Favorite quotes from Morgan Housel’s The Psychology of Money


Money plays an integral part in our lives, our thoughts, feelings, and behaviors so it makes good sense to understand the psychology behind how we are with money. Managing our finances is essential, being effective with it and achieving financial freedom is even more important. I recently came across the book The Psychology of Money, it was a very good read. Good enough for me to write a post about it! The Psychology of money is a much-needed sensible book on money. In it you get the kind of advice your grandmother would give you on money, yet it is so true and resonates. The book doesn’t take a sexy approach to money if I were to sum it up in a word – Timeless truths. Okay, that’s two words but I am sure you all get the vibe. The book explores how we are with money – our attitudes and how these attitudes trigger the financial decisions and outcomes we eventually have. When we understand a thing, then we can navigate it better and be better at managing it too. You can get the book here.

1. Why we don’t do what we are meant to do with Money

“We all think we know how the world works, but we’ve all only experienced a tiny sliver of it”

Our money decisions are being shaped by our unique life experiences. Financial decisions made by people are reasonable at the time, ultimately no one is crazy.

2. On Luck and Risk

“If you acknowledge that luck brought you success, you have to believe in luck’s cousin – risk, which can turn your story around just as quickly”

In making financial decisions there are too many complexities and infinite moving parts and elements outside our control in play. It is essential to look for more broad, common, and realistic patterns that would get the same results as opposed to one-off events. Stay in, keep playing until the odds play out in your favor, and ensure you don’t get wiped out!

Financial decisions made by people are reasonable at the time, ultimately no one is crazy.

3. The never-enough syndrome

“The ceiling of social comparison is so high that virtually no one would ever hit it”

“The hardest financial skill is getting the goalpost to stop moving”

In a world where you are not just keeping up with the Jones but the internet at large, it can be hard to establish what enough is. There will always be someone who makes more money. When you know what your enough money is, it prevents you from risking everything in the pursuit of more.  Warren Buffet puts it nicely advising not to risk what you have and need, for what you don’t have and don’t need.

4. The power of compounding

“A small starting base can lead to results so extraordinary they seem to defy logic”

In the world of investing, you don’t always need tremendous force to create tremendous results. Growth with compounding is all about the consistency of earning good returns that can be repeated over time.

5. Getting wealthy and staying wealthy

 “Having an edge and surviving are two different things”

Get good at getting and staying wealthy. Both require completely different skills set. To get wealth requires some level of risk-taking and optimism, whilst staying wealthy requires humility and frugality. Staying financially unbreakable must always win over returns, investing is like growing oak trees.

6. What freedom is

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

Freedom and control of your time is one of the biggest dividends money pays.

7. The man in the car paradox

“Humility, kindness, and empathy would bring you more respect than horsepower ever will”

Wealth signaling does not necessarily attract admiration from other people.

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