Book Review: The Psychology of Money: Timeless lessons on wealth, greed, and happiness by Morgan Housel
@ https://www.amazon.com/Psychology-Money-Timeless-lessons-happiness/dp/0857197681
Happiness = Results - Expectations
Financial success is not a hard science. It’s a soft skill,
where how you behave is more important than what you know. Physics
isn’t controversial, It’s guided by laws. Finance is different, It’s
guided by people’s behaviors.
Key Takeaways
Freedom:
The
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 pays.
More than your salary. More than the size of your house. More than the
prestige of your job. Control over doing what you want, when you want
to, with the people you want to, is the broadest lifestyle variable that
makes people happy. Having more flexibility and control over your time
is far more valuable than getting another 2% on your returns by working
all-nighters or making speculative bets that impact your sleep.
Getting Wealthy vs Staying Wealthy:
There
are a million ways to get wealthy but there’s only one way to stay
wealthy. i.e some combination of frugality and paranoia. Good investing
is not necessarily about making good decisions. It’s about consistently
not screwing up. Getting money requires taking risks, being optimistic,
and putting yourself out there. But keeping money requires the opposite
of taking risk. It requires humility, and fear that what you’ve made can
be taken away from you just as fast. It requires frugality and an
acceptance that at least some of what you’ve made is attributable to
luck, so past success can’t be relied upon to repeat indefinitely.
Being rich vs wealthy:
If
you’re rich, you have a high current income. But being wealthy is
something different – wealth is not visible. It’s the money that you
have that’s not spent. It’s the choice to buy or do something at a
future time. Being rich offers you opportunities in the short-term, but
being wealthy provides you the flexibility of having more of the items
you want – freedom, time, possessions – in the future.
Pessimism is persuasive:
Pessimism
often sounds smarter and more persuasive than optimism. If something is
not going well, it’s easy to think that it will continue not going
well. And that sounds very plausible. But what this line of thinking
misses is that problems often create demand for change and solutions.
And this leads to ingenuity that creates changes that only the optimist
might believe in.
Ferraris don’t generate respect:
People
buy mansions and fancy cars because they want respect and admiration
from others. What they don’t realize is that people don’t admire the
person with the fancy house or car; they admire the object and think of
themselves having that object. So buying impressive items to gain
admiration and respect from others is a fool’s pursuit – these things
can not be bought.
