Heralded as THE book to read when starting your personal finance journey, The Psychology of Money is a nonfiction book on the right mindsets to adopt to make your money work for you.
To say that I finally read this book is no small joy. I’d been procrastinating about doing so for far too long, and with good reason! I had an inkling that most of its content would be intimidating. Having read The Psychology of Money, I can say that I wasn’t wrong.
Divided into 20 chapters, the book elaborates on different maxims. From growing your money to saving money, it strives to improve your financial intelligence through behavioural measures.
I love that the author emphasizes the importance of learning personal finance and addresses how sometimes the approach with which we are taught about money matters can be ineffective due to a lack of attention to underlying governing factors.
“… 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).“
One of the reasons why I feel that the wisdom in the book is persuasive is that it’s all linked to historical and economic events.
Morgan Housel draws from anecdotes, both personal and of others, in driving home the points he is making.
His writing is informative, encouraging, and seeks to be relatable. The way the book is written, i.e. the language or the tone in itself doesn’t make for difficult reading. I felt that the conversational tone makes it more engaging.
That said, a lot of the data that is foundational to the arguments the author makes is very specific to the US. Of course, no one expects him to write about stats from across the globe – that’s not even feasible. But if you aren’t familiar with the US stock market or the country’s economic trajectory, you might find some parts of the book to be a tad bit overwhelming.
“Modern capitalism is a pro at two things: generating wealth and generating envy.“
Some of the topics you’ll read about are compounding, luck & risk, margin of error, social comparison, optimism vs. pessimism, etc.
I suggest that you don’t go into this book expecting to find tips & tricks that will make you wealthy instantly. Instead, you’ll find sufficient guidance on what behavioural and mindset changes to make. These can be implemented starting now, and you’ll reap the rewards in the years to come.
I understand why this book is recommended by everyone. It can be extremely beneficial if you have started/ are about to start becoming financially independent. Just keep in mind that some of the information may not be relevant to you or may not align with the financial laws of your country.
Having annotated several passages throughout the book, I definitely see myself revisiting it again.
If you do The Psychology of Money a try, I hope you can make the most of it!