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Business. Finance. Nonfiction. HTML:Doing well with money isn't necessarily about what you know. It's about how you behave. And behavior is hard to teach, even to really smart people. Money�??investing, personal finance, and business decisions�??is typically taught as a math-based field, where data and formulas tell us exactly what to do. But in the real world people don't make financial decisions on a spreadsheet. They make them at the dinner table, or in a meeting room, where personal history, your own unique view of the world, ego, pride, marketing, and odd incentives are scrambled together. In The Psychology of Money, award-winning author Morgan Housel shares 19 short stories exploring the strange ways people think about money and teaches you how to make better sense of one of life's most important t… (more)
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This is American but it mostly doesn't matter as it is about psychology & humanity is not
I think this is a gem. It mostly reflects the way I think anyway so am not sure how someone with a different attitude would feel. But I found it sensible and readable. Excellent.
- the ability to control your time is the biggest dividend you get from money and wealth
- live below your means and save/invest
- no one is as impressed by your stuff (house, car, etc.) as you are
- keep a buffer for contingencies and the unexpected so that you don't have to dip into your investments, which lets them keep compounding
- compound interest is the most powerful force in the universe.
Each chapter has a nugget like those above, and it was hard to choose just five.
Why I picked this book up: I have been spending more time thinking about money and a psychologist so they go together
Thoughts: Ad. How many times have
Some golden nuggets:
Psycholology of Money: Timeless Lessons on Wealth, Greed and Happiness by Morgan Housel is a timeless work about how our feelings, emotions and interactions with money often results in different outcomes for different people – because people are different. So, insights into how to think and behave about money is instructive.
This book is full of great insights written to possibly guide us
Quotes that hit home from various chapters are presented below. There are many more quotes possible to review but then you’d miss the message between each quote. I strongly suggest getting the book to see how these below snippets string together into a powerful story about how we think and behave towards money.
Quote:
• Your personal experiences with money make up maybe 0.00000001% of what’s happened in the world, but maybe 80% of how you think the world works.
• Luck and risk are siblings.
• Yes, but I have something he will never have … enough.
• 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 nuggets goalpost to stop moving.
• $81.5 billion of Warren Buffett’s $84.5 billion net worth came after his 65th birthday.
• Buffett began serious investing when he was 10 years old.
• His skill is investing, but his secret is time. That’s how compounding works.
• But good investing isn’t necessarily about earning the highest returns, because the highest returns tend to be one-off hits that can’t be repeated. It’s about earning pretty good returns that you can stick with and which can be repeated for the longest period of time. That’s when compounding runs wild.
• Getting wealthy vs. staying wealthy.
• Getting money is one thing. Keeping it is another.
• Planning is important, but the most important part of every plan is to plan on the plan not going according to plan.
• No one is impressed with your possessions as much as you are.
• 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.”
• Humility, kindness, and empathy will bring you more respect than horsepower ever will.
• Spending money to show people how much money you have is the fastest way to have less money.
• Money has many ironies. Here’s an important one: Wealth is what you don’t see.
• Past a certain level of income people fall into three groups: Those who save, those who don’t think they can save, and those who don’t think they need to save.
• Building wealth has little to do with your income or investment returns, and lots to do with your savings rate.
• The value of wealth is relative to what you need.
• Past a certain level of income, what you need is just what sits below your ego.
• People’s ability to save is more in their control than they might think.
• Things that have never happened before happen all the time.
• The thing that makes tail events easy to underappreciate is how easy it is to underestimate how things compound. How, for example, 9/11 prompted the Federal Reserve to cut interest rates, which helped drive the housing bubble, which led to the financial crisis, which led to a poor jobs market, which led to tens of millions to seek a college education, which led to [over a trillion dollars] in student loans with [a high percentage of default rates].
• The correct lesson to learn from surprises is that the world is surprising.
• The most important part of every plan is planning on your plan not going according to plan.
• The purpose of the margin of safety is to render the forecast unnecessary.
• The End of History Illusion is what psychologists call the tendency for people to be keenly aware of how much they’ve changed in the past, but to underestimate how much their personalities, desires and goals are likely to change in the future. [Thus, their history of change won’t change anymore into their future].
• Every job looks easy when you’re not the one doing it.
• Successful investing looks easy when you’re not the one doing it. Hold stocks for the long run … but do you know how hard it is to maintain a long-term outlook when stocks are collapsing?
• Price … not dollars and cents … it’s volatility, fear, doubt, uncertainty … all of which are easy to overlook until you’re dealing with them in real time.
• Beware of taking financial cues from people playing a different game than you are.
• When investors have different goals and time horizons – and they do in every asset class – prices that look ridiculous to one person can make sense to another, because the factors those investors pay attention to are different.
• The interesting thing about [absolutely pessimistic] stories is that their polar opposite – forecasts of outrageous optimism – are rarely taken as seriously as prophets of doom.
• Pessimism just sounds smarter and more plausible than optimism.
• …progress happens too slowly to notice, but setbacks happen too quickly to ignore.
• The more you want something to be true, the more likely you are to believe a story that overestimates the odds of it being true.
• We don’t know what we don’t know.
• Coming to terms with how much you don’t know means coming to terms with how much of what happens in the world is out of your control. And that can be hard to accept.
• Less ego, more wealth.
• If you want to to do better as an investor, the single most powerful thing you can do is increase your time horizon.
Unquote.
There’s a lot of wisdom alone in the various quotes above. There’s even more wisdom reading how they string together to see the larger story line to understand your psychology of money applied in your own life.
Why I finished this read: Good, short book that was interesting
Stars rating: 4.5 of 5 stars
Don't let the easy style fool you. There are enough things to consider in the book that must make
Read two chapters a day, no more. Read, think, decide on what you want to do, move on.
Before you begin investing, the author requires you to put a considerable amount of effort in defining the kind of investor you want to be. It's this persona that helps you stay composed even when things go helter-skelter. In short, you define your game and play by those rules till you achieve your goals.
I appreciate the subtle but important distinction between being rational vs reasonable that's explained in the book. Being reasonable provides psychologically invulnerable to the ups-and-downs that happen in the stock market, and I concur with the author on this, but have to see how I behave in my own journey with money.
Authors lay out very bold (and correct in my view, similar to Nassim Taleb's Randomness at Wall Street book) that luck plays biggest role in successes and failures. However, he immediately forgets that assertion in the rest of book, and starts making inferences on individual instances of successes and failures and draw lessons. If you forgive this flaw, and suppress the inevitable feeling which comes when reading such books is that perhaps examples are being cherry picked, then you will come out some thought provoking ideas. For existing passive investor like me, this was primarily confirmation of what I was already doing.
I am not a business-minded, financial-savvy type of person, I saw this book, picked it up and immediately knew that this was different. This is not a traditional "how-to" or a book that explains the history of investing or the markets. Morgan breaks down personal finance, investing, and your possible business decisions not on the basis of spreadsheets and equations, but of each persons unique history, their family conversations and by the way most people tend to think. There is some history, there are some technical topics and terms, but it is all for perspective purposes. Mr. Housel explains things in such a manner that someone without much knowledge can grasp and understand what he is talking about.
If you are someone beginning to start using your money to start making money, or have been investing and working to improve on your personal finances or have in interest in that field and want to taking in a new perspective, I could not recommend this book enough! Great book!
My aim is to improve, and this book is helping me do just that.
It's straightforward and easy to understand, prompting me to grab my journal and jot down some of the insights for further reflection.
I'll