The Psychology of Money by Morgan Housel

The Psychology of Money by Morgan Housel on Coffee Table

Book Review, Summary, Highlights and Quotes from The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness by Morgan Housel

For the last year or so, I’ve been hearing nothing but good things about The Psychology of Money by Morgan Housel. Over, and over, and over, this book has taken the Personal Finance community by storm.

I finally decided to take the plunge after a little friendly nudging by Kurtis Hanni.

As is with many of the books I have picked up lately, this book ended up with nearly every page tabbed for its quotability. Example:

People do some crazy things with money. But no one is crazy.

– Morgan Housel, The Psychology of Money

Morgan somehow manages to take every thought or view I have had about saving and investing, rich vs. wealthy, risk vs. reward, and managed to put them all into a cohesive and brilliantly written book.

The lessons from The Psychology of Money paired with The Simple Path to Wealth by JL Collins and The Little Book of Common Sense Investing by Jack Bogle, are all that anyone would need to make more prudent and shrewd financial moves for the rest of their life!

I love Morgan’s writing style, his ability to weave together short stories, famous money quotes, and psychology into a compelling narrative about money – or rather, why people do what they do with their money.

Morgan also leaves us with a postscript A Grief History of Why the U.S. Consumer Thinks the Way They Do that is simply the best rundown I have seen of why America is in the place we are today financially, socially, economically, and politically. It was really insightful.

Even if you have read every financial book out there, you’ll find reasons to enjoy The Psychology of Money by Morgan Housel.

AR’s Book Score: 8 out of 10

Key book highlights from The Psychology of Money by Morgan Housel

The Psychology of Money contains 20 chapters each with their own unique perspective on money. Example chapters like:

  • No One’s Crazy
  • Luck & Risk
  • Tails, You Win
  • Freedom
  • Reasonable > Rational
  • Surprise!
  • Room for Error
  • When You’ll Believe Anything

Morgan Housel covers everything from the fact that the 401(k) is relatively new (I didn’t realize this), to why saving even when there is no reason at all is prudent.

Most financial advice is about today. What should you do right now, and what stocks look like good buys today?

But most of the time today is not that important. Over the course of your lifetime as an investor the decisions that you make today or tomorrow or next week will not matter nearly as much as what you do during the small number of days – likely 1% of the time or less – when everyone around you is going crazy.

– Morgan Housel, The Psychology of Money

He dives into being Rich vs. Wealthy, Risk vs. Reward, and also works in his takes on happiness, and why time > money. The book also has some brief touches on Financial Independence throughout.

Morgan also lays out how exactly he invests his money in the last chapter.

Lastly, the Postscript is a great essay unto itself about American consumerism, and how we have gotten to the point that we are at now.

Best quotes from The Psychology of Money by Morgan Housel

Spreadsheets can model the historic frequency of big stock market declines. But they can’t model the feeling of coming home, looking at your kids, and wondering if you’ve made a mistake that will impact their lives.

– Morgan Housel, The Psychology of Money

It should surprise no one that many of us are bad at savings and investing for retirement. We’re not crazy. We’re all just newbies.

– Morgan Housel, The Psychology of Money

You are one person in a game with seven billion other people and infinite moving parts. The accidental impact of actions outside of your control can be more consequential than the ones you consciously take.

– Morgan Housel, The Psychology of Money

There is no reason to risk what you have and need for what you don’t have and don’t need.

– Morgan Housel, The Psychology of Money

Modern capitalism is a pro at two things; generating wealth and generating envy.

– Morgan Housel, The Psychology of Money

“Enough” is realizing that the opposite – an insatiable appetite for more – will push you to the point of regret.

– Morgan Housel, The Psychology of Money

$81.5 billion of Warren Buffett’s $84.5 billion net worth came after his 65th birthday. Our minds are not built to handle such absurdities.

– Morgan Housel, The Psychology of Money

Good investing isn’t necessarily about earning the highest returns, because the highest returns tend to be one-off hits that can’t be repeated. It’s about earning pretty good returns that you can stick with and which can be repeated for the longest period of time.

– Morgan Housel, The Psychology of Money

Did they buy a Ferrari thinking it would bring them admiration without realizing that I – and likely most others – who are impressed with the car didn’t actually give them, the driver, a moment’s thought?

– Morgan Housel, The Psychology of Money

Spending money to show people how much money you have is the fastest way to have less money

– Morgan Housel, The Psychology of Money

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 to, with the people you want to, is the broadest lifestyle variable that makes people happy,

– Morgan Housel, The Psychology of Money

The truth is that wealth is what you don’t see.

– Morgan Housel, The Psychology of Money

Wealth is hidden. It’s income not spent. Wealth is an option not yet taken to buy something later.

– Morgan Housel, The Psychology of Money

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.

– Morgan Housel, The Psychology of Money

Having more control over your time and options is becoming one of the most valuable currencies in the world.

– Morgan Housel, The Psychology of Money

People do not want the mathematically optimal strategy. They want the strategy that maximizes for how well they sleep at night.

– Morgan Housel, The Psychology of Money

The world isn’t that kind to anyone – not consistently, anyways. You have to give yourself room for error. You have to plan on your plan not going according to plan.

– Morgan Housel, The Psychology of Money

Market returns are never free and never will be. They demand you pay a price, like any other product.

– Morgan Housel, The Psychology of Money

Beware of taking financial cues from people playing a different game than you are.

– Morgan Housel, The Psychology of Money

When investors have different goals and time horizons – and they do in every asset class – prices that look ridiculous to one person can make sense to another, because the factors those investors pay attention to are different.

– Morgan Housel, The Psychology of Money

Growth is driven by compounding, which always takes time. Destruction is driven by single points of failure, which can happen in seconds, and loss of confidence, which can happen in an instant.

– Morgan Housel, The Psychology of Money

The bigger the gap between what you want to be true and what you need to be true to have an acceptable outcome, the more you are protecting yourself from falling victim to an appealing financial fiction.

– Morgan Housel, The Psychology of Money

We own our house without a mortgage, which is the worst financial decision we’ve ever made but the best money decision we’ve ever made.

– Morgan Housel, The Psychology of Money

We all want the complicated world we live in to make sense. So we tell ourselves stories to fill in the gaps of what are effectively blind spots.

– Morgan Housel, The Psychology of Money

Savings that aren’t earmarked for anything in particular is a hedge against life’s inevitable ability to surprise the hell out of you at the worst possible moment.

– Morgan Housel, The Psychology of Money

I can afford to not be the greatest investor in the world, but I can’t afford to be a bad one.

– Morgan Housel, The Psychology of Money

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4 comments

  1. You know it’s a good review when 90% of it are quotes from the book! Thanks for this. I also agree strongly that time > money and relished that part of the book especially.

    1. Yeah I enjoyed the tie ins with Financial Independence without needing to overtly do it. Hopefully introduce the concept to many new people. And yeah, this similar to Atomic Habits is a very quoteable book!

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