The Psychology of Money - Morgan Housel

In this timeless bestseller, Morgan Housel, describes twenty different lessons and stories about how our minds combat the thoughts of greed and money.

The Psychology of Money is incredibly hard to put down due to Housel's expertise of drawing the reader in with a devastatingly catchy hook at the end of every chapter.

I finished this book a few weeks ago and then took some time to reflect on the main topics that are discussed so that I could most accurately portray my thoughts in this article.

Following the structure of my other book reviews, I'll give you guys a quick summary, share some notable quotes, and close out with some key takeaways.

I hope you enjoy.

Summary

This book has the potential to change the way you think about- well...everything.

Housel uses twenty short chapters to keep the reader engaged in each separate lesson or story that he tries to convey.

The most notable theme that is seen throughout the book is that people make financial decisions and not spreadsheets. In addition, the decisions that people make about money are made in meeting rooms, on golf courses, and at the dinner table. Rarely, if ever, are financial decisions based strictly on the numbers.

Housel tries to get the reader to grasp that the way that we think about money as a society is only based off of recent history. The modern financial system that we utilize today has only been in place for about 20-50 years. This leads to a lack of true expertise in the volatility of our markets.

Also, Housel describes, in-depth, the ability of every human being to become wealthy - all it takes are a few psychological tendencies - not a degree from Harvard or MIT. The story described by Housel to portray this message is one about a man by the name Ronald James Read.

Read was a longtime janitor and gas station attendant who took what little money he made and invested for years. By living humbly and watching his savings compound, Read was able to amass a savings of over $8 million by the time he passed away at the age of 92.

If someone making minimum wage, or maybe even less, can save $8 million - why can't you?

Housel say's it's because we don't think about money the right way - and that's the premise of every short story compiled within book.

Notable Quotes

"Money is everywhere, it affects all of us, and confuses most of us."

"Ordinary folks with no financial education can be wealthy if they have a handful of behavioral skills that have nothing to do with formal measures of intelligence."

"Past a certain level of income, what you need sits just below your ego. Think of it like this, and one of the most powerful ways to increase your savings isn't to increase your income. It's to raise your humility."

Ever heard of compounding?

"81.5 billion of Warren Buffet's $84.5 billion net worth came after his 65th birthday. Our minds are not built to handle such absurdities."

"The highest form of wealth is the ability to wake up every morning and say, "I can do whatever I want today.""

Key Takeaways

Despite the overarching theme of thinking differently about money, the biggest lesson I was able to garner from this book is one I've yet to mention. This lesson is what Housel calls the "Man in the Car Paradox."

Housel discusses how he would see so many nice cars while working as a valet. However, the people driving those cars he seldom paid attention to.

"There is a paradox here: people tend to want wealth to signal to others that they should be liked and admired. But in reality those other people often bypass admiring you, not because they don't think wealth is admirable, but because they use your wealth as a benchmark for their own desire to be liked and admired."

Personally, this makes me think of "you're never as cool as you think you are." Therefore, we should focus on taking care of the things we want to accomplish and leave the ego behind. When ego comes into the picture, greed soon follows, and from there - our obsession with money becomes more prevalent than our compassion towards our fellow man.

To tie this in, I'll use a quote found in a book I'm currently reading. Thomas Carlyle says, "A great man shows his greatness by the way he treats little men."

This book was one I needed to read as I start my professional career. It helped me realize some savvy saving strategies, but most importantly, it reminded me that a man shouldn't be judged by the items he possesses or the size of his bank account.

The most wealth I can ever possess will be the freedom of my time, and the most genuine way to curb an ego is to treat all humans, even those impoverished, with the same amount of respect.

Much love,

Vin

If you haven't checked out my prior book review on A Million Miles in a Thousand Years by Donald Miller please click here to give it a read.

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Sources/Images: Amazon