The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness

The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness

From the author, Morgan Housel:

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.

My take on The Psychology of Money

In my opinion, this one of those books that should be highly suggested reading for people looking for finance advice. It is not a book that deals with asset allocations of stocks and bonds, but with the psychology of money and the irrationality of one’s mind in regards to finances. Using 19 short stories as examples, he delves into the how and why of how some very rich people make very bad choices and become greedy to the detriment of their financial health. For these individuals, enough never seems to be enough and, with that mindset, they lose it all.

The author then explains that decisions that might not necessarily make the best financial sense on a spreadsheet might psychologically be the best decisions. For example, if a person really wishes to have their house paid off, it does not matter that they may make more investing that money instead of paying off their mortgage early. Psychologically, if the goal of the person might be to eliminate the stress of paying a mortgage, then focusing on that first is what makes the most sense for them.

Housel writes in a way that is relatable to many of us, without delving into too much financial jargon or overwhelming steps to take. An easy, entertaining read.