9 Lessons From The Psychology Of Money

The Psychology of Money is written by former finance columnist Morgan Housel. Written in 2020, The Psychology of Money has already become one of the best selling finance books of all time, which is pretty insane when you consider how many finance books there are out there!

I think what makes this book so special is the way Housel tells stories. He explains complex money ideas and makes them easy to understand with the use of real life tales.

It’s easily one of the best finance books I’ve ever read. It’s not dry and boring (like many finance books are), it’s incredibly engaging and easy to read. If there was such thing as the perfect finance book, it would be the Psychology of Money.

Please, go grab yourself a copy, I promise you wont regret it!

So, here are 9 lessons from The Psychology Of Money…

1. “Not all success is due to hard work, and not all poverty is due to laziness. Keep this in mind when judging people, including yourself."

Whether we like to believe it or not, hard work doesn’t always equal financial success, and people don’t struggle financially because they’re lazy and don’t work hard. There’s a whole range of factors which come into it.

For example, did you know that Bill Gates went to one of the only high schools in the world that had a computer? It’s not to say he didn’t work ridiculously hard to get where he is today. He probably would have still been majorly successful, but he probably wouldn’t have gone on to be the richest man in the world!

2. “Coming to terms with how much you don’t know means coming to terms with how much of what happens in the world is out of your control.”

It’s hard to come to terms with the unknown, it leaves us feeling out of control, and let’s be honest with ourselves, nobody likes to feel out of control.

But the truth is, most of the things what happen in this world are way beyond our control and there is nothing we can really do about it! One of the only thing we can genuinely control is ourselves, and how we react to external events.

3. “Few things matter more with money than understanding your own time horizon and not being persuaded by the actions and behaviours of people playing different games than you are.”

Money is made far more complicated than it needs to be. The number one reason why is because people get caught up in playing other people’s money games when they should be playing there own and focusing more on themselves.

For example: some people want to make money quickly in the short-term, whereas other people are happy playing the long-term game, and at the end of the day, there’s no right or wrong.

What works for other people, might not necessarily work for you and that’s okay. Find the game you want to play and stick to it.

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

We judge wealth based on what we see because it’s the only information we have presented in front of us, but it doesn’t always tell the full story.

Quite often, the richest and most successful people don’t feel the need to brag about it. They drive boring, inexpensive reliable cars, live in relatively modest homes, and spend a lot less than they earn.

Realise that Wealth is what you don’t see.

5. “Controlling your time is the highest dividend money pays.”

At the end of the day, the most valuable thing money can buy you is time and freedom. The ability to do what you want, with who you want, whenever you want is priceless.

However much money you need to be ‘free’ is entirely up to you!

6. “Planning is important, but the most important part of every plan is to plan on the plan not going according to plan.”

Everyone needs to do some form of planning, but also realise that the plan isn’t necessarily going to go how you wanted it to! Another thing to bear in mind is that the more specific and anal you are about your plan, the more fragile and easier it is to break, which is why it’s important to remain flexible too.

7. ”Good investing isn’t necessarily about earning the highest returns… It’s more about earning pretty good returns that you can stick with and which can be repeated for the longest period of time.”

When it comes to investing you don’t always need mega returns to make a lot of money, but you do need time and a strategy that you can stick to during good times and bad times.

Long-term investing is boring investing, but boring investing is good investing.

8. “Spending money to show people how much money you have is the fastest way to have less money.”

You might show how much money you have as a way to be respected. But it’s funny because when other people admire your possessions, they’re not admiring you, they barely notice you, they’re just admiring your possessions!

9. “Money’s greatest intrinsic value — and this can’t be overstated — is its ability to give you control over your time.”

Money = time.

Money gives us control over our time, and the more time you have the happier you are. When you have control over your time, you can choose what to do, and when to do it.