Learn about money from a psychological viewpoint.
A Book Review – The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness
By Morgan Housel
Short Summary
In “The Psychology of Money”, Morgan explains through 20 short chapters the numerous fallacies humans have towards money, and convinces readers on why money is more a psychological matter than math-based science.
“Controlling your time is the highest dividend money pays.”
Chapter 7 – Freedom
The author believes to better understand money, we shall not approach money in the traditional way taught by textbooks. Instead, if we look at money with psychology and history lenses on, we would make much better sense out of it. It follows that through his short chapters, Morgan gave many real life examples of how famous investors (good and bad) approach money, as well as made numerous references to major historical events which largely impacted the financial market.
Towards the end of the book, Morgan provided a list of short and actionable lessons for readers to make better financial decisions, and also shared his own approach on money and investment strategy.
The Psychology of Money is behavior science.
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Personal thoughts
The Psychology of Money is not a typical finance or investment book. Instead it is a personal sharing guide which is entertaining and insightful. No matter you are interested in business/ finance or not, you should be able to take away something by reading this book, as it is undeniable that we face money in our everyday life..
In particular, I agree much to a few chapter’s ideas in the book:
Chapter 1 – No one’s Crazy: The idea is that we all make financial decisions based on our own unique experiences. Sometimes these decisions may turn out to be totally wrong or crazy, but to some people they may make perfect sense. This is simply because we are all unique beings and we all respond to money differently.
Chapter 7 – Freedom: In modern days we always hear people aiming to reach the state of financial freedom as early as possible. Simply put, we are much happier when we have more control in life, knowing that we can wake up doing whatever we liked, whenever we liked and spending time with whoever we liked everyday. It makes us happier when we have control over our pace in life.
Chapter 11 – Reasonable > Rational: Facing money, it’s better to be a reasonable person rather than a rational one. This approach helps make us more human and happier in life.
What else to learn
- You cannot control your investment outcome – knowing this actually brings calmness to our mind when we make investment decisions
- Knowing what is “enough” for oneself is the hardest psychological barrier to overcome in our desire towards money
- All wealth needed time to accumulate. We can resort to the traditional saving and compounding methods to grow wealth
The Mouse talks to the Creator
May I know exactly how much is “enough” in terms of money?
I think it varies from person to person. It’s important to understand your own needs and circumstances, and definitely good to plan your finances early in life. You shall have a rough idea when you start planning and how much is “enough” for you shall firm up as time goes along.
Own the book
The Psychology of Money is behavior science.
(Paid link via Amazon)
From Amazon
