A review of The Psychology of Money: Timeless lessons on wealth, greed, and happiness
Put your money where your mind is.
In his 2020 book, The Psychology of Money: Timeless lessons on wealth, greed, and happiness, Morgan Housel explores the complex relationship between money and human behavior.
Drawing on history, psychology, and personal anecdotes, The Psychology of Money presents a useful framework for reevaluating our relationship with cold, hard cash, and defining the ever elusive “enough.”
Key summary
Over the course of The Psychology of Money, Housel shares 19 short stories to explore its central theme: doing well with money isn’t necessarily about what you know, it’s about how you behave. Housel acknowledges theoretical personal financial concepts before exploring how human psychology can’t be confined within a spreadsheet.
“[Knowing] what to do tells you nothing about what happens in your head when you try to do it.”
It feels like the goal of this book is to dispense financial advice that cements its practicality in the fickleness of emotion.
Some personal takeaways:
- Money’s core value is to buy you time and energy to get and do the things you want. Something you love can sour easily with the right traits, such as taking up space from other things you care about.
- Individuals in certain tax brackets see wealth as an ego game. These folks usually do not stay wealthy long.
- It’s normal for things to go wrong and often. The successful investor continues their routine, while everyone else goes crazy.
- “The hardest financial skill is getting the goalpost to stop moving.”
- Plans need to be flexible because people change and grow. A plan that you can consistently stick to is better than the more technically accurate or by-the-book one.
General thoughts
I picked this book because I have grown tired of trying to grasp technical investing concepts and complex formulas to pick the right stocks. The Psychology of Money made me an optimist about my personal finance through its reasonable principles. These principles leveled with me in a way that made me feel wealth generation was actually possible, especially after some thoughtful reflection and an audit of what I value in my life.
Typically, I don’t enjoy anecdotes, and this is even more true when it comes to books about finance, as they are often about individuals with an income I’ll never attain in my life. But Housel did a fantastic job creating applicable lessons from each story, along with useful analysis of psychology. Even though I’d never be in some of these positions, I could see how these concepts fit into my life.
I felt the length of the book was perfectly appropriate for its concepts and topic. The book didn’t drag but took the time to expand on the questions it asked.
Housel’s writing style is engaging, like that of an academic professor who knows how to spin a boring topic into something people pay attention, with a sense of “I’ve never thought about it that way.” Similar tones are how I prefer my non-fiction to be: a sense of authority, empathy, and curiosity.
Conclusion
I enjoyed The Psychology of Money and found it fascinating. More importantly, it provided a concrete framework to re-evaluate my relationship with money and to take stock of what’s important in my life. If you’re looking for technical investing advice or perhaps you dream of earning enough to drive a snazzy sports car, this book is probably not for you (though perhaps you should still read it?). Otherwise, I’d recommend this generally because I think the idea of a moving financial goal post is something that many fellow Americans struggle with.
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