This book on money is not the usual personal finance book that gives exact step by step guide on how to budget and invest money. It shares different stories that makes you ponder deeply on your own relationship, behavior and psychology about money.
I highly recommend that you buy and read this book: The Psychology of Money: Timeless lessons on wealth, greed and happiness
Different Background
“Some people are born into families that encourage education; others are against it. Some are born into flourishing economies encouraging of entrepreneurship; others are born into war and destitution. I want you to be successful, and I want you to earn it. But realize that not all success is due to hard work, and not all poverty is due to laziness. Keep this in mind when judging people, including yourself.” ― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness
Each and everyone has different background and collective experiences which have impact on financial decisions. Human beings are emotional creatures. Behavior matters more than the intelligence when it comes to winning the money game. Reasonableness over rationality will also keep you on the money game.
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Luck and Risk
Expect bad money decisions in your lifetime. Even the best financial plan don’t always go as planned.
Bills Gates when given an opportunity to study in a school with a computer. He learn and practiced how to code. We may assess the result of a person by looking at the broader perspective: Luck + Skills + Unfair advantage
“Growth is driven by compounding, which always takes time. Destruction is driven by single points of failure, which can happen in seconds, and loss of confidence, which can happen in an instant.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness
Give importance on not screwing up than making more money. I also learned this in stock market investing. We can always take a bet or invest but if we lose all our chips then we cannot invest anymore. Always think risk first annd think long term. The longer time you invest the bigger the return because of compounding. Warren Buffet ‘s 99.9% of his wealth came from compounding interest.
Never Enough
Why there are people even if they haveenough can never be satisfied?
Capitalism is great at creating wealth and creating envy. There will always be someone better, bigger and smarter. Capitalism lets everyone make money with no limit. Envy is a game you cannot win so just don’t join that game. Focus on what you can control by identifying what really makes you happy on your own terms. Learn to say enough.
“There is no reason to risk what you have and need for what you don’t have and what you don’t need.”― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness
Freedom
“Money’s greatest intrinsic value—and this can’t be overstated—is its ability to give you control over your time.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness
Money cannot buy you happiness but money can give more freedom in your life that can bring happiness. We can always earn more money but we have limited time. With money, you can buy time by leveraging other people’s time like delegating work that you do not want to do and focus on doing work that you truly enjoy.
“Savings can be created by spending less. You can spend less if you desire less. And you will desire less if you care less about what others think of you.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness
Saving equals income less ego. You can reassess your spending and identify which spending are based on ego. Saving is something you can control. Saving money gives more freedom. Just like what Navy Seal Jocko Willink said, “Discipline equals freedom”. Save as much as you can. Many people are tied to a job that they don’t like because they have to pay for debt on their fancy house/car that they don’t really need just to impress other people.
Wealth is what you don’t see
“Use money to gain control over your time, because not having control of your time is such a powerful and universal drag on happiness. The ability to do what you want, when you want, with who you want, for as long as you want to, pays the highest dividend that exists in finance.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness
“Be nicer and less flashy. No one is impressed with your possessions as much as you are. You might think you want a fancy car or a nice watch. But what you probably want is respect and admiration. And you’re more likely to gain those things through kindness and humility than horsepower and chrome.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness
Man in the Car Paradox is about a certain amount of intangible status you can get on material possessions like a fancy car. People in general don’t care or impressed on the owner of material possessions but instead people are just impressed on the material possession itself. People decides on their purchases based on the respect and admiration they think they can get from others. The real magnet of respect and admiration are humility, kindness and empathy.
“Spending money to show people how much money you have is the fastest way to have less money.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness
There are a lot of people that over-leveraged themselves to create an appearance of wealth but in reality they didn’t have money in the bank or they are just one paycheck away.
Everything changes
“Planning is important, but the most important part of every plan is to plan on the plan not going according to plan.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness
As time goes by, our preferences and desires change so do our finances need to adapt. Avoid extreme financial commitments for your future self.
Quotes from the book The Psychology of Money: Timeless lessons on wealth, greed, and happiness
“Things that have never happened before happen all the time.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness
“Controlling your time is the highest dividend money pays.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness
“Independence, to me, doesn’t mean you’ll stop working. It means you only do the work you like with people you like at the times you want for as long as you want.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness
“doing something you love on a schedule you can’t control can feel the same as doing something you hate.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness
I love Voltaire’s observation that “History never repeats itself; man always does.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness
“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. They are driven by the same thing: You are one person in a game with seven billion other people and infinite moving parts. The accidental impact of actions outside of your control can be more consequential than the ones you consciously take.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness
“Napoleon’s definition of a military genius was, “The man who can do the average thing when all those around him are going crazy.”
― Mo― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness
“Less ego, more wealth. Saving money is the gap between your ego and your income, and wealth is what you don’t see. So wealth is created by suppressing what you could buy today in order to have more stuff or more options in the future. No matter how much you earn, you will never build wealth unless you can put a lid on how much fun you can have with your money right now, today.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness
“To grasp why people bury themselves in debt, you don’t need to study interest rate: you need to sturdy the history of greed , insecurity and optimism.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness
“You are one person in a game with seven billion other people and infinite moving parts. The accidental impact of actions outside of your control can be more consequential than the ones you consciously take.”
―― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness
“Bill Gates once said, “Success is a lousy teacher. It seduces smart people into thinking they can’t lose.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness
“Compounding works best when you can give a plan years or decades to grow. This is true for not only savings but careers and relationships. Endurance is key. And when you consider our tendency to change who we are over time, balance at every point in your life becomes a strategy to avoid future regret and encourage endurance.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness
“A mindset that can be paranoid and optimistic at the same time is hard to maintain, because seeing things as black or white takes less effort than accepting nuance. But you need short-term paranoia to keep you alive long enough to exploit long-term optimism. Jesse Livermore figured this out the hard way.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness
“Using your money to buy time and options has a lifestyle benefit few luxury goods can compete with.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness
“Daniel Kahneman once told me about the stories people tell themselves to make sense of the past. He said: Hindsight, the ability to explain the past, gives us the illusion that the world is understandable. It gives us the illusion that the world makes sense, even when it doesn’t make sense. That’s a big deal in producing mistakes in many fields.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness
“The customer is always right” and “customers don’t know what they want” are both accepted business wisdom. The line between “inspiringly bold” and “foolishly reckless” can be a millimeter thick and only visible with hindsight.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness