Book Review: The Psychology of Money by Morgan Housel
The Psychology of Money delves into the behavioral aspects of how individuals are with their money. The book is divided into 20 chapters which are written more like short stories. I found this short story concept refreshing because I could read a chapter and then quit for the evening or even a few days, then come back to the book and start a new chapter, learning a new concept without having to keep up as you would with a traditional book. Each chapter is filled with facts from history, psychology and sound financial advice that is good for anyone.
My favorite chapter in the book was Chapter 10: Save Money. The first idea—simple, but easy to overlook—is that building wealth has little to do with your income or investment returns, and lots to do with your savings rate. Morgan put people into three categories- those who save, those who don’t think they can save, and those who don’t think they need to save. This chapter is for the latter two. As a saver and someone who has dedicated her life to helping others financially, I don’t need to be convinced of this statement.
For individuals who don’t think they can save, Morgan had a few tips.
- Savings can be created by spending less
- You don’t need a specific reason to save, but if you do have goals, they can increase your likelihood of success
For individuals who think they don’t need to save, Morgan shares these tips.
- The value of wealth is relative to what you need. A high savings rate means you will have lower expenses; having lower expenses means your savings will go farther if needed.
- Past a certain income level, what you need is just what sits below your ego. Here he is talking of materialism and really looking into the lens of what you truly need.
In short, everyone’s ability to save is more in their control than they might think. If you are interested in learning more about your psychology with money, I invite you to check out this book.