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

Summary

  1. In finance, the soft skills (how you behave) is typically more powerful than the hard, technical skills. Finance is guided more by psychology than laws and this book will help you better understand this idea and how to counter some of the more deleterious effects that ignoring them might bring

Key Takeaways

  1. Luck and risk are inescapable – nothing is ever as good or as bad as it seems
  2. “Enough” is a powerful word and one of the most valuable financial skills is to keep the goal posts from moving.
  3. Compounding is a true superpower. A mentality of frugality, paranoia, survival is key. Don’t do anything that can wipe you out and understand that staying wealthy is a different skill than getting wealthy
  4. Honor the power of tails, 80/20
  5. Money’s greatest value is to give you control over how you spend your time
  6. Wealth is what is hidden
  7. Reasonable > Rational – having an approach which you’ll sustain and which allows you to sleep at night is better than what is mathematically optimal
  8. Think of volatility as fees rather than fines
  9. More than some dollar amount, seek independence, the ability to do what you want, when you want. Save more than you spend, keep your lifestyle spending in check, understand your priorities, and give yourself a nice margin of safety

What I got out of it

  1. An incredibly applicable, approachable, and useful book for those who want to better understand how to think about money, investing, saving, and what true wealth really means