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The Psychology of Money by Morgan Housel

Welcome to my blog summary of Morgan Housel's The Psychology of Money. This book doesn't give formulas or step-by-step guides to getting rich. Instead, Housel, an award-winning author, shares 19 engaging stories exploring how people think about money.


Drawing lessons from history, finance, psychology, and everyday examples, Housel writes a vivid narratives of our financial behavior and investments. His writing is easy to follow and refreshingly non-preachy. You can dive into any chapter independently; by the end, you might see your financial habits in a new light. This book offers a genuinely unique and human take on understanding money.

These are my book insights into Greg McKeown's "Essentialism." My notes are informal and contain quotes from the book. Each book summary has a short description, top lessons from the book, a beyond-the-book section, and favorite quotes. Enjoy!


Top 10 Lessons from the Book

 

1. The highest form of wealth is waking up every morning and saying, "I can do whatever I want to do." This ability to do what you want, when you want, with who you want, for as long as you want, is priceless. It is the highest dividend money paid.


2. Never enough- Social comparison can make us feel like we are never enough. There is always a bigger fish. Do not risk what you have for what you don't need. "Enough" is not too little. "Enough" is realizing that the opposite—an insatiable appetite for more—will push you to regret.


3. In investing, you must identify the price of success—volatility and loss amid the long growth backdrop—and be willing to pay it.


4. Few things matter more with money than understanding your time horizon and not being persuaded by the actions and behaviors of people playing different games than you are.


5. People from different generations, raised by different parents who earned different values in different parts of the world, born into different economies, experiencing different job markets with different incentives and degrees of luck, learn different lessons. No one is crazy. We all make decisions based on unique experiences that make sense to us in a given moment.


6. Aim to be financially unbreakable, leave room for errors


7. The first rule of compounding is never to interrupt it unnecessarily.


8. Past a certain income level, what you need is just what sits below your ego. When you define savings as the gap between your ego and your income, you realize why many people with decent incomes save so little.


9. To grasp why people bury themselves in debt, you don't need to study interest rates; you need to study the history of greed, insecurity, and optimism.


10. The truly rich don't spend unnecessarily because real money resides where people can't see it.


Favorite quotes from the book:

 

"A genius is a man who can do the average thing when everyone else around him is losing his mind."

—Napoleon Bonaparte.


"The world is full of obvious things which nobody ever observes."

—Sherlock Holmes.


"Expectations always move slower than facts."
"The hardest financial skill is getting the goalpost to stop moving."
"Using your money to buy time and options has a lifestyle benefit few luxury goods can compete with." 

—Morgan Housel 


"There is no reason to risk what you have and need for what you don't have and don't need." 

—Warren Buffett.


Beyond the book


As a partner at Collaborative Fund, he regularly writes thought-provoking articles on their blog. You can read his posts on the Collaborative Fund Blog.


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