I think I saw The Psychology of Money (2021) by Morgan Housel on a “best of” non-fiction list somewhere, although I am not certain. I have a lot of fear when it comes to investing and saving my money. I also have a (reasonable?) fear of not having enough money to live comfortably and falling into ruin. It probably doesn’t help that whatever we had of a safety net in the United States feels like it’s rapidly deteriorating. So, I tend to be pretty conservative when it comes to money on the one hand, and stick my head in the sand and think about it as little as possible on the other.
Housel’s book is not your typical financial advice book, and he made a number of points that had me thinking about money differently. Housel says that finance is the one profession that anyone can do. You can’t walk off the street and start operating on people, but anyone can invest money. And it’s not the smartest people that necessarily end up making the most. As far as making it big, there is so much luck involved that being smart only gets you so far.
The book begins with the descriptions of two men. One is a janitor who died as a millionaire philanthropist. The other is a tech bro who made millions of dollars and lost it all. The janitor was patient, spent very little, and consistently invested year after year. The tech bro was the opposite, and although he made a lot of money, this money was not coming in consistently and he spent it quickly.
One point that Housel made was that everyone has a different relationship to money depending on when and how you grew up. If you grew up the daughter of Bill Gates, you would think very differently from someone who struggled not having enough money for food. The time period matters, too. The people who grew up in The Great Depression have a very different view of the stock market than Millennials. What feels like a smart, rational financial decision to some, might feel reckless to others. These views of money are deeply personal and deeply ingrained. So, there is no one rational financial decision for everybody.
Other pertinent points Housel discusses in his book include his emphasis on how time makes a difference in compounding interest. When you invest early and often and keep your money invested, you will make so much more than if you’re looking for the big gains elsewhere. Housel also shows that when people make money they usually think it was because of their actions, but when they lose money they blame it on bad luck.
Housel ends his book by saying he doesn’t want to give generic financial advice because everyone is so different. But he does explain his own money strategy, which involves living well below his means, paying off his house, and making long term investments that are relatively safe. It was nice to see an expert keep everything so simple.
I thought this book was easy to read and understand with a lot of interesting points. Recommended.
You can find all my reviews on my blog.