Thank you for your support, Allen. I’ll have to add “Enough” to my reading list. I hope you enjoy this book as much as I did… promise it’s a quick and easy read, and the short story format really helps. The behavioral information within is really interesting both from the viewpoint of analyzing society, as well as looking inward to your own habits and beliefs about money. I’ll be curious to hear what you think once you’ve read it.

David @ Filled With Money

The best thing is that wealth is what you don’t see. When I was little, I read media articles all the time of rich people buying expensive mansions and HUGE houses. What I didn’t realize was that these people are billionaires. Meaning, they spend less than 1% of their net worth on mansions and houses.

The misconception that the rich spend money like there’s no tomorrow is so untrue. I got the wrong impression ever since I was little.

So true. The ultra rich spend a lot of money… but what looks like an insane amount to us may be only a small portion of their fortune. The everyday people (like you or I) who are spending money left and right on all the big luxuries probably don’t actually have that much $ in the bank.

I think this book, and books like The Millionaire Next Door, can be great eye-openers for a lot of people.

Mr. Housel has some great pearls of wisdom throughout this book. I’ve skimmed sections but really need to sit down and read it. One of my favorites: “Doing something you love on a schedule you can’t control can feel the same as doing something you hate.” Control over your own destiny can really make a difference, and that’s the point of FI.

Agree, and that’s one of my favorite quotes as well. It’s not the first study on happiness that I’ve seen supporting that control over our destiny and choices is one of the top factors for determining our happiness levels. Thanks for stopping by!

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Book Reviews

Money at 30: “the psychology of money” book review.

One of the things I love most about the book reviews I’ve been doing for the past several months now is that, despite writing about finance for five years or so now, I’m consistently introduced to new insights, ideas, and perhaps even some “hot takes” about money. My latest bit of consumption is no exception and, in fact, may be the most paradigm-shifting read I’ve experienced yet. Released earlier this month, The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness by Morgan Housel may already rank among my favorite personal finance books — partially because it’s so much different from the financial books I typically encounter.

The Psychology of Money by Morgan Housel

With a title like “The Psychology of Money,” you might expect the material within to be dense and heady. On the contrary, the book is extremely approachable and digestible. That’s thanks in part to its structure that breaks the contents down into 20 relatively short chapters (plus an intro and a postscript). Each of these chapters finds Housel tackling a different topic, with the majority of these chapters feeling like their own isolated essays. That said, lest you lose the thread along the way, the author ties it all up in a bow by in the penultimate numbered chapter.

The book starts out with an extremely relevant and insightful look at how our experiences influence our world views — particularly when it comes to money. Titled “No One’s Crazy,” this chapter does a tremendous job of explaining how two people can come to different conclusions but neither actually be wrong. In just a dozen pages, Housel completely sold me on the premise of the rest of the book and had me hooked. Now is also a good time to mention that, while there is definitely financial advice to be found in Housel’s prose, it’s rare for the author to harp on many specifics seeing as the book’s thesis revolves around us all being different. Nevertheless, in the interest of transparency, he does recount his personal money experiences, beliefs, and strategies in chapter 20.

Throughout the book, Housel also draws distinctions between terms that might not seem so different on the surface. Riches vs. wealth, rational vs. reasonable, fee vs. fine — all are explored and explained to great effect. In every case, the author makes a solid case for the nuance in these expressions, while also detailing how each can impact your relationship with finances. On a similar note, I also appreciated the assessments of what people really mean when they say certain things about money. Easily my favorite example of this is when Housel writes, “When most people say they want to be a millionaire, what they might actually mean is ‘I’d like to spend a million dollars.’ And this is literally the opposite of being a millionaire.” This revelation may sound obvious to some but, for me, really highlights an irony that exists in personal finance.

Another one of my favorite chapters looked at the nature of optimism and why the opposite mentality typically gets the most attention. As I consider myself an optimist, I loved that this highlighted some important truths that are often overlooked. If I may say, the chapter also served as a nice pallet cleanser from the daily news grind these days.

Speaking of these unique days we find ourselves in, I was surprised to see Housel mention the coronavirus ever-so-briefly in his book. Given the lead time I expect most publications have, I really wasn’t expecting anything so up to date. That said, in a later chapter, he notes that the United States currently has record low unemployment, so not everything is up to the minute. Personally, I’m actually thankful that the crisis was mostly excluded as 2020 readers will certainly be able to insert such references on their own where appropriate.

For all the strengths of The Psychology of Money , I did have a couple of minor criticisms. One is that, at times, I felt like the subject strayed a bit from the concept of “psychology” and more toward general “do this, not that” advice. It’s not that these chapters weren’t interesting or lacked impact, but it is something that stuck out to me. The other nitpick I had is that there are a couple of moments that feel redundant or find Housel hammering home his point perhaps a tad too hard — namely in chapter 16, where I felt as though I kept reading the same refrain (although the chapter was still strong overall). Again, these are only small critiques that hardly took away from my enjoyment of the book on the whole.

When I pre-ordered my copy of The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness , I really had no idea what to expect. What I found was a deeply intriguing book that not only helped change the way I thought about money but I predict will also influence the way I write about money in the future. Needless to say, if you’re looking for a different kind of personal finance book — and one that will surely open your mind regardless of who you are — I highly recommend The Psychology of Money by Morgan Housel.

Kyle Burbank

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18 Wealth Lessons from “The Psychology of Money” by Morgan Housel (Book Summary)

By Kyle Kowalski · 2 Comments

This is a book summary of The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness by Morgan Housel.

I couldn’t ignore The Psychology of Money any longer. It seems like everyone is talking about it in my little corner of Twitter. Many are calling it their top book of the year.

And, Amazon supports the hype. The book launched in September 2020 and already has over 2,500 ratings.

If you’re looking for an intro to Morgan Housel, here you go:

Quick Housekeeping:

All quotes are from the author, Morgan Housel, unless otherwise stated.
I’ve added my own emphasis in bold .

Book Summary Contents: Click a link here to jump to a section below

No One’s Crazy
Luck & Risk
Never Enough
Confounding Compounding
Getting Wealthy vs. Staying Wealthy
Tails, You Win
Man in the Car Paradox
Wealth is What You Don’t See
Reasonable > Rational
Room for Error
You’ll Change
Nothing’s Free
You & Me
The Seduction of Pessimism
When You’ll Believe Anything

Overview of The Psychology of Money :

“The premise of this book is that doing well with money has a little to do with how smart you are and a lot to do with how you behave .”

“Financial success is not a hard science. It’s a soft skill, where how you behave is more important than what you know . I call this soft skill the psychology of money .”
“The aim of this book is to use short stories to convince you that soft skills are more important than the technical side of money .”
“We think about and are taught about money in ways that are too much like physics (with rules and laws) and not enough like psychology (with emotions and nuance) .”
“Physics isn’t controversial. It’s guided by laws. Finance is different. It’s guided by people’s behaviors. “

1. No One’s Crazy

“Your personal experiences with money make up maybe 0.00000001% of what’s happened in the world, but maybe 80% of how you think the world works.”

“Every decision people make with money is justified by taking the information they have at the moment and plugging it into their unique mental model of how the world works.”
“ People do some crazy things with money. But no one is crazy. Here’s the thing: People from different generations, raised by different parents who earned different incomes and held different values, in different parts of the world, born into different economies, experiencing different job markets with different incentives and different degrees of luck, learn very different lessons .”
“In theory people should make investment decisions based on their goals and the characteristics of the investment options available to them at the time. But that’s not what people do. The economists found that people’s lifetime investment decisions are heavily anchored to the experiences those investors had in their own generation—especially experiences early in their adult life .”
“ Their view of money was formed in different worlds. And when that’s the case, a view about money that one group of people thinks is outrageous can make perfect sense to another.”
“Few people make financial decisions purely with a spreadsheet. They make them at the dinner table, or in a company meeting. Places where personal history, your own unique view of the world, ego, pride, marketing, and odd incentives are scrambled together into a narrative that works for you .”

2. Luck & Risk

“Luck and risk are both the reality that every outcome in life is guided by forces other than individual effort. They are so similar that you can’t believe in one without equally respecting the other. They both happen because the world is too complex to allow 100% of your actions to dictate 100% of your outcomes .”

“They are driven by the same thing: You are one person in a game with seven billion other people and infinite moving parts. The accidental impact of actions outside of your control can be more consequential than the ones you consciously take. “
“The line between ‘inspiringly bold’ and ‘foolishly reckless’ can be a millimeter thick and only visible with hindsight . Risk and luck are doppelgangers.”
“Be careful who you praise and admire. Be careful who you look down upon and wish to avoid becoming. Or, just be careful when assuming that 100% of outcomes can be attributed to effort and decisions .”
“Therefore, focus less on specific individuals and case studies and more on broad patterns .”
“Go out of your way to find humility when things are going right and forgiveness / compassion when they go wrong. Because it’s never as good or as bad as it looks. “
“ You should like risk because it pays off over time. But you should be paranoid of ruinous risk because it prevents you from taking future risks that will pay off over time.”

3. Never Enough

“Life isn’t any fun without a sense of enough . Happiness, as it’s said, is just results minus expectations .”

“ ‘Enough’ is not too little … ‘Enough’ is realizing that the opposite—an insatiable appetite for more—will push you to the point of regret.”
“ The hardest financial skill is getting the goalpost to stop moving . But it’s one of the most important. If expectations rise with results there is no logic in striving for more because you’ll feel the same after putting in extra effort. It gets dangerous when the taste of having more—more money, more power, more prestige—increases ambition faster than satisfaction.”
“ Social comparison is the problem here … The point is that the ceiling of social comparison is so high that virtually no one will ever hit it. Which means it’s a battle that can never be won, or that the only way to win is to not fight to begin with —to accept that you might have enough, even if it’s less than those around you.”
“There is no reason to risk what you have and need for what you don’t have and don’t need.”
“There are many things never worth risking, no matter the potential gain.”
“Maintaining a lifestyle below what you can afford is avoiding the psychological treadmill of keeping up with the Joneses .” (Note: See voluntary simplicity )

4. Confounding Compounding

“If something compounds—if a little growth serves as the fuel for future growth— a small starting base can lead to results so extraordinary they seem to defy logic . It can be so logic-defying that you underestimate what’s possible, where growth comes from, and what it can lead to.”

“ $81.5 billion of Warren Buffett’s $84.5 billion net worth came after his 65th birthday. Our minds are not built to handle such absurdities.”
“ His skill is investing, but his secret is time. That’s how compounding works.”
“If you want to do better as an investor, the single most powerful thing you can do is increase your time horizon . Time is the most powerful force in investing.”
“Good investing isn’t necessarily about earning the highest returns, because the highest returns tend to be one-off hits that can’t be repeated. It’s about earning pretty good returns that you can stick with and which can be repeated for the longest period of time. That’s when compounding runs wild.”

5. Getting Wealthy vs. Staying Wealthy

“There are a million ways to get wealthy … but there’s only one way to stay wealthy: some combination of frugality and paranoia .”

“Good investing is not necessarily about making good decisions. It’s about consistently not screwing up. “
“If I had to summarize money success in a single word it would be ‘survival.'”
“Getting money requires taking risks, being optimistic, and putting yourself out there. But keeping money requires the opposite of taking risk. It requires humility , and fear that what you’ve made can be taken away from you just as fast. It requires frugality and an acceptance that at least some of what you’ve made is attributable to luck, so past success can’t be relied upon to repeat indefinitely.”
“ The ability to stick around for a long time, without wiping out or being forced to give up, is what makes the biggest difference. This should be the cornerstone of your strategy , whether it’s in investing or your career or a business you own. There are two reasons why a survival mentality is so key with money. One is the obvious: few gains are so great that they’re worth wiping yourself out over. The other is the counterintuitive math of compounding. Compounding only works if you can give an asset years and years to grow.”
“ More than I want big returns, I want to be financially unbreakable. And if I’m unbreakable I actually think I’ll get the biggest returns, because I’ll be able to stick around long enough for compounding to work wonders.”
“ Planning is important, but the most important part of every plan is to plan on the plan not going according to plan … Many bets fail not because they were wrong, but because they were mostly right in a situation that required things to be exactly right. Room for error—often called margin of safety—is one of the most underappreciated forces in finance. It comes in many forms: A frugal budget, flexible thinking, and a loose timeline—anything that lets you live happily with a range of outcomes.”
“A barbelled personality —optimistic about the future, but paranoid about what will prevent you from getting to the future—is vital.”

6. Tails, You Win

“A lot of things in business and investing work this way. Long tails—the farthest ends of a distribution of outcomes—have tremendous influence in finance, where a small number of events can account for the majority of outcomes. “

“That can be hard to deal with, even if you understand the math. It is not intuitive that an investor can be wrong half the time and still make a fortune. It means we underestimate how normal it is for a lot of things to fail . Which causes us to overreact when they do.”
“ Anything that is huge, profitable, famous, or influential is the result of a tail event —an outlying one-in-thousands or millions event. And most of our attention goes to things that are huge, profitable, famous, or influential. When most of what we pay attention to is the result of a tail, it’s easy to underestimate how rare and powerful they are.”
“A good definition of an investing genius is the man or woman who can do the average thing when all those around them are going crazy. Tails drive everything. “

“The ability to do what you want, when you want, with who you want, for as long as you want, is priceless. It is the highest dividend money pays. “

“ The highest form of wealth is the ability to wake up every morning and say, ‘I can do whatever I want today.’ People want to become wealthier to make them happier. Happiness is a complicated subject because everyone’s different . But if there’s a common denominator in happiness—a universal fuel of joy—it’s that people want to control their lives .”
“More than your salary. More than the size of your house. More than the prestige of your job. Control over doing what you want, when you want to, with the people you want to, is the broadest lifestyle variable that makes people happy. “
“ Money’s greatest intrinsic value—and this can’t be overstated—is its ability to give you control over your time. To obtain, bit by bit, a level of independence and autonomy that comes from unspent assets that give you greater control over what you can do and when you can do it.”
“Using your money to buy time and options has a lifestyle benefit few luxury goods can compete with.”
“Aligning money towards a life that lets you do what you want, when you want, with who you want, where you want, for as long as you want, has incredible return.”
“Being able to wake up one morning and change what you’re doing, on your own terms, whenever you’re ready, seems like the grandmother of all financial goals . Independence, to me, doesn’t mean you’ll stop working. It means you only do the work you like with people you like at the times you want for as long as you want .”

8. Man in the Car Paradox

“No one is impressed with your possessions as much as you are.”

“There is a paradox here: people tend to want wealth to signal to others that they should be liked and admired. But in reality those other people often bypass admiring you, not because they don’t think wealth is admirable, but because they use your wealth as a benchmark for their own desire to be liked and admired. “
“It’s a subtle recognition that people generally aspire to be respected and admired by others, and using money to buy fancy things may bring less of it than you imagine. If respect and admiration are your goal, be careful how you seek it. Humility, kindness, and empathy will bring you more respect than horsepower ever will. “

9. Wealth is What You Don’t See

“Spending money to show people how much money you have is the fastest way to have less money.”

“We tend to judge wealth by what we see, because that’s the information we have in front of us. We can’t see people’s bank accounts or brokerage statements. So we rely on outward appearances to gauge financial success . Cars. Homes. Instagram photos. Modern capitalism makes helping people fake it until they make it a cherished industry.”
“ The truth is that wealth is what you don’t see. Wealth is the nice cars not purchased. The diamonds not bought. The watches not worn, the clothes forgone and the first-class upgrade declined. Wealth is financial assets that haven’t yet been converted into the stuff you see. That’s not how we think about wealth, because you can’t contextualize what you can’t see.”
“ The only way to be wealthy is to not spend the money that you do have. It’s not just the only way to accumulate wealth; it’s the very definition of wealth. We should be careful to define the difference between wealthy and rich . It is more than semantics. Not knowing the difference is a source of countless poor money decisions.”
“ Rich is a current income. Someone driving a $100,000 car is almost certainly rich, because even if they purchased the car with debt you need a certain level of income to afford the monthly payment. Same with those who live in big homes. It’s not hard to spot rich people. They often go out of their way to make themselves known.”
“ Wealth is hidden. It’s income not spent. Wealth is an option not yet taken to buy something later. Its value lies in offering you options, flexibility, and growth to one day purchase more stuff than you could right now.”
“People are good at learning by imitation. But the hidden nature of wealth makes it hard to imitate others and learn from their ways .”

10. Save Money

“Building wealth has little to do with your income or investment returns, and lots to do with your savings rate.”

“Independence, at any income level, is driven by your savings rate.” (Note: See FIRE (Financial Independence Retire Early) )
“Personal savings and frugality—finance’s conservation and efficiency—are parts of the money equation that are more in your control and have a 100% chance of being as effective in the future as they are today.”
“Wealth is just the accumulated leftovers after you spend what you take in. And since you can build wealth without a high income, but have no chance of building wealth without a high savings rate , it’s clear which one matters more.”
“ Learning to be happy with less money creates a gap between what you have and what you want —similar to the gap you get from growing your paycheck, but easier and more in your control. A high savings rate means having lower expenses than you otherwise could, and having lower expenses means your savings go farther than they would if you spent more.”
“ Spending beyond a pretty low level of materialism is mostly a reflection of ego approaching income, a way to spend money to show people that you have (or had) money. Think of it like this, and one of the most powerful ways to increase your savings isn’t to raise your income. It’s to raise your humility. When you define savings as the gap between your ego and your income you realize why many people with decent incomes save so little.”
“Savings can be created by spending less. You can spend less if you desire less. And you will desire less if you care less about what others think of you.”
“ You don’t need a specific reason to save … You can save just for saving’s sake. And indeed you should. Everyone should.”
“Everyone knows the tangible stuff money buys. The intangible stuff is harder to wrap your head around, so it tends to go unnoticed. But the intangible benefits of money can be far more valuable and capable of increasing your happiness than the tangible things that are obvious targets of our savings . Savings without a spending goal gives you options and flexibility, the ability to wait and the opportunity to pounce. It gives you time to think. It lets you change course on your own terms.”
“Savings in the bank that earn 0% interest might actually generate an extraordinary return if they give you the flexibility to take a job with a lower salary but more purpose , or wait for investment opportunities that come when those without flexibility turn desperate.”
“If you have flexibility you can wait for good opportunities, both in your career and for your investments. You’ll have a better chance of being able to learn a new skill when it’s necessary. You’ll feel less urgency to chase competitors who can do things you can’t, and have more leeway to find your passion and your niche at your own pace . You can find a new routine, a slower pace , and think about life with a different set of assumptions .”
“Having more control over your time and options is becoming one of the most valuable currencies in the world.”
“Less ego, more wealth. Saving money is the gap between your ego and your income, and wealth is what you don’t see.”

11. Reasonable > Rational

“ Do not aim to be coldly rational when making financial decisions. Aim to just be pretty reasonable. Reasonable is more realistic and you have a better chance of sticking with it for the long run, which is what matters most when managing money.”

“What’s often overlooked in finance is that something can be technically true but contextually nonsense.”
“A rational investor makes decisions based on numeric facts. A reasonable investor makes them in a conference room surrounded by co-workers you want to think highly of you, with a spouse you don’t want to let down, or judged against the silly but realistic competitors that are your brother-in-law, your neighbor, and your own personal doubts. Investing has a social component that’s often ignored when viewed through a strictly financial lens. “

12. Surprise!

“ The correct lesson to learn from surprises is that the world is surprising. Not that we should use past surprises as a guide to future boundaries; that we should use past surprises as an admission that we have no idea what might happen next.”

“ History is the study of change , ironically used as a map of the future.”
“It is smart to have a deep appreciation for economic and investing history. History helps us calibrate our expectations, study where people tend to go wrong, and offers a rough guide of what tends to work. But it is not, in any way, a map of the future. “
“A trap many investors fall into is what I call ‘historians as prophets’ fallacy: An overreliance on past data as a signal to future conditions in a field where innovation and change are the lifeblood of progress .”
“ The most important driver of anything tied to money is the stories people tell themselves and the preferences they have for goods and services. Those things don’t tend to sit still. They change with culture and generation. They’re always changing and always will.”
“ The most important economic events of the future—things that will move the needle the most—are things that history gives us little to no guide about. They will be unprecedented events. Their unprecedented nature means we won’t be prepared for them, which is part of what makes them so impactful. This is true for both scary events like recessions and wars, and great events like innovation.”
“History can be a misleading guide to the future of the economy and stock market because it doesn’t account for structural changes that are relevant to today’s world.”
“ The further back in history you look, the more general your takeaways should be. General things like people’s relationship to greed and fear, how they behave under stress, and how they respond to incentives tend to be stable in time. The history of money is useful for that kind of stuff. But specific trends, specific trades, specific sectors, specific causal relationships about markets, and what people should do with their money are always an example of evolution in progress. Historians are not prophets.”

13. Room for Error

“ Margin of safety—you can also call it room for error or redundancy—is the only effective way to safely navigate a world that is governed by odds, not certainties. And almost everything related to money exists in that kind of world.”

“ 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 most important part of every plan is planning on your plan not going according to plan.”
“There is never a moment when you’re so right that you can bet every chip in front of you. The world isn’t that kind to anyone—not consistently, anyways. You have to give yourself room for error. You have to plan on your plan not going according to plan. “
“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.”
“ Two things cause us to avoid room for error. One is the idea that somebody must know what the future holds, driven by the uncomfortable feeling that comes from admitting the opposite. The second is that you’re therefore doing yourself harm by not taking actions that fully exploit an accurate view of that future coming true.”
“If there’s one way to guard against their damage, it’s avoiding single points of failure . A good rule of thumb for a lot of things in life is that everything that can break will eventually break. So if many things rely on one thing working, and that thing breaks, you are counting the days to catastrophe. That’s a single point of failure.”
“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.”

14. You’ll Change

“Long-term planning is harder than it seems because people’s goals and desires change over time.”

“ An underpinning of psychology is that people are poor forecasters of their future selves. Imagining a goal is easy and fun. Imagining a goal in the context of the realistic life stresses that grow with competitive pursuits is something entirely different. This has a big impact on our ability to plan for future financial goals.”
“The End of History Illusion is what psychologists call the tendency for people to be keenly aware of how much they’ve changed in the past, but to underestimate how much their personalities, desires, and goals are likely to change in the future.”
“ We should avoid the extreme ends of financial planning. Assuming you’ll be happy with a very low income, or choosing to work endless hours in pursuit of a high one, increases the odds that you’ll one day find yourself at a point of regret.”
“We should also come to accept the reality of changing our minds.”

15. Nothing’s Free

“Everything has a price, but not all prices appear on labels.”

“ Everything has a price, and the key to a lot of things with money is just figuring out what that price is and being willing to pay it. The problem is that the price of a lot of things is not obvious until you’ve experienced them firsthand, when the bill is overdue.”
“ Most things are harder in practice than they are in theory. Sometimes this is because we’re overconfident. More often it’s because we’re not good at identifying what the price of success is, which prevents us from being able to pay it.”
“Like everything else worthwhile, successful investing demands a price. But its currency is not dollars and cents. It’s volatility, fear, doubt, uncertainty, and regret—all of which are easy to overlook until you’re dealing with them in real time.”
“The question is: Why do so many people who are willing to pay the price of cars, houses, food, and vacations try so hard to avoid paying the price of good investment returns? The answer is simple: The price of investing success is not immediately obvious. It’s not a price tag you can see, so when the bill comes due it doesn’t feel like a fee for getting something good. It feels like a fine for doing something wrong. And while people are generally fine with paying fees, fines are supposed to be avoided. You’re supposed to make decisions that preempt and avoid fines.”
“It sounds trivial, but thinking of market volatility as a fee rather than a fine is an important part of developing the kind of mindset that lets you stick around long enough for investing gains to work in your favor.”
“Market returns are never free and never will be. They demand you pay a price, like any other product.”
“ The trick is convincing yourself that the market’s fee is worth it. That’s the only way to properly deal with volatility and uncertainty —not just putting up with it, but realizing that it’s an admission fee worth paying. There’s no guarantee that it will be.”
“Define the cost of success and be ready to pay for it. Because nothing worthwhile is free.”

16. You & Me

“Beware taking financial cues from people playing a different game than you are.”

“ An idea exists in finance that seems innocent but has done incalculable damage. It’s the notion that assets have one rational price in a world where investors have different goals and time horizons.”
“Bubbles form when the momentum of short-term returns attracts enough money that the makeup of investors shifts from mostly long term to mostly short term.”
“The formation of bubbles isn’t so much about people irrationally participating in long-term investing. They’re about people somewhat rationally moving toward short-term trading to capture momentum that had been feeding on itself. “
“ It’s hard to grasp that other investors have different goals than we do, because an anchor of psychology is not realizing that rational people can see the world through a different lens than your own. Rising prices persuade all investors in ways the best marketers envy. They are a drug that can turn value-conscious investors into dewy-eyed optimists, detached from their own reality by the actions of someone playing a different game than they are.”
“ A takeaway here is that few things matter more with money than understanding your own time horizon and not being persuaded by the actions and behaviors of people playing different games than you are. The main thing I can recommend is going out of your way to identify what game you’re playing.”
“Smart, informed, and reasonable people can disagree in finance, because people have vastly different goals and desires. There is no single right answer; just the answer that works for you. “

17. The Seduction of Pessimism

“Optimism sounds like a sales pitch. Pessimism sounds like someone trying to help you.”

“ Optimism is a belief that the odds of a good outcome are in your favor over time , even when there will be setbacks along the way.”
“Money is ubiquitous, so something bad happening tends to affect everyone and captures everyone’s attention.”
“Pessimists often extrapolate present trends without accounting for how markets adapt.”
“Progress happens too slowly to notice, but setbacks happen too quickly to ignore.”
“ It’s easier to create a narrative around pessimism because the story pieces tend to be fresher and more recent. Optimistic narratives require looking at a long stretch of history and developments, which people tend to forget and take more effort to piece together.”

18. When You’ll Believe Anything

“ Stories are, by far, the most powerful force in the economy. They are the fuel that can let the tangible parts of the economy work, or the brake that holds our capabilities back.”

“The more you want something to be true, the more likely you are to believe a story that overestimates the odds of it being true.”
“ An appealing fiction happens when you are smart, you want to find solutions, but face a combination of limited control and high stakes. They are extremely powerful. They can make you believe just about anything.”
“ Incentives are a powerful motivator, and we should always remember how they influence our own financial goals and outlooks. It can’t be overstated: there is no greater force in finance than room for error, and the higher the stakes, the wider it should be.”
“Everyone has an incomplete view of the world. But we form a complete narrative to fill in the gaps.”
“Wanting to believe that we are in control is an emotional itch that needs to be scratched, rather than an analytical problem to be calculated and solved. The illusion of control is more persuasive than the reality of uncertainty. So we cling to stories about outcomes being in our control. “

About Kyle Kowalski

👋 Hi, I'm Kyle―the human behind Sloww . I'm an ex-marketing executive turned self-education entrepreneur after an existential crisis in 2015. In one sentence: my purpose is synthesizing lifelong learning that catalyzes deeper development . But, I’m not a professor, philosopher, psychologist, sociologist, anthropologist, scientist, mystic, or guru. I’m an interconnector across all those humans and many more—an "independent, inquiring, interdisciplinary integrator" (in other words, it's just me over here, asking questions, crossing disciplines, and making connections). To keep it simple, you can just call me a "synthesizer." Sloww shares the art of living with students of life . Read my story.

Sloww participates in the Amazon Services LLC Associates Program. When you purchase a book through an Amazon link, Sloww earns a small percentage at no additional cost to you. This helps fund the costs to support the site and the ad-free experience.

Reader Interactions

December 17, 2020 at 10:30 AM

I like what you do. Rather I admire it. Your persistence is remarkable. You work hard to present the very best of what you read. You are generous. You go to great lengths to correctly present. You are very mindful and respectful of your audience. If I may, my only suggestion to you will be “come forth” . It will be most wonderful to see you in sloww writings. The time has come. Good bye.

December 17, 2020 at 11:26 AM

Thank you for the kind words, Reza. And, I greatly appreciate the feedback. Someone else has also suggested that I “humanize” myself more. Here’s my thinking on this currently:

– I’ll be sharing more of my personal story in a new Premium series called “Behind the Scenes.” This will include writing about my life, entrepreneurial journey, and more.

– If “come forth” means show myself in photo/video/audio more, I hope to do some appearances on podcasts in the future. I may also do some audio narration for my eBooks or future course. Due to my introverted personality type, I’m not too interested in having my own podcast or YouTube channel.

– All in all, I feel that my primary purpose (as far as I can tell right now) is synthesizing. I love thinking more than writing—it comes more naturally to me. In the coming year, I’m planning to connect the dots between everything I’ve learned to date. In my mind, this will be my most natural “coming forth” and contribution to the world.

All the best! Kyle

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Book Review: The Psychology of Money

"The Psychology of Money" by Morgan Housel is a thought-provoking exploration into the complex relationship between human behavior and financial decisions. Released in 2020, this book offers a refreshing perspective on money management, going beyond traditional financial advice to delve into the psychological aspects that drive our financial choices.

Housel, a seasoned financial writer and partner at Collaborative Fund, brings a wealth of experience to the table. He combines real-world anecdotes, historical examples, and psychological insights to create a compelling narrative that resonates with readers from all walks of life. The book is not just a guide to managing money; it's a journey into understanding the emotional and behavioral nuances that influence our financial well-being.

Housel avoids jargon and complex financial theories, making the content accessible to readers with various levels of financial literacy. The storytelling approach, drawing from his own experiences and those of notable figures, creates a narrative that feels more like a conversation with a wise friend than a lecture from a financial expert. The central theme revolves around the idea that wealth is not only about the dollars and cents on a balance sheet but also about the emotions, values, and stories that shape our relationship with money. Housel argues that personal finance is more about behavior than it is about numbers, and understanding our psychological biases is crucial for making sound financial decisions.

The book is divided into multiple chapters, each addressing a specific aspect of the psychology of money. Housel explores topics such as the importance of saving, the impact of compounding, the role of luck and risk, and the significance of time in building wealth. Each chapter is a standalone exploration of a fundamental concept, allowing readers to absorb the information at their own pace.

One of the standout chapters is "Getting Wealthy vs. Staying Wealthy," where Housel emphasizes the difference between building wealth and preserving it. Through compelling examples, he illustrates how financial success often hinges on avoiding catastrophic mistakes rather than achieving extraordinary gains. This nuanced perspective challenges the conventional wisdom that often glamorizes risk-taking. Housel's writing style is engaging and pragmatic. He doesn't promise get-rich-quick schemes or one-size-fits-all solutions. Instead, he encourages readers to embrace their individuality and make financial decisions aligned with their values and goals. The book serves as a guide to understanding the underlying principles of money management, allowing readers to apply these lessons to their unique circumstances.

Moreover, "The Psychology of Money" is not limited to personal finance; it extends its insights to the broader realm of societal attitudes towards wealth and success. Housel reflects on the stories we tell ourselves about money, success, and happiness, urging readers to question societal norms and make intentional choices that align with their personal narratives.

In conclusion, "The Psychology of Money" stands out as a refreshing and insightful take on personal finance. Morgan Housel's ability to distil complex financial concepts into relatable stories makes this book a valuable resource for readers seeking a deeper understanding of the psychology behind their financial decisions. Whether you're a novice or an experienced investor, the wisdom shared in this book has the potential to reshape your approach to money and wealth.

Maria Rashid

Habingabire valerien .

It is good to read this summary or introduction of book.

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The Night Owl

[Book Review] Morgan Housel's 'The Psychology of Money'

Night Owl Score - 5/5 Hoots

Genre - Non-fiction

Themes - Life advice, personal finance, human behavior

The book in 3 sentences: a 30-second summary

It offers great psychological advice to think about when confronted with financial dilemmas and desires.

It has riveting insights into human behavior and decision-making as it relates to stock market investing and other financial decisions.

It offers ideologies that will help one live a fuller life.

I discovered this book on a trip to the historic Chandi Chowk in Old Delhi, India. This erstwhile magnificent avenue in the heart of Mughal Delhi was the envy of the Europeans when they first visited the country. Now it is reduced to shambles. Here, pirated books are sold next to nothing and I managed to pick up 5 books for Rs 500 which was a solid deal.

This is a great read for young graduates who are earning a serious income for the first time. It can be disorienting to have so much money, so suddenly. Hence, it is important that we effectively control our money and not let it control us.

Chapter Highlights & Quotes

Introduction

"To understand why people sell at the bottom of the bear market, you don't need the math of expected future returns. You need to understand the agony of looking at one's family and realizing the jeopardy of their future."

Financial success comes from inculcating good habits around money that take into account the emotions involved in personal finance.

No One is Crazy

" Your personal experiences with money make 0.0000001% of what's happened in the world, but maybe 80% of how you think the world works."

The impressions of your early teens and 20s drive a lot of your financial behaviour. People who grew up in the decades after the 1929 Depression have a very different approach to stock market investing than folks like me who saw record-breaking stock market performance just after Covid.

Luck & Risk

" Nothing is as good or bad as it seems."

100% of our actions will never dictate 100% of our outcomes. Because of the inherent risk in financial decisions, a failed outcome does not necessarily reflect an incorrect thought process. Keep this in mind while judging your efforts and the efforts of others. Focus less on individual success or failure stories but more on broader patterns.

Never Enough

“At a party, Kurt Vonnegut says to Joseph Heller, “The hedge fund manager organizing the party earns more a day than you earned from your novel Catch-22.", to which Heller replies, "Yes but I have something he will never have....enough" .

"Enough" might seem conservative, but it is the realization that an insatiable appetite for more will push you to the point of regret. There are some things that aren’t worth risking :

Freedom and independence

Family and friends

Being loved by those who you want to love

Peace of mind

Confounding Compounding

" $81.5 Billion of Warren Buffet's $84.5 billion net worth came after his 65th birthday. Our minds are not built to handle such absurdities."

Good investing is not about making one-off great returns but about staying in the game long enough to let your money compound over time. The power of compounding is insane and we can’t grapple with it because linear thinking is intuitive whereas exponential thinking is not. Compounding is exponential.

Getting wealthy vs staying wealthy

“Getting rich is one thing. Staying rich is another”

Keeping money is hard because it requires the opposite of risk-taking, which is how money is often accumulated in the first place. It requires humility and acceptance that there was some degree of luck involved in your success and hence the process cannot be expected to be repeated indefinitely.

Appreciate the Margin of Safety . It could be a frugal budget, a loose timeline, or flexible thinking. A higher margin of safety lets you raise your long-term odds of success by ensuring survivability, allowing compounding to work its magic.

Tails, you Win

“We underestimate how normal it is for a lot of things to fail which causes us to overreact when they do.”

Anything that is huge, profitable, or famous is a result of a tail event, an outlier. Since most of our attention goes to such events, we underestimate how rare they are. On the converse, normalizing such events instills a belief that failures are rare which makes us overreact to them.

“Controlling your time is the highest dividend money pays.”

The ability to do what you want, with who you want, when you want, and for how long, is the ultimate thing money can buy. Doing a job you love can feel like doing something you hate if there is no autonomy or control.

Man in the Car Paradox

“No one is as impressed by your possessions as much as you are.”

We hold wealth as a proxy for happiness, admiration, and respect, but money seldom brings that, especially from the people you most want it from. Humility, kindness, and empathy will bring you more respect and admiration than money ever will.

Wealth is what you don't see

“Spending money to show people how much money you have is the fastest way to have less money.”

True wealth are the financial assets that haven’t yet been converted into materialistic fluff. The world is full of people who look modest but are actually wealthy, and people who look rich but are actually razor's edge close to insolvency.

“One of the most powerful ways to increase your wealth is not increase your income. It is to increase your humility”

We often think increasing our income is the best way to have more money but something much simpler (and far more in our control) is to save more of our current paycheck. We save more by spending less. We spend less by desiring less and we desire less when we think less of what others think about us.

Reasonable > Rational

“Commitment to your strategy during the lean years of the market is the financial variable that most correlates to your eventual outcome.”

Mathematically optimal investing strategies seldom work in the real world because people don’t factor in the emotional roller coasters that come with investing. Sticking to an investing strategy allows the magic of compounding to work, and people stick to those strategies that let them sleep peacefully at night.

“History is the study of the change, ironically used as a map of the future.”

We fool ourselves by over-admiring people who've "been there, done that" when it comes to money. Experiencing certain events does not necessarily qualify you to know what will happen next. In fact, it rarely does, because experience leads to overconfidence more than forecasting ability.

Room for Error

“The most important part of a plan is to plan for the plan not going according to plan.”

In investing and many other aspects of life, we’re playing a game of odds, not certainties. Hence should be wary of believing anyone who says he knows what the future holds just because we are uncomfortable with the truth that nobody does. The purpose of 'room for error' then is to render forecasting unnecessary in a game of uncertainties.

You'll change

“We are bad forecasters of our future selves.”

Long-term financial planning is hard because we tend to be keenly aware of how much we’ve changed over the past, but underestimate how much we’d change in the future. As we continuously change, sunk costs — anchoring decisions to past efforts that can't be refunded — make our future selves slaves to our different, past selves. It's like a stranger making decisions for you.

Nothing’s Free

“Everything has a price, but not all prices appear on labels.”

The price of successful investing is emotional upheaval, doubt, uncertainty, and regret. For 95% of the days, the outperforming stocks stay below their erstwhile all-time highs.

You & Me

“Beware taking financial cues from people who are playing a different game than you are.”

Imitating others’ financial decisions is unwise because different people have different goals over varying time horizons. There is no single piece of advice that works for all. What makes sense to day traders might not make sense to long-term, value investors. Don’t blindly believe what you hear on TV, Twitter, or other social media.

The Seduction of Pessimism

“Optimism sounds like a sales pitch. Pessimism sounds like someone trying to help you.”

Because humans are so risk-averse , we tend to take notice of pessimists proportionally more than optimists. But, real optimists don't believe everything will be great. That's complacency. Optimism is the belief that over time things will be in your favor even if there will be setbacks along the way.

When You'll Believe Anything

“The more you want something to be true, the more you're likely to believe the story that overestimates the odds of it being true.”

We like to believe we live in a predictable world so we turn to authoritative-sounding people who promise to satisfy that need. Indeed, the illusion of control is more comforting than the reality of uncertainty.

Raghav is a senior at Cornell University and is graduating with a Bachelors in Electrical and Computer Engineering. An avid reader, he is interested in figuring out what constitutes a happy and meaningful life; be it through practicing meditation, having deep life chats with friends, or penning his thoughts down on paper, you can often find him trying to quieten the endless chatter of his mind.

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The Psychology of Money: Timeless lessons on wealth, greed, and happiness

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The Psychology of Money: Timeless lessons on wealth, greed, and happiness Paperback – September 8, 2020

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Doing well with money isn’t necessarily about what you know. It’s about how you behave. And behavior is hard to teach, even to really smart people. Money―investing, personal finance, and business decisions―is typically taught as a math-based field, where data and formulas tell us exactly what to do. But in the real world people don’t make financial decisions on a spreadsheet. They make them at the dinner table, or in a meeting room, where personal history, your own unique view of the world, ego, pride, marketing, and odd incentives are scrambled together. In The Psychology of Money , award-winning author Morgan Housel shares 19 short stories exploring the strange ways people think about money and teaches you how to make better sense of one of life’s most important topics.

Print length 256 pages
Language English
Publisher Harriman House
Publication date September 8, 2020
Reading age 16 years and up
Dimensions 5.55 x 0.75 x 8.45 inches
ISBN-10 0857197681
ISBN-13 978-0857197689
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"It’s one of the best and most original finance books in years." -- Jason Zweig , The Wall Street Journal " The Psychology of Money is bursting with interesting ideas and practical takeaways. Quite simply, it is essential reading for anyone interested in being better with money. Everyone should own a copy." -- James Clear , Author, million-copy bestseller, Atomic Habits "Morgan Housel is that rare writer who can translate complex concepts into gripping, easy-to-digest narrative. The Psychology of Money is a fast-paced, engaging read that will leave you with both the knowledge to understand why we make bad financial decisions and the tools to make better ones." -- Annie Duke , Author, Thinking in Bets "Housel's observations often hit the daily double: they say things that haven't been said before, and they make sense." -- Howard Marks , Director and Co-Chairman, Oaktree Capital & Author, The Most Important Thing and Mastering the Market Cycle "Morgan Housel is one of the brightest new lights among financial writers. He is accessible to everyone wanting to learn more about the psychology of money. I highly recommend this book." -- James P. O’Shaughnessy , Author, What Works on Wall Street "Few people write about finance with the graceful clarity of Morgan Housel. The Psychology of Money is an essential read for anyone who wants to make wiser decisions or live a richer life." -- Daniel H. Pink , #1 New York Times Bestselling Author of When , To Sell Is Human , and Drive Review

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Publisher ‏ : ‎ Harriman House (September 8, 2020)
Language ‏ : ‎ English
Paperback ‏ : ‎ 256 pages
ISBN-10 ‏ : ‎ 0857197681
ISBN-13 ‏ : ‎ 978-0857197689
Reading age ‏ : ‎ 16 years and up
Item Weight ‏ : ‎ 2.31 pounds
Dimensions ‏ : ‎ 5.55 x 0.75 x 8.45 inches
#2 in Budgeting & Money Management (Books)
#2 in Introduction to Investing
#7 in Success Self-Help

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About the author

Morgan housel.

Morgan Housel is a partner at The Collaborative Fund. He is a two-time winner of the Best in Business Award from the Society of American Business Editors and Writers, winner of the New York Times Sidney Award, and a two-time finalist for the Gerald Loeb Award for Distinguished Business and Financial Journalism. He lives in Seattle with his wife and two kids.

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COMMENTS

Book Review: 'The Psychology of Money,' by Morgan Housel
how we make money. . "The Psychology of Money" is a compelling, quick read that shows how the ability to achieve wealth often depends more on healthy behavioral skills than on intelligence ...
The Psychology of Money by Morgan Housel
The Psychology of Money is one of the those books that lays the fundamentals required for investment and saving your money without pushing and punishing with a lot of jargons, technical terms, and read-the-offer-documents-carefully-before-investing kind of mundane warnings (mind you, I am academically qualified and work in Finance and a Legal ...
The Psychology Of Money Book Review: Harness Your Financial Emotions
The Psychology of Money provides new insight into how and why consumers interact with money. Morgan Housel shares a series of short stories that allow you to consider the world's interactions with money more closely. Throughout the book, you'll approach the concept and consequences of money in terms of behavior.
4 Lessons I Learned From 'the Psychology of Money' by Morgan Housel
For me, four lessons from the book helped me improve my money mindset and invest more. 1. The magic ingredient in compounding is time. Compound interest helps investors build wealth by generating ...
The Psychology of Money
The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness by Morgan Housel is a fascinating insight into the "why" behind many of our most important financial decisions. The author is an expert in behavioral finance and history and an avid proponent of financial independence. In his book, he takes us through some of the most ...
Book Review: "The Psychology of Money" by Morgan Housel
In my opinion, Morgan Housel is the best behavioral financial writer today. I learn something from every article of his that I read. So when I found out he was releasing a book, I preordered a copy. The Psychology of Money includes some of Housel's existing blog posts, plus new insights and information about people's relationship with money.
Book Review: 'The Psychology of Money,' by Morgan Housel
Book Review: 'The Psychology of Money,' by Morgan Housel. "The Psychology of Money" is a compelling, quick read that shows how the ability to achieve wealth often depends more on healthy ...
The Psychology of Money
Morgan Housel's 2020 book, The Psychology of Money, looks beyond the spreadsheets and finance textbooks and into how emotions and intuition influence the way people interact with money.Unlike highly theoretical fields like physics or medicine, human psychology plays an inherent role in the world of investing, and this book explores how biases have tangible effects on both the global markets ...
Book Review: The Psychology of Money
Morgan Housel's "The Psychology of Money" offers a unique lens through which to view this process, focusing less on the 'how-to' and more on the 'why.' Housel's book is not your typical financial guide filled with investment tips or budgeting tricks. Instead, it delves into the behavioral aspects of dealing with money.
The Psychology of Money
In The Psychology of Money, the author shares 19 short stories exploring the strange ways people think about money and teaches you how to make better sense of one of life's most important matters. MORGAN HOUSEL is a partner at The Collaborative Fund and a former columnist at The Motley Fool and The Wall Street Journal.
The Psychology of Money: A Comprehensive Review
Morgan Housel, in 'The Psychology of Money,' highlights the importance of behavioral skills, such as managing your emotions, to achieve financial happiness. Your background shapes these skills, affecting your money habits and attitudes. Ronald Read's story illustrates that a deep understanding of the psychology of money, combined with emotional ...
The Psychology of Money: Book Review & Lessons Learned
In the Psychology of Money, Housel shares 19 short stories exploring these concepts so that we can be more mindful as to what's driving us, and change course (if we so choose). He also shares his own financial strategy at the end, for those interested. Overall, I found this book to be well-written, concise, and an interesting read.
Book Review: The Psychology of Money by Morgan Housel
With a title like "The Psychology of Money," you might expect the material within to be dense and heady. On the contrary, the book is extremely approachable and digestible. That's thanks in part to its structure that breaks the contents down into 20 relatively short chapters (plus an intro and a postscript). Each of these chapters finds ...
18 Wealth Lessons from "The Psychology of Money" by Morgan Housel (Book
This is a book summary of The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness by Morgan Housel. I couldn't ignore The Psychology of Money any longer. It seems like everyone is talking about it in my little corner of Twitter. Many are calling it their top book of the year. And, Amazon supports the hype. The book launched ...
Book Review: The Psychology of Money
Review. 3 MINS READ. 2. 601. 01 March, 2024. "The Psychology of Money" by Morgan Housel is a thought-provoking exploration into the complex relationship between human behavior and financial decisions. Released in 2020, this book offers a refreshing perspective on money management, going beyond traditional financial advice to delve into the ...
Book Review: The Psychology of Money
Book Review: The Psychology of Money - Morgan Housel 'The Psychology of Money - Timeless Lessons on Wealth, Greed, and Happiness' by award-winning author Morgan Housel is one of the best books on personal finance. Neat and crisply written - this book offers a lot of wisdom and high-quality content.
[Book Review] Morgan Housel's 'The Psychology of Money'
The book in 3 sentences: a 30-second summary. It offers great psychological advice to think about when confronted with financial dilemmas and desires. It has riveting insights into human behavior and decision-making as it relates to stock market investing and other financial decisions.
The Psychology of Money: Timeless lessons on wealth, greed, and
For years, seasoned investors poo-poo psychology (read the one and two-star reviews of this book). There is at least one huge exception. One of the most significant financial thinkers of the 20th century and the mentor and professor of Warren Buffett.
Book Review: "The Psychology of Money" by Morgan Housel
Conclusion. If you're looking for a book that explores the human & mindset side of money management and investing, "The Psychology of Money" by Morgan Housel is an excellent choice. The book's approachable writing style and engaging storytelling make complex financial concepts easy to understand. He does a great job of focusing on the "why it ...
Book Review: The Psychology of Money by Morgan Housel
The Wiser team provides a book review of The Psychology of Money by Morgan Housel. In the book, Housel shares 19 short stories exploring the strange ways people think about money and teaches you how to make better sense of one of life's most important topics. The Wiser team discusses their favorite insights from the book and how we apply many ...
Book Review: The Psychology of Money by Morgan Housel
Buy from Amazon | ₹ 211. The book is organized into 20 chapters, each of which covers a different topic related to the psychology of money. The chapters are relatively short and can be read independently, making the book easy to pick up and put down. Some of the chapter titles include "Tails, You Win," and "The Psychology of Prediction.".
PDF The Psychology of Money: Timeless lessons on wealth, greed, and happiness
The premise of this book is that doing well with money has a little to do with how smart you are and a lot to do with how you behave. And behavior is hard to teach, even to really smart people. ... My own appreciation for the psychology of money is shaped by more than a decade of writing on the topic. I began writing about finance in early 2008.
The Psychology Of Money Book Review
23. The Pyschology of Money Book Reveiew. T he book " The Psychology of Money " is a masterpiece that highlights the most common mistakes people tend to make with money. Even though we came ...

Book Review: ‘The Psychology of Money,’ by Morgan Housel

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Keys to a money-saving mindset

It’s all about frugality and humility

Cash in the bank has unseen returns

Low-earners can save money, too

Behaviors and beliefs for successful investing

Success comes from survival mode

The power of compound interest

No one’s crazy when it comes to money

True wealth is often hidden

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Book Review: “The Psychology of Money” by Morgan Housel

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Book Review: ‘The Psychology of Money,’ by Morgan Housel

Keys to a money-saving mindset

It’s all about frugality and humility

Cash in the bank has unseen returns

Low-earners can save money, too

Behaviors and beliefs for successful investing

Success comes from survival mode

The power of compound interest

No one’s crazy when it comes to money

True wealth is often hidden

Bottom line

The Psychology of Money

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MY FAVORITE TAKAWAYS FROM THE PSYCHOLOGY OF MONEY

Nothing is as good or as bad as it seems.

Learning to have “enough” is the key to wealth.

Wealth is what you don’t see.

Slow and steady wins the race

Expect the Unexpected

You are not a spreadsheet; You are a person.

If you’ve read the Psychology of Money, what was your favorite takeaway?

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