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

 

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

BOOK AUTHOR; MORGEN HOUSEL

BOOK CATEGORY: FINANCE & BUSINESS BOOKS

BOOK RATING: 4/5 Ratings, 28,878 reviews

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.

SNAPSHOT OF THE BOOK:

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.

WHY READ THIS BOOK:

‘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.
 
In this book, Morgan Housel shares 19 stories exploring the strange ways people think about money.  It covers observations on our relationship with money and tells us how our thinking towards finances drives the critical decisions of our life.
 
The premise of this book is that – doing well with money has little to do with how smart you are and a lot to do with how you behave. It inspires you to live a wealthy life by making smart decisions.
 
Key Takeaways from the Book
‘The Psychology of Money’ is filled with interesting ideas and practical takeaways. A few are listed below.
• Both luck and risk are hard to measure
• Social comparison is a problem. Comparison is the thief of all joy. Remember – there's always a bigger fish.”
• Give yourself a chance to win and take advantage of long tails
• Compounding only works if you give it the time to grow
• Having the ability to do what you want, when you want, is the ultimate form of wealth
• Don’t be tempted by those who flaunt wealth. Someone can seem rich, but it’s impossible to know at a glance.
• Reduce your ego. Wait for the best opportunities. These can only happen if you save.
• Be reasonable rather than rational. Reasonable is more realistic.
• Investing is not hard science
• Every investment won’t be a winner. Learn to plan accordingly.
• Deal with market volatility. Accept and embrace it.
• Run your own race.
 
Some Great Quotes from The Book
• “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.”
• Money’s greatest intrinsic value—and this can’t be overstated—is its ability to give you control over your time.”
• “One of my deeply held investing beliefs is that there is little correlation between investment effort and investment results.”
• “But there’s only one way to stay wealthy: some combination of frugality and paranoia.”
• “And short-term traders operate in an area where the rules governing long-term investing—particularly around valuation—are ignored because they’re irrelevant to the game being played.”
• “You are one person in a game with seven billion other people and infinite moving parts. The accidental impact of actions outside your control can be more consequential than the ones you consciously take.”
• “Using your money to buy time and options has a lifestyle benefit few luxury goods can compete with.”
• “After spending years around investors and business leaders, I’ve come to realize that someone else’s failure is usually attributed to bad decisions, while your own failures are usually chalked up to the dark side of risk.”
‘The Psychology of Money is an essential read for anyone interested in being better with money. Fast-paced and engaging, this book will help you refine your thoughts about money. You can finish this book in a week, unlike other books that are too lengthy.
 

CHAPTERS IN THIS BOOK:

Introduction: The Greatest Show on the Earth

1. No One's Crazy

1. Luck & Risk

1. Never Enough

1. Confounding Compounding

1. Getting Wealthy VS Staying wealthy

1. Tails, You Win

1. Freedom

1. Man In The Car Paradox

1. Wealth is What You Don't See

1. Save Money

1. Reasonable > Rational

1. Surprise!

1. Rooms For Error

1. You'll Change

1. Nothing's Free

1. You & Me

1. The Seduction Of Pessimism

1. Why you'll Believe Anything

1. All Together Now

1. Confession

Postscript: a Brief History of Why the US customer Thinks the Way They Do
End note

BOOK SUMMARY VIDEO:

Popular Highlights in this book:

• There is no reason to risk what you have and need for what you don’t have and don’t need.
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• Having a strong sense of controlling one’s life is a more dependable predictor of positive feelings of well-being than any of the objective conditions of life we have considered.
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• Financial success is not a hard science. It’s a soft skill, where how you behave is more important than what you know.
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• Therefore, focus less on specific individuals and case studies and more on broad patterns.

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