In my opinion, Morgan Housel is the best behavioral financial writer today. I learn something from every article of his that I read. So when I found out he was releasing a book, I preordered a copy. The Psychology of Money includes some of Housel’s existing blog posts, plus new insights and information about people’s relationship with money. Here are 10 of my favorite passages from the book:
- Happiness is just results minus expectations.
- (On the power of compounding) $81.5 billion of Warren Buffett’s $84.5 billion net worth came after his 65th birthday.
- Money’s greatest intrinsic value is its ability to give you control over your time.
- Wealth is what you don’t see.
- Building wealth has little to do with your income or investment returns, and lots to do with your savings rate.
- Saving is a hedge against life’s inevitable ability to surprise the hell out of you at the worst possible moment.
- The odds are in your favor when playing Russian roulette. But the downside is not worth the potential upside.
- Beware taking financial cues from people playing a different game than you are.
- Optimism sounds like a sales pitch. Pessimism sounds like someone trying to help you. Tell someone that everything will be great, and they’re likely to either shrug you off or offer a skeptical eye. Tell someone they’re in danger, and you have their undivided attention.
- The illusion of control is more persuasive than the reality of uncertainty.
Back in March 2018, I wrote about my “5 all-time favorite money books.” If I were to rewrite that post today, I would take out The Behavior Gap and replace it with The Psychology of Money. This book is that good. If you are interested in personal finance, investing, or understanding the forces at work as you make money decisions, I’d highly recommend The Psychology of Money.
If you want to check out more of Morgan Housel’s writings, start with these five blog posts:
- Save Like a Pessimist, Invest Like an Optimist
- The Laws of Investing
- Common Plots of Economic History
- Financial Advice for My New Daughter
- Short Money Rules
We’ve also written about “7 investment biases to watch out for” and “7 investment rules it pays to remember,” the latter of which is a shortened version of a Morgan Housel blog post.
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