The Psychology Of Money

 

Money is not a perfect science. 

Much of what we believe about money has been conditioned from a very early age. As Morgan Housel explains in “The Psychology Of Money,” much of our financial success depends on how our emotions and beliefs impact our choices.

Here are a few key points that I hope will help you on your financial journey:

Remember, Your Perspective Is Different From Mine

I love Morgan Housel’s statement that “no one is crazy.” Depending on your experiences growing up, you and I probably have very different goals and beliefs about money. I may choose to spend my money on a certain item that you would never consider purchasing. Just because you and I disagree doesn’t mean that one of us is crazy. Different experiences shape different lives. 

Our different perspectives also have a role in helping us define how much is enough. When you decide what is enough for you, there should be no reason to risk what you have for what you don’t have and don’t need. 

Only you can decide what the goal of “enough” really looks like. There’s no need to compare yourself to others. 

We all have different goals. 

Being Wealthy Vs. Being Rich

The next important concept in “The Psychology Of Money” can be summed up in one sentence:

“Wealth is what you don’t see.”(p.89)

Short and straightforward concept but not always practiced. 

Many judge wealth by what we see because that is our experience. But what may be hidden from sight is an overdrawn bank account or mounting debt. This is the equivalent of judging a book by its cover. 

Being rich is being flashy. 

Being wealthy is hidden from sight. 

The difference between what you could do and what you choose to do is the difference between being rich and being wealthy.

What Do You Believe?

We all tell ourselves a story about money and how the world works.

Some of us may tell the story that the lottery is the only way to get rich.

Others may tell the story that investing in the stock market will bring wealth, as long as you let the interest compound over many years.

The point is, whatever you believe, will shape your financial goals. 

Justifying your money decisions will be based on your beliefs about how the world works. 

Morgan Housel says that stories are the most powerful force in the economy. 

Beliefs can stop us from achieving what we are capable of or propel us to achieve what some may see as impossible.

Changing your narrative is the first step in changing your money psychology.

Final Thoughts 

One of the most important things that “The Psychology Of Money” has reminded me of is that my financial choices are highly influenced by my emotions and beliefs. There is no right or wrong answer, it boils down to individual perspective and goals.

I hope this book of the week review has provided some value to you. As always, thanks for reading!

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