The Psychology of Money

by Morgan Housel

“A genius is the man who can do the average thing when everyone else around him is losing his mind.” —Napoleon

The premise of this book is that doing well with money has a 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.

financial success is not a hard science. It’s a soft skill, where how you behave is more important than what you know.

“some lessons have to be experienced before they can be understood.”

Bill Gates once said, “Success is a lousy teacher. It seduces smart people into thinking they can’t lose.”

Failure can be a lousy teacher, because it seduces smart people into thinking their decisions were terrible when sometimes they just reflect the unforgiving realities of risk.

There is no reason to risk what you have and need for what you don’t have and don’t need.

The hardest financial skill is getting the goalpost to stop moving.

Modern capitalism is a pro at two things: generating wealth and generating envy. Perhaps they go hand in hand; wanting to surpass your peers can be the fuel of hard work. But life isn’t any fun without a sense of enough. Happiness, as it’s said, is just results minus expectations.

“Enough” is not too little.

Whatever it is, the inability to deny a potential dollar will eventually catch up to you.

Reputation is invaluable. Freedom and independence are invaluable. Family and friends are invaluable. Being loved by those who you want to love you is invaluable. Happiness is invaluable. And your best shot at keeping these things is knowing when it’s time to stop taking risks that might harm them. Knowing when you have enough.

Having a strong sense of controlling one’s life is a more dependable predictor of positive feelings of wellbeing than any of the objective conditions of life we have considered.

Money’s greatest intrinsic value—and this can’t be overstated—is its ability to give you control over your time. To obtain, bit by bit, a level of independence and autonomy that comes from unspent assets that give you greater control over what you can do and when you can do it.

Proof that time is more important than money.

When you see someone driving a nice car, you rarely think, “Wow, the guy driving that car is cool.” Instead, you think, “Wow, if I had that car people would think I’m cool.” Subconscious or not, this is how people think.

So true. Especially working at a car dealership.

Do not aim to be coldly rational when making financial decisions. Aim to just be pretty reasonable. Reasonable is more realistic and you have a better chance of sticking with it for the long run, which is what matters most when managing money.

This makes so much sense! Overthinking can happen when you're rational about your finances.

“The best way to achieve felicity is to aim low,”

Charlie Munger says the first rule of compounding is to never interrupt it unnecessarily.