The Psychology of Money _ Morgan Housel!

 

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What do we know about money?

The answer depends upon person to person – some people might say it is the mark of the modern economy, it is a tool to control the economy, it is the paper required for the exchange of goods and services, it is the essential element of the modern times without which survival is nearly impossible, and so on. Whatever the answer might be, we can all agree on that, it is essential and it is essential only up to a certain level i.e. money doesn’t matter for most of the people after accumulating wealth to a certain level (based on their individual goals) – however, there are some people who never stops craving for money even after accumulating billions.

It is not a great book ever written in the niche of wealth, finance, or economics. It is not written in a language that could possibly win a Nobel Prize in literature. It is not written by some billionaire or noble person. And, it definitely is not a bible of money or wealth. Then, the question might arise what it is then – it is a book which tries convincingly hard enough to make a point that getting wealthy and staying wealthy is not the matter of the size of our earnings or the size of our return on investment. It is not always the person who earns the most is wealthy: wealthy people have different mindset, different definition about wealth, and different approach to getting and staying wealthy.

The Psychology of Money has made an attempt to dissect that differences in mindset, definition, and approach. Housel has put a tremendous effort in searching the various stories and events in the 20^th and 21^st century to assist him in making his point. We must say, it is not a mediocre book either, it is written with great depth and conviction that it has a potential to shatter some of the conventional beliefs about wealth. It has, however, failed short in providing some kind of tool or how to manual for getting and staying wealthy – because, some of the people might be interested in jumping right into the how to manual rather than understanding the fundamental. Being a banker, I’d also expected a lot from this book – like tools to accumulating wealth and staying wealthy, ways to getting wealthier faster etc.; still, I am not disappointed with the wisdom that it contains and the contents of the book.

...behavior is hard to teach, even to really smart people…

…most of the reason why, I believe, is that we think about and are taught about money in ways that are too much like physics (with rules and laws) and not enough like psychology (with emotions and nuance)…

….individual investors’ willingness to bear risk depends on personal history…….

.....it should surprise no one that many of us are bad at saving and investing for retirement. We’re not crazy. We’re all just newbie…..

……luck and risks are both the reality that every outcome in life is guided by forces other than individual effort…..

..…there is no reason to risk what you have and need for what you don’t have and don’t need…..

…the big takeaway from ice ages is that you don’t need tremendous force to create tremendous results….

…..but there’s only one way to stay wealthy: some combination of frugality and paranoia….

…..more than I want big returns, I want to be financially unbreakable. And if I’m unbreakable I actually think I’ll get the biggest returns, because I’ll be able to stick around long enough for compounding to work wonders…..

….planning is important, but the most important part of every plan is to plan on the plan not going according to plan…..

…..a barbelled personality—optimistic about the future, but paranoid about what will prevent you from getting to the future—is vital…..

….we need short term paranoia to keep us alive long enough to exploit long term optimism…..

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

…….but doing something you love on a schedule you can’t control can feel the same as doing something you hate…..

……compared to generations prior, control over your time has diminished. And since controlling your time is such a key happiness influencer, we shouldn’t be surprised that people don’t feel much happier even though we are, on average, richer than ever…..

…..wealth is the nice cars not purchased. The diamonds not bought. The watches not worn, the clothes forgone and the first-class upgrade declined. Wealth is financial assets that haven’t yet been converted into the stuff you see…..

…..the first idea—simple, but easy to overlook—is that building wealth has little to do with your income or investment returns, and lots to do with your savings rate……

……every bit of savings is like taking a point in the future that would have been owned by someone else and giving it back to yourself……

……the correct lesson to learn from surprises is that the world is surprising. Not that we should use past surprises as a guide to future boundaries; that we should use past surprises as an admission that we have no idea what might happen next…….

………being able to wake up one morning and change what you’re doing, on your own terms, whenever you’re ready, seems like the grandmother of all financial goals……..

……..consumption became an explicit economic strategy in the years after World War II…..

……the biggest difference between the economy of the 1945–1973 period and that of the 1982–2000 period was that the same amount of growth found its way into totally different pockets…..

.....the lifestyles of a small portion of legitimately rich Americans inflated the aspirations of the majority of Americans, whose incomes weren’t rising…..

Though, it is very personal decision when it comes to earning money, spending money, and saving money; however, we are all newbie when it comes to truly understanding the money or wealth. It all depends upon the personal goal, aspirations, needs, and desires; and the book is very cautious about making it clear that it is not intended to force us anything. It is not a how to manual for earning and accumulating more wealth – so, if you’re looking some kind of how to manual for being wealthy and staying wealth, this is not the book for you – PERIOD.

However, if you’re looking to understand wealth, how the time value of money works, and if you believe there are some hidden things about money that we are not able to comprehend in full yet – this is the book for you. It is written in simple language with references to back things mentioned therein; and it is written for one sole purpose only – i.e. to make us understand the nature of money and wealth. Once, we understand the nature of money and wealth, it is up to us to decide and come up with how to manual, for being and staying wealthy, ourselves. It is the fundamental book ever written over the most complex thing of the modern times: for all of us who are trying to become wealthy and for all of us wealthy people trying to stay wealthy, this book could generate epiphany, and maybe we could get a whack on the side of our head for good. Still, it’s up to the person to decide if it’s worth reading and worth giving time.

Rating: 4.8/5