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| Source - Amazon |
Introduction
Book’s Name - Psychology Of Money- Timeless Lessons On The Wealth, Greed, And Happiness
Author - Morgan Housel
Language - English
Genre - Entrepreneur, Business, Finance
About the Author
Source - PR Newswire
Morgan Housel is a Swedish investor and is a partner at The Collaborative Fund and a former columnist at The Motley Fool and The Wall Street Journal. He is a two-time winner of the Best in Business Award from the Society of American Business Editors and Writers, winner of the New York Times Sidney Award, and a two-time finalist for the Gerald Loeb Award for Distinguished Business and Financial Journalism.
Morgan has presented at more than 100 conferences in a dozen countries. He speaks about behavioral finance and history, using storytelling to explore how investors deal with risk and how we can think about risk in a more productive way.
Book Review
The Psychology of Money is one of the best books explaining key financial management lessons. Housel tells about how finance is taught in the form of basic mathematical equations. Based on that, we make decisions, and actions are taken about managing your finances.
“Money’s greatest intrinsic value—and thus can’t be overstated—is its ability to give you control over your time.”
However, in real life, people make financial decisions based on their emotions and intuitions. People don’t make decisions on a spreadsheet. People make decisions while sitting for dinner around the dining table, meeting room where your ego, pride, and thoughts about the world are all scrambled together.
What I noticed about this book is that it provides a better perspective to look at money and its value to be perceived in reality. The book starts with a simple anecdote: earning money and managing money are 2 different premises. While one may be an expert in his field earning a heavy and decent paycheck, that necessarily does not mean the person must be good at staying rich in the long run.
For being rich, one must be better at managing expenses and their own finances which determine their net worth. Many a time, people spend their money on things to show status and pride among the society. However, one simply gets into a debt trap and loans and often ends up with little savings for emergencies and living an independent life.
Source - Freemasonry Today
The author speaks about how achieving wealth is never enough as there are always people better than your achievements. This causes envy to generate more wealth and work hard ending up going towards wrong investment and financial decisions. It’s always better to know and define your stop limit. That is, it’s enough of earnings and being satisfied with what you have rather than getting into never-ending desires.
“Some people are born into families that encourage education; others are against it. Some are born into flourishing economies encouraging entrepreneurship; others are born into war and destitution. I want you to be successful, and I want you to earn it. But realize that 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.”
This book also mentions investment advice and that is explained by examples of Warren Buffet. For any investment to grow and multiply, there is a concept of compounding where progress happens in multiples every time at regular time intervals. But that requires time and patience which are the key components to achieve long-term financial success.
Often that is not understood by the majority of the investor. You need to have a strong mind and heart for investing and getting compounded returns.
Source - Wallet Genius
The author mentions the financial equations that compose of two factors: things within your control, and things outside your control. Investments and trading on the stock markets are largely beyond your control. There is no guarantee that an investment strategy will work, the stock market may not cooperate with your interests, and a freak accident tomorrow can wipe out your investments.
Savings, and financial frugality, are completely within your control. Controlling for inflation, your savings rate can be 100% as effective today as it was tomorrow.
Lastly, the author tells his own story about what he does with his money. He simply puts his money where the mouth is. That is investing the earnings into savings yielding him a higher interest rate and being optimistic, patient about value will be added by an economy over the decade.
The Bottom Line
For a beginner who wants to start investing money, this book is not really recommended to begin reading with. However, this book will provide some seriously good advice over managing your money, being satisfied, and living a happy and financially independent life.
As a reader, this book is insightful and thought-shaping, redefining our perspective on money. This book is excellent and easily understandable for average readers and will generate interest to know more about financial literacy.
My rating for the book - 4 on 5
You can easily buy this book from Amazon - Psychology of Money
Written By - Prajwal Barate
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