‘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 a 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 Take-Aways 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 of 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 towards money. You can finish this book in a week, unlike other books that are too lengthy.
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