Book Review: The Psychology of Money

Title: The Psychology of Money

Author: Morgan Housel

Genre: Non-fiction, Personal development

Pages: 252 pages; 6 hours (audiobook)

Level of difficulty: 3/5 Dictionaries

Rating: 4/5 Stars

Brief Introduction:

Doing well with money isn’t necessarily about what you know. It’s about how you behave. And behavior is hard to teach, even to really smart people. Morgan Housel shares 19 short stories exploring the strange ways people think about money and teaches you how to make better sense of one of life’s most important topics.

Review:

I really enjoyed how the lessons were conveyed through storytelling – the stories of specific individuals and companies.

Here are some lessons I learnt from the book that I would like to share:

  1. Our willingness to bare risk depends on personal history (where and when you were born)
  2. Luck and risk are duo forces in our lives
    • Success is what differentiates a bold decision and a foolish choice
    • Luck is the cousin of failure
  3. The hardest financial skill is getting the goal post to stop moving
  4. Big things can happen with small forces
    • Compound interest
  5. The only way to stay wealthy is frugality and paranoia
    • Getting money and keeping money are two different skills
  6. The key of a plan is planning for when the plan fails
    • Margin of safety is important
    • Ensure a room for error when estimating your future returns
  7. The highest dividend that money pays is freedom / control over one’s time
  8. Experience doesn’t lead to forecast abilities
  9. We underestimate how much we will change in the future
  10. The more you want something to be true, the more likely you are to believe a story that overestimates it