The Psychology Of Money – Morgan Housel
- Date Of Publication: 1st September 2020
- Chapters: 20
- Category: Personal Finance
About Author Morgan Housel
Morgan Housel is a partner at the Collaborative Fund, a venture capital firm supporting young companies that are moving the world forward and adding values in the society.
He is also 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.
The Psychology Of Money Book Review
In The Psychology of Money, award-winning author Morgan Housel shares 19 short stories examining the unusual ways people think about money and teaches you how to make a better understanding of one of life’s most important topics. Those Life lessons are given below in a very simplistic manner
- 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.”
- 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 related 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.”
- Never Enough
- Life isn’t any fun without a sense of enough. Happiness, as it’s said, is just results minus expectations.
- Confounding Compounding
- The first rule of compounding is never obstructed it unnecessarily.
- 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.
- 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.
- Tails, You Win
- Most of the things in business and investing work this way. Longtails—the farthest ends of the distribution of outcomes—have tremendous influence in finance, where a small number of events can account for the majority of outcomes.
- 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.
- Man in the Car Paradox
- No one is impressed with your possessions as much as you are.
- Wealth is What You Don’t See
- Squandering money to show people how much money you have is the most foolish way to have less money.
- Save Money
- Building wealth has little to do with your income or investment returns, and lots to do with your savings rate.
- 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.
- 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.
- Room for Error
- The 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.
- You’ll Change
- Long-term planning is harder than it seems because people’s goals and desires change over time.
- Nothing’s Free
- Everything has a price, but not all prices appear on labels.
- You & Me
- Beware taking financial cues from people playing a different game than you are.
- The Seduction of Pessimism
- Optimism sounds like a sales pitch. Pessimism sounds like someone trying to help you.
- 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.
- All Together Now
- This chapter contains the whole summary of all the previous chapters.
- In this last chapter of the book, the author had made many confessions about his beliefs, his financial behaviour, his learning, routine, etc.
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Famous Quotes From The Psychology Of Money Book
- “How you behave is more important than what you know.”
- “If you want to win, then you have to last.”
- “The hardest financial skill is getting the goalpost to stop moving.”
- “Engineers can easily figure out why a bridge collapse, But it’s a lot harder to figure out why a financial market collapsed.”
- “Wealth is like an iceberg, it’s mostly below the surface.”
Conclusion – The Psychology Of Money Book Review
Overall the psychology of Money is a pretty good book. Majority of the personal finance books are on stock, multi-bagger, portfolio and all but this book is something offbeat. It gives the whole idea about personal finance, how to deal with it, how humans see and behave with money, about why people bury themselves in debt, etc.
First 18 chapters in the book explores an individual human behavior or attitude towards money and the final two chapters(i.e 19–20) are a summary of the lessons and on Housel’s personal financial practices.
I’ve read a bit of Morgan’s writing before, so had high expectations for the book.
Now, you all tell me your views on this book and also tell me which part of the book you liked the most and if still, you had not read the book then tell me the reason which stopping you from reading this pretty book in the comment box.
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