Review of ‘The Psychology of Money’ by Morgan Housel
In the Psychology of Money, Morgan Housel teaches you how to have a better relationship with money and to make smarter financial decisions. Instead of pretending that humans are ROI-optimizing machines, he shows you how your psychology can work for and against you.
𝐓𝐢𝐭𝐥𝐞: The Psychology of Money
𝐀𝐮𝐭𝐡𝐨𝐫: Morgan Housel
𝐏𝐚𝐠𝐞𝐬: 240
𝐆𝐞𝐧𝐫𝐞: Personal Finance
𝐑𝐚𝐭𝐢𝐧𝐠: 5 / 5
“The highest form of wealth is the ability to wake up every morning and say, I can do whatever I want today ”- Morgan Housel
𝗜𝗻𝘁𝗿𝗼𝗱𝘂𝗰𝘁𝗶𝗼𝗻 :
The thought behind 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.
It teaches us that financial success is not hard science, It’s a soft skill. This book includes very practical arguments to convince you that these soft skills are more important than the technical side of the money.
𝐊e𝐲 𝐟𝐞𝐚𝐭𝐮𝐫𝐞𝐬 𝐨𝐟 𝐭𝐡𝐢𝐬 𝐛𝐨𝐨𝐤:
This book can help you achieve long-term financial success by instilling in you the right behavior and the right goals towards money.
There are few ideologies that are worth practicing while dealing with money:
There are things outside of our control where luck plays a major role and it is okay if all of our investment decisions didn’t turn out to be great, we just need a few good decisions to overshadow all the bad ones.
Your goal shouldn’t be to earn the highest returns but the ability to do what you want, when you want, with who you want, and for as long as you want. It’s the highest dividend money pays.
We all want respect and admiration but we need to earn these things from kindness and humility rather than from money.
Always have room for error, a life full of surprises, and crazy things happen all the time.
𝐇𝐨𝐰 𝐭𝐡𝐢𝐬 𝐛𝐨𝐨𝐤 𝐜𝐚𝐧 𝐡𝐞𝐥𝐩 𝐲𝐨𝐮?
It will make you believe that achieving financial success is not rocket science. By making some behavioral changes you can do wonders for your finances. The world is full of obvious things which nobody by any chance ever observes.
Five of my favourite lessons from the book are:
1. No one’s crazy. : Quoting an impressive paragraph from the book. 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. No one is crazy; everyone invests money basis their life experiences. A corollary of the same — the right investment for someone else is not necessarily suitable for you. Take the buy/sell advise by experts with a grain of salt.
2. Luck and risk are doppelgangers. : A lot of success and failures in life are courtesy luck and the role of chance. It isn’t straightforward to estimate the proportion of luck and skill that leads to success. Not all success is due to hard work, and not all poverty is due to laziness.
3. One must aim for getting the goalpost of lifestyle desires to stop moving. The savings generated by personal frugality and living below your means can equip you to handle the curveballs life throws.
4. Compounding is powerful — the first rule of compounding: Never interrupt it unnecessarily (Charlie Munger).
5. The most significant value of money is control over one’s time. The ability to do what you want, when you want, with whom you want, for as long as you want, is priceless. It is the highest dividend money pays.
𝗖𝗼𝗻𝗰𝗹𝘂𝘀𝗶𝗼𝗻 :
If you are interested in making better financial choices in 2021, the Psychology of Money is a must-read. If you happen to read the book, do share your ideas, comments and feedback. I would love to hear your takeaways.
If you don’t want to miss some crucial money lessons, then go and grab a copy.
