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About the Book

Title: The Psychology of Money

Author: Morgan Housel

Genre: Nonfiction, Finance, Personal Finance, Self Help, Personal Development

Publisher: Harriman House

Publication Date: January, 2020

Pages: 256, Paperback

The Psychology of Money by Morgan Housel is a good book on personal finances, especially if you are just getting started. 

I’ll admit there’s nothing much to learn about how financial markets work in helping create your wealth or in-depth details on trading, asset allocation, and diversifying your portfolio. If you have progressed into your personal finance journey and want to learn more, you are better off looking for another book. 

Nevertheless, Housel’s simplistic approach to how people behave with and around money and the easy-to-read prose without so much finance and investment jargon can make for a point or two in your personal finances. Each chapter includes a story that introduces you to the behaviors of other individuals with money that, I’ll admit, offer a few lessons and possibly a mirror of how some of us handle money. 

Get Your Copy of The Psychology of Money by Morgan Housel

I’ll probably not say much without spoiling the book for you. But below are a few lessons from the book I’d like to point out:

1. We all have different experiences in life that shape our behavior with and towards money. So, what I do with my money might look crazy to you, but I am not crazy. That’s what I know. 
2. You do not need a reason to save. Many of us have a savings fund for specific expenses, like purchasing household electronics, a travel fund, savings for land, etc. How often do you set money aside without a particular saving goal? It allows you to have options without being tied down to one spending goal. 
3. Saving, investing, and growing your wealth is more about your ego. The money you spend on fun things, like unplanned travels, gadgets, and fashion item purchases, are probably more about massaging your ego. So, minimize these, cut the bad habits, and start saving and investing your money. Don’t spend your money on things you don’t need. Speaking of which, have you joined our 2022 money-saving challenge? 
4. Are you comfortable with the way you spend your money? Do you sleep well at night, or do you turn in bed all night long, worried you’ll lose everything? Whatever your strategy and goal are, whether it is earning the highest return or not, make sure it is something that makes you sleep well at night. 
5. Define the cost of your success and be ready to pay it because everything worthwhile is worth the price. It might not be necessary at a financial cost. It could include emotional distress, like doubt, uncertainty, and regret.
6. Always be ready and okay with things going wrong, including losing your investment capital. Because the market is not perfect, neither are you. So, diversify your portfolio to allow for the good performers to offset the bad ones. 
7. And last but not least, worship the room for error. What you need to happen in the future and what could happen are different, and in between that is your room for error, something that gives you the endurance to wait and let compounding work its magic. 

Now, the book is not without its flaws. First, the title is a bit misleading. Given the choice of words, The Psychology of Money, I actually thought it would have more detailed and scientifically proven information about behavioral finance. 

Second, I would also have loved to read more stories and experiences of women. We live in a world where women are becoming successful but still have a long way to go, given the struggle with the pay gap and inequalities between the genders. And that’s where I recommend Why Women Are Poorer Than Men and What We Can Do About It by Annabelle Williams. 

Get Your Copy of The Psychology of Money by Morgan Housel

My ★ Rating 3.8

Goodreads ★ Rating 4.39 (as of February 2022)