Last updated on October 20th, 2023 at 02:27 pm
Timeless Lessons on Wealth, Greed, and Happiness
Rating
5/5
Date Started
10/2/2023
Date Completed
10/9/2023
Five Powerful Quotes from the Book
Quote 1
“Financial success is not a hard science; it’s a soft skill, where how you behave is more important than what you know. I call this soft skill the Psychology of Money. The aim of this book is to use short stories to convince you that soft skills are more important than the technical side of money…
“Through collective trial and error over the years, we learned how to become better farmers, skilled plumbers, and advanced chemists. But has trial and error taught us to become better with our personal finances? Are we less likely to bury ourselves in debt? More likely to save for a rainy day? Prepare for retirement? Have realistic views about what money does and doesn’t do to our happiness? I’ve seen no compelling evidence. Most of the reason why, I believe, is that we think about and are taught about money in ways that are too much like physics, with rules and laws, and not enough like psychology, with emotions and nuance. And that, to me, is as fascinating as it is important.”
Pithy Summary
Quote 2
“John Bogle, the Vanguard founder who passed away in 2019, once told a story about money that highlights something we don’t think about enough.
“‘At a party given by a billionaire on Shelter Island, Kurt Vonnegut informs his pal Joseph Heller that their host, a hedge fund manager, had made more money in a single day than Heller had earned from his wildly popular novel Catch 22 over its whole history. Heller responds: ‘Yes, but I have something he will never have – enough.’ Enough. I was stunned by the simple eloquence of that word. Stunned for two reasons. First, because I have been given so much in my own life. And second, because Joseph Heller couldn’t have been more accurate.’
“For a critical element of our society, including many of the wealthiest and most powerful among us, there seems to be no limit today on what enough entails…
“Few of us will ever have $100 million… But a measurable percentage of those listening to this book will, at some point in their life, earn a salary, or have a sum of money sufficient to cover every reasonable thing they need, and a lot of what they want. If you’re one of them, remember a few things. 1. The hardest financial skill is getting the goalpost to stop moving, but it’s one of the most important. If expectations rise with results, there is no logic in striving for more because you’ll feel the same after putting in extra effort… 2. Social comparison is the problem here… 3. Enough is not too little. The idea of having enough might look like conservatism, leaving opportunity and potential on the table. I don’t think that’s right. Enough is realizing that the opposite, the insatiable appetite for more, will push you to the point of regret… 4. There are many things never worth risking, no matter the potential gain…
“The truth is that wealth is what you don’t see. Wealth is the nice cars not purchased, the diamonds not bought, the watches not worn, the clothes foregone, and the first-class upgrade declined. Wealth is financial assets that haven’t yet been converted into the stuff you see. That’s not how we think about wealth, because you can’t contextualize what you don’t see…
“The only way to be wealthy is to not spend the money that you do have. It’s not just the only way to accumulate wealth, it’s the very definition of wealth. We should be careful to define the difference between wealthy and rich – it is more than semantics. Not knowing the difference is a source of countless poor money decisions.”
Pithy Summary
Quote 3
“The highest form of wealth is the ability to wake up every morning and say: ‘I can do whatever I want today.’ People want to be wealthier to make them happier. Happiness is a complicated subject because everyone’s different. But if there’s a common denominator in happiness, a universal fuel of joy, it’s that people want to control their lives. The ability to do what you want, when you want, with who you want, for as long as you want, is priceless. It’s the highest dividend money pays…
“The most powerful common denominator of happiness was simple. [Angus] Campbell summed it up: ‘Having a strong sense of controlling one’s life is a more dependable predictor of positive feelings of well-being than any of the objective conditions of life we have considered.’
“More than your salary, more than the size of your house, more than the prestige of your job. Control over doing what you want, when you want, with the people you want to is the broadest lifestyle variable that makes people happy. 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…
“Use money to gain control over your time, because not having control of your time is such a powerful and universal drag on happiness. The ability to do what you want, when you want, with who you want, for as long as you want to, pays the highest dividend that exists in finance.”
Pithy Summary
Quote 4
“Savings in the bank that earn 0% interest might actually generate an extraordinary return if they give you the flexibility to take a job with a lower salary but more purpose. Or wait for investment opportunities that come when those without flexibility turn desperate. And that hidden return is becoming more important…
“Manage your money in a way that helps you sleep at night. That’s different from saying you should aim to earn the highest returns, or save a specific percentage of your income. Some people won’t sleep well unless they’re earning the highest returns. Others will only get a good rest if they’re conservatively invested. To each their own. But the foundation of – ‘Does this help me sleep at night?’ – is the best universal guidepost for all financial decisions.”
Pithy Summary
Quote 5
“When a commentator on CNBC says, ‘You should buy this stock,’ keep in mind that they do not know who you are. Are you a teenager trading for fun? An elderly widow on a limited budget? A hedge fund manager trying to shore up your books before the quarter ends? Are we supposed to think those three people have the same priorities and that whatever level a particular stock is trading at is right for all three of them? It’s crazy.
“It’s hard to grasp that other investors have different goals than we do, because an anchor of psychology is not realizing that rational people can see the world through a different lens than your own…
“Few things matter more with money than understanding your own time horizon, and not being persuaded by the actions and behaviors of people playing different games than you are. The main thing I can recommend is going out of your way to identify what game you’re playing. It’s surprising how few of us do.
“We call everyone investing money ‘investors,’ like they’re basketball players, all playing the same game with the same rules. When you realize how wrong that notion is, you see how vital it is simply to identify what game you’re playing…
“At the personal level, there are two things to keep in mind about a story-driven world when managing your money. 1. 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… 2. Everyone has an incomplete view of the world, but we form a complete narrative to fill in the gaps…
“Define the game you’re playing, and make sure your actions are not being influenced by people playing a different game.”
Pithy Summary
About the Book
Date Published
The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness – Audiobook | Ebook | Hardcover – “
About the Author
Morgan Housel – “
Additional Resources
- The Psychology of Money – the blog article that led to the book
Tags
Business | Nonfiction