The Psychology of Money by Morgan Housel
Doing well with money has little to do with how smart you are and a lot to do with how you behave. And behavior is hard to teach, even to really smart people.
Morgan Housel
A few weeks ago, I was browsing through a bookstore when I came across The Psychology of Money by Morgan Housel. I remembered hearing good things about it and decided to pick it up.
I’m glad I did.
It wasn’t what I expected — no formulas, no investment advice, no “get rich” strategy.
Instead, it was a book about why we handle money the way we do and what we can do to change.
What is The Psychology of Money about
The Psychology of Money is not a book about investing. It will not tell you exactly what to do with your money, such as what stocks to buy.
But it will explain to you why you failed to save money in the past, why you live paycheck to paycheck, and provide you with a lot of examples of how your mindset affects your decisions and results.
In this book, Morgan Housel shares 19 short stories exploring the different ways people think about money and teaches you how to make better sense of money and wealth.
Key takeaways from The Psychology of Money
The book is divided into 20 concise chapters, each addressing a distinct aspect of money psychology.
The Psychology of Money is an easy and enjoyable read; it is not full of statistics or difficult financial jargon. It is really meant to be read by anyone, so don’t be scared to pick it up.
There are a lot of important lessons in this book, and I will list some of the biggest ones below:
Money as a Reflection of Values
You first need to understand your own values to make proper decisions with your money.
What do you care deeply about? What do you want money to secure?
Once you really think about this, you then know if you’d rather invest your money or spend it on the newest bag.
We oten go through life without the big picture in mind, but the writer reminds us in this book to take a step back and take a different approach to money and wealth.
Saving is independence, not sacrifice
Saving used to feel restrictive to me, like I was not living fully. However, I now see it differently.
Saving is simply buying freedom for my future self. So that I can take a break if I need one, so that I can say no to things I don’t want.
Saving is not limiting your life; it is actually going to allow you more freedom in the long run.
If you save when you are young, you will be able to spend more time with your kids or retire earlier. Money gives you options and a freedom to choose.
Steady returns
Wealth grows not through sudden bursts of success, but through steady, sustained effort — like a constant, gentle wind that moves a ship forward over time.
Morgan housel
In The Psychology of Money, Morgan Housel uses the idea of a “steady wind” to describe the power of consistency and long-term thinking in building wealth and peace of mind.
You don’t need massive wins to build financial security; you need persistence.
Saving a little consistently matters far more than saving a lot occasionally.
He also tells us to avoid extremes and risks.
The importance of compounding
Good investing isn’t necessarily about earning the highest returns. It’s about earning pretty good returns that you can stick with for the longest period of time.
Morgan housel
Think of compounding like a snowball. A little growth that keeps fuelling future growth. It might start small, but over time, the results can be huge.
Sometimes, compounding isn’t our first thought. It is difficult to look that ahead and realize the full potential of it.
Buffett’s net worth is over $80 billion, but Housel points out that $81.5 billion of it came after his 65th birthday.
That means almost all of his wealth was built because he invested early and stayed consistent for over 75 years — not because he found some secret strategy.
You don’t need to be the smartest investor; you just need to stay steady and let time do its work.
Never enough
Morgan Housel talks about one of the biggest traps we fall into — the feeling of never enough.
This insight reminds us that true wealth isn’t about chasing more, but about knowing when to stop.
You do not want to risk what you have and need for what you don’t need and don’t have.
It is important to realize what enough means for you. There are things you never want to risk in life: your family, your free time, your friends, your peace of mind.
Wealth is what you don’t see
Another powerful point Housel makes is that true wealth isn’t flashy. It’s not the new car, the designer bag, or even the perfectly curated home.
Wealth is the money you don’t spend, the freedom and security it gives you later.
This perspective hit home. I often fall into the trap of thinking, “If I buy this, I’ll feel better.” But the calm I’m actually searching for isn’t in the purchase; it’s in stability, in knowing I have choices.
Remember, appearances can be deceiving. There are modest folks out there with hidden wealth, and flashy folks who are just a step away from insolvency.
How The Psychology of Money helped me change
There are a couple of changes I introduced since reading this book.
It became clear to me that I behave recklessly with my money.
I buy something on a whim, only to realize a few days later that I didn’t really need it.
I throw away a lot of things that I buy because I bought them without thinking or while influenced by social media.
It is scary to realize just how much money is spent following silly online trends in beauty or fashion. That money could have been invested and could have tripled by today.
Since reading this book, I made two decisions:
- I will invest part of my paycheck monthly in long-term investments that are not risky.
- I will save as much money as I can, because I don’t value owning a lot of things; I value having freedom and control over my time.
I didn’t finish The Psychology of Money with a list of financial goals. I finished it with very insightful questions:
- What does “enough” mean to me?
- Am I spending in ways that truly make my life better?
- What kind of freedom do I want money to give me?
As I move into the new year, I want to approach money differently. Not something I am scared to think about, but something that I need to focus on and plan for.
Related post: How to start a reading journal
Final thoughts
If you are someone who reads a lot of financial books and already saves and invests money, then this book is not for you.
However, I haven’t read a lot of financial books, and I have saved money without doing anything with it. I have also wasted a lot of money on pointless purchases and accumulated things I don’t really need.
So if you are like me, you will find this book very useul. It might not be the most exciting book I have read, but it is certainly one of the most important ones.
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