I took a week away at the cottage, before I left 4 great books arrived to tide me over.
One of those books was the Psychology Of Money by Morgan Housel – this book has exceptional reviews and I heard so much about it I just HAD to pick up a copy.
It was every bit as good as many have said – there are many tips, but I like to summarize knowledge down to 10 or less USABLE and IMPORTANT takeaways.
Here are my Top 8 Takeaways From The Psychology of Money
You’re Experience Is Brief
Your brief experience dictates your limited understanding and management of money. There are things that have happened in every decade for the last two decades that you really need to understand to FULLY understand the history of money.
Yet many people believe THEIR history is good enough. Best to study beyond your 0-40-year experience to see the bigger picture
Emotions Rule!
What you will find as you go back in history and understand the history of money is that emotions RULE! It wasn’t SO MUCH the things that happened as the response to it.
Two big takeaways in this regard:
- You can’t assume you understand historical trends FULLY as you don’t have as much insight into the emotions of the time
- Psychology is critical for understanding money – it’s not JUST a science
Compounding Works.
Compounding Takes Time Warren Buffett Net Worth of > $84B was nearly all accumulated over the age of 60.
Most people understand compounding but can’t commit when the payoff is so far away.
It’s THE fundamental principle that has been proven to work – just DO IT!
The Thing About Spending Money
Spending money to show people how much money you have is the fastest way to have no money.
Think of wealth as saving or investing money to have for later vs spending to FEEL rich
Get a handle on your confidence and the role of money in your life. Most people completely give up their ability to get wealthy because they use money to substitute for other personal issues in their lives
Get your psychology right, money becomes easier to manage.
Stop Spending On THIS
If you simply stop spending on things you buy to impress others…
And invest that instead
You will be wealthy
About Fictions And Pessimism
We have a tendency to wish things were better because we want them to be (appealing fictions)…the challenge here is that we miss the reality.
And to exaggerate negativity in bad times…
We need a balance
The Market Is Uncertain (Involves Human Behavior and Many Things We Don’t Have Grasp Of)
Yet our minds seek certainty. Be careful we don’t make up fiction to reach false certainty
Be Careful With Opinion
85% of managed funds underperform the index
Some people seek short-term gains, others compounding
Many are simply wrong
Stick to main principles
Most of us are woefully undereducated in the principles of money – and that goes for the Psychology around money too.
I strongly urge you get hold of “The Psychology Of Money” – it’s a lifetime of education on money for under $20…and it’s a simple read.
