The Psychology of Money
Morgan Housel
1. No One’s Crazy
“Some lessons have to be experienced before they can be understood.”
— Page 19
2. Luck & Risk
Some people are born into families that encourage education; others are against it. Some are born into flourishing economies encouraging of 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.
— Page 41
3. Never Enough
If you risk something that is important to you for something that is unimportant to you, it just does not make any sense.
— Page 48
7. Freedom
The ability to do what you want, when you want, with who you want, for as long as you want, is priceless. It is the highest dividend money pays.
— Page 89
12. Surprise!
The correct lesson to learn from surprises is that the world is surprising.
— Page 130
13. Room for Error
The most important part of every plan is planning on your plan not going according to plan.
— Page 138
The idea is that you have to take risk to get ahead, but no risk that can wipe you out is ever worth taking. The odds are in your favor when playing Russian roulette. But the downside is not worth the potential upside. There is no margin of safety that can compensate for the risk. Same with money. The odds of many lucrative things are in your favor. Real estate prices go up most years, and during most years you’ll get a paycheck every other week. But if something has 95% odds of being right, the 5% odds of being wrong means you will almost certainly experience the downside at some point in your life. And if the cost of the downside is ruin, the upside the other 95% of the time likely isn’t worth the risk, no matter how appealing it looks.
— Page 145
The ability to do what you want, when you want, for as long as you want, has an infinite ROI.
— Page 146
A good rule of thumb for a lot of things in life is that everything that can break will eventually break. So if many things rely on one thing working, and that thing breaks, you are counting the days to catastrophe. That’s a single point of failure.
— Page 148
The trick that often goes overlooked—even by the wealthiest—is what we saw in chapter 10: realizing that you don’t need a specific reason to save. It’s fine to save for a car, or a home, or for retirement. But it’s equally important to save for things you can’t possibly predict or even comprehend—the financial equivalent of field mice. Predicting what you’ll use your savings for assumes you live in a world where you know exactly what your future expenses will be, which no one does. I save a lot, and I have no idea what I’ll use the savings for in the future.
— Page 149
19. All Together Now
Go out of your way to find humility when things are going right and forgiveness/compassion when they go wrong.
— Page 209
20. Confessions
Being able to wake up one morning and change what you’re doing, on your own terms, whenever you’re ready, seems like the grandmother of all financial goals. Independence, to me, doesn’t mean you’ll stop working. It means you only do the work you like with people you like at the times you want for as long as you want.
— Page 216