2. THE PSYCHOLOGY
OF MONEY
• Author : MORGAN HOUSEL
• He is a two-time winner of the Best in
Business Award from the Society of
American Business Editors and Writers
• And winner of the New York Times
Sidney Award
• Other books by him:
• 50 years in the making
• Same as ever
• everyone believes it most will be wrong
3. In the Psychology of Money, Morgan Housel teaches you
how to have a better relationship with money and to make
smarter financial decisions.
The book "The Psychology of Money" promises to
teach us about things that do not become obsolete
with time. It was released in September 2020, has 183
pages separated into 20 chapters.
The book is an international bestseller acclaimed by
journalists from The Wall Street Journal.
Book introduction
Published on 8 sept 2020
4. Why should we read it ?
If you want to understand how personal finance, investments,
financial planning and the money industry, in general, works, this
book is made for you.
The summary is indispensable for people starting their journey
with finance, who want to reorganize their priorities, and also
those who already have extensive technical knowledge and would
like to look at money from another perspective.
5. Key takeaways
• When it comes to earning money and building wealth, it really doesn’t matter how smart
you are. Instead, what really matters is how you behave.
• Even the smartest people can lose control of their emotions and plunge into financial
disasters while ordinary people with no financial education, but robust behavioural skills,
can become wealthy.
• It is not enough just to know how to do something. You must be able to fight with internal
emotional and mental turmoil in order to make the best financial decisions.
• Considering the lack of accumulated wisdom in terms of modern finance, many of the poor
financial decisions that you end up making arise from peoples’ collective inexperience.
6. • You must not risk what you already have and require for things which
you do not have and do not actually need.
• Creating wealth and maintaining wealth are two different things.
Creating wealth is easy, but keeping it is very difficult.
• While there are many ways to accumulate wealth, there is only one
way to maintain it, and that involves being frugal and paranoid of
potential losses.
7. 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 optionality 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.
8. • “Their view of money was formed in different worlds. And when that’s
the case, a view about money that one group of people thinks is
outrageous can make perfect sense to another.”
• “Every decision people make with money is justified by taking the
information they have at the moment and plugging it into their
unique mental model of how the world works.”
9. 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.
10. • “Luck and risk are both the reality that every outcome in life is guided
by forces other than individual effort. They are so similar that you can’t
believe in one without equally respecting the other. They both happen
because the world is too complex to allow 100% of your actions to
dictate 100% of your outcomes.”
• Therefore, focus less on specific individuals and case studies and
more on broad patterns.
11. You should like risk because it pays off over time. But you should be
paranoid of ruinous risk because it prevents you from taking future risks
that will pay off over time.
The line between ‘inspiringly bold’ and ‘foolishly reckless’ can be a
millimeter thick and only visible with hindsight. Risk and luck are
doppelgangers.
12. • Life isn’t any fun without a sense of enough. Happiness, as it’s said, is
just results minus expectations.
• Doing well with money has a little to do with how smart you are and a
lot to do with how you behave.
13. conclusion
• The Psychology of Money explores how money moves around in an
economy and how personal biases and the emotional factor play an
important role in our financial decisions, as well as how to think more
rationally and make better decisions when it comes to money.
14. My reading experience
• The book's emphasis on the emotional and psychological aspects of
money, and its focus on long-term thinking and humility, make it a
valuable resource for anyone looking to make better decisions about
their finances and achieve long-term financial success and happiness.
• While reading this book, I went through a transition phase of viewing
world with new perspectives of financial ways
• No matter which background you come from but you need to have
financial skills to sustain your life
• This book is a key to strengthen your financial knowledge and skills.
