Summary
- Everyone goes through life with unique experiences that shape their view on money. I might make a financial decision that seems odd to you simply because I'm playing a different financial game.
- Getting money is one thing, but keeping it is another. Getting money requires you to take risks, whereas keeping it requires some form of paranoia. It's also important to understand that gaining money involves luck, and to not become discouraged if you can't consistently replicate returns.
- When making financial decisions, aim to be pretty reasonable instead of coldly rational. Being reasonable is more realistic as you have a better chance of sticking with a financial plan for the long term.
- Be cautious of your burn rate, it's difficult to build wealth when you don't put a cap on the fun you have with your money.
- No one cares about your possessions, despite how much you think it would grant you that respect or admiration. You'll earn those through authenticity and humility. Like why would you want to be around people who gravitate to your shiny new possessions anyways?
Thoughts
Honestly, "The Psychology of Money" was a surprisingly good read since I'm not really a fan of finance books in general. I just think they're a load of BS, but I still took a shot at this one because a friend recommended it to me and I've seen the author, Morgan Housel, pop up on Twitter/X a few times.
I found it refreshing because I agree with most of the points, but I can't really remember things I disagreed with because I didn't highlight any of them on my Kindle.
What I must say is that this book heavily reminded me of the fitness industry, specifically in bodybuilding/powerlifting. For example, the book makes the point that you should make reasonable financial decisions because you're more likely to stick with it, to which I absolutely agree with. And just like with workout splits, you should stick with the one that you enjoy working out to because it's accessible. Some like Push/Pull/Legs because it doesn't take up too much time, whereas young newcomers with more time on their hands start out with the "Bro Split".
You're better off following some suboptimal financial/workout plan that you're actually going to use because who cares if you're not making 5% more returns/gains if you're not even going to do it? Reasonable > Rational, but that doesn't mean you should completely ignore what data tells you.
It's a worthwhile read, but you're probably already familiar with most of the concepts detailed, which is a common theme amongst these finance books.
Quotes
When things are going extremely well, realize it's not as good as you think. You are not invincible, and if you acknowledge that luck brought you success then you have to believe in luck's cousin, risk, which can turn your story around just as quickly.
Exercise is like being rich. You think, “I did the work and I now deserve to treat myself to a big meal.” Wealth is turning down that treat meal and actually burning net calories. It's hard, and requires self-control. But it creates a gap between what you could do and what you choose to do that accrues to you over time.
The world is filled with people who look modest but are actually wealthy and people who look rich who live at the razor's edge of insolvency. Keep this in mind when quickly judging others' success and setting your own goals.
Past a certain level of income, what you need is just what sits below your ego.
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.