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This book is excellent it is easy to grasp the concepts around investing, banking, and financial acumen by weaving relatable stories and true life case studies. I also interested with the idea that luck plays in the wealth of most of the people that are revered for being “good business people”, pointing out that many of them get that way because: they had money handed down to them, they had parents or caretakers teach them to be financially literate, and had the ability to start compounding interest from a young age. He makes a point multiple times in the book that “no one’s crazy” meaning that the way we behave around money has more to do with our life experiences and thus, our psychology, than our morality.
What was my favorite quote:
”Intelligence is not a reliable advantage in a world that’s become as connected as ours has. In a world where intelligence is hyper-competitive and many previous technical skills have become automated, competitive advantages tilt toward nuanced and soft skills — like communication, empathy, and perhaps, most of all, flexibility.
If you have flexibility you can wait for good opportunities, both in your career and for your investments. You’ll have a better chance of being able to learn a new skill when it’s necessary. You’ll feel less urgency to chase competitors who can do things you can’t, and have more leeway to find your passion and your niche at your own pace. You can find a new routine, a slower pace, and think about life with a different set of assumptions. The ability to do those thing when most others can’t is one of the few things that will set you apart in a world where intelligence is no longer a sustainable advantage.”
Things I responded to: Towards the end of the book Morgan focuses on the ways that our brain can trip us up - one of those being how we “fill in the blanks” when we don’t understand and ultimately, we end up filling in the blanks with the wrong information - usually not based in truth, but rather, based in our beliefs. I like this focus in the book because it applies to so many other areas of our lives - how we assume what other people are thinking or even saying when they use a different tone, whether it’s about money, relationships, body image, or otherwise.
He says “Most people, when confronted with something they don’t understand, do not realize they don’t understand. it because they’re able to come up with an explanation that makes sense based on their own unique perspective and experiences in the world, however, limited those experiences are” he continues… “The illusion of control is more persuasive than the reality of uncertainty. So we cling to stories about outcomes being our control.”
So, my take away from this, less in regards to investments is moreso in regards to how I perceive what/how other people are doing and how I’m filling in the gaps to confirm beliefs that keep me stuck in the same old way of thinking. It comes down to my favorite question: Do I know that to be 100% true?
Something in the book that stayed with me: Sucess happens AND setbacks happen - work for one while preparing for the other. It’s not a matter of IF, it’s a matter of WHEN. As he says “A plan is only useful if it can survive reality. And a future filled with unknowns is everyone’s reality.” and I loved a few survival mindsets that he mentioned:
”More than I want big returns, I want to be financially unbreakable. And if I’m unbreakable I actually think I’ll get bigger returns, because I’ll be able to stick around long enough for compounding to work wonders.”
and
”Planning is important, but the most important part of every plan is to plan on the plan not going according to plan.”
Simple reviews :
" The Psychology of Money is easily the best money book I’ve read. What makes it stand out is how simple, practical, and easy to understand it is. You don’t need a background in finance or economics to get value from this book, it speaks to the way everyday people actually think about and deal with money.
Rather than focusing solely on complicated financial strategies, the book explores the behaviors, emotions, habits, and decisions that ultimately shape our financial lives. The lessons are practical and relevant to virtually everyone, regardless of income level or financial experience. I especially appreciated how Housel takes complex ideas about wealth, saving, investing, risk, and financial independence and presents them in a way that is easy to understand and apply to real life. The book encourages you to think differently about money and, more importantly, about your own behavior with it. I believe The Psychology of Money should be read by everyone who cares about their finances. Whether you’re just starting your financial journey or have been managing money for years, there are lessons here that can make a meaningful difference. It’s one of those books that is worth reading, rereading, and putting into practice." _Aime Tineo
Ideas explored by the author:
-figure out what your “enough” looks like in reality, and anything you make above that put it into investments to compound interest
-the long game is the best game
-no one makes good decisions all of the time: when you see “successful” people, it’s because they failed a lot at first
-find freedom from your finances, not more stuff
-the difference between being rich (showing how much money you have) and being wealthy (saving the money that you have)
-humans tend to make decisions based on fear, therefore the decisions we make tend to offer us a reprieve from a future regret or a current pain
-takeaways from history should be general, not specific the further back you go
-most things are harder in practice than they are in theory, which is why we fall back into old habits easily
-when investing be conscious of your time horizon (can you play the long game or do you have less years and thus, can be a bit riskier?)
-progress happens to slowly to notice, but setbacks happen too quickly to ignore