💰 The Psychology of Money: Key Takeaways and Personal Insights
📚 Introduction
I recently read The Psychology of Money by Morgan Housel, and it slightly impressed me. In this post, I will share:
The most important insights from the author.
My own takeaways from the book.
The book is available on Amazon.
✍️ The most important insights from the author
The most important concepts author highlited at the end of the book are:
Go out of your way to find humility when things are going right and forgiveness/compassion when they go wrong.
Less ego, more wealth - save money.
Manage your money in a way that helps you sleep at night.
If you want to do better as an investor, the single most powerful thing you can do is increase your time horizon.
Become OK with a lot of things going wrong. You can be wrong half the time and still make a fortune.
Use money to gain control over your time.
Be nicer and less flashy.
Save. Just save. You don't need a specific reason to save.
Define the cost of success and be ready to pay it.
Worship room for error.
Avoid the extreme ends of financial decisions. The more extreme decisions are, the more you may regret them as you evolve.
You should like risk because it pays off over time.
Define the game you're playing, and make sure your actions are not being influenced by people playing a different game.
Respect the mess.
🤓 My own takeaways from the book
In understood the book in this way:
No one is crazy.
It's never as good or bad as it looks.
Luck plays a big role in our lives.
Always think about probabilities in decisions involving humans, due to emotions, instability, and greed.
From my experience as a software engineer: when dealing with people, think in probabilities, not precise units. When estimating software projects, consider irrational human behavior to provide more accurate estimates.
Always save money for the future.
Leave room for error, protected by saved money.
Always have flexibility in career or any decision. Saved money provides this flexibility.
Life decisions can't be perfect; I use SWOT analysis to make better decisions. While not in this book, SWOT analysis complements its concepts well.
Everything has its price.
Everyone has their own thoughts about any decision you make, and that's okay. We naturally form opinions.
Humans often fill knowledge gaps with assumptions; it doesn't make them stupid.
People tend to prefer pessimism over optimism.
When you believe in something, you see signals that confirm your beliefs.
Think about odds in your decisions.
Expensive cars and houses don't indicate wealth; they might suggest large debts.
Wealth is the ability to manage your time as you wish.
No one is as impressed with your possessions as you are.
Everyon's life is a continuous chain of surprises.
💎 Conclusions
The Psychology of Money is a good book that explores psychological aspects of human behavior and money. I recommend it, but it wasn't groundbreaking for me—just a good read.