The Psychology of Money Summary & PDF, Audiobook FREE : By Morgan Housel

The Psychology of Money Book Details

One of my favorite finances and investing books I’ve read is The Psychology of Money PDF  by Morgan Housel. Almost all of us have faced some kind of financial hardship in our lives.

Though we rarely discuss our relationship with money, it shapes our behavior and decisions every day.

In this book, Morgan Housel covers all the financial topics and explains each as best as he can. Your perspective about being wealthy will change after reading or listening to this book.

Morgan Housel says, Getting wealthy is easy, staying wealthy isn’t.

Morgan Housel – Author Details

Morgan Housel is a Managing Partner of the Collaborative Fund and mainly invests his money in early-stage businesses that are evolving how the world works.

Formerly, he worked as an analyst at The Motley Fool and a columnist at The Wall Street Journal. He was chosen for inclusion in the Best Business Writing anthology by the Columbia Journalism Review and Society of American Business Editors and Writers.

He has won the Best in Business Award twice from the Society of American Business Editors and Writers. His many accomplishments included being a finalist for the Gerald Loeb Award and Scripps Howard Award.

By showing how investors fall prey to their own cognitive bias, he illustrates how the system works. To achieve financial goals, he stresses the importance of understanding your behavior.

A combination of storytelling and the latest research is used to discuss financial markets, the investment industry, and personal finance.

In addition to his expertise in behavioral finance, he is also particularly well versed in investment history.

He has also written “50 Years in the Making: The Great Recession and Its Aftermath” and “Everyone Believes It, Most Will Be Wrong”. Morgan Housel’s ability to explain is simply extraordinary. 

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The Psychology of Money Book Summary

The refreshing aspect of Morgan’s writing is that he takes care of his readers’ time. The book is only 250 pages and gets to the point quickly.

I really enjoyed reading the book. The book provides no specific strategies for achieving financial success. It focuses on the mindsets and behaviors that contribute to most people’s financial success.

It is one of those rare books you’ll read over and over again. This book seems like it is very much in line with my ideas and experiences regarding money, so I feel like it has real resonance with me.

The book is divided out into 20 chapters, each containing a story or anecdote that teaches financial and investing principles.

What I loved most about Morgan’s book was the precise examples he used to illustrate his points. Especially for people who are just starting on their journey, this book is a must-read and an excellent reference.

In Morgan’s view, learning should be multidisciplinary. Aside from finance, he often reads about subjects such as biology, physics, and history. Because of this, the lessons and observations his book offers can be used in multiple fields.

The book contains 18 Wealth Lessons. We will attempt to cover each one in this article. 

The Psychology of Money Book Chapters

1. Introduction: The Greatest Show on Earth

• • According to this book, the key to having good money management deals with how well you behave before you consider how smart you are. 
  • You do not have to be a genius to be successful. The ability to behave well is more important than our knowledge. We call this the psychology of money.
  • Using a collection of short stories, this book uses tales to prove soft skills are essential to money success.
  • In our thinking and teaching about money, we usually treat it like physics and too little like psychology.

1. No One’s Crazy

   • Every individual has their perception of how the world works. There have been many external factors that have been attributed to this unique worldview, including unique circumstances, values, and external influences.
   • Your personal experiences with money make up maybe 0.00000001% of what’s happened in the world, but maybe 80% of how you think the world works.”
   • According to theory, investing decisions should be based on the goals of the individual. Furthermore, they had to think about the characteristics of the investment options that were available to them at that time. The truth is, people, don’t do that. Based on the economists’ research, lifetime investment decisions are often influenced by experiences from previous generations- particularly in early adulthood.
   • Only a small percentage of financial decisions are solely based on spreadsheets. Some people make them their dinner table, or in a company meeting. There are times when you have to combine personal history, your unique worldview, with ego, pride, marketing, and odd incentives to formulate a narrative that works for you.
   • Today’s financial planning process is comparatively new. A good example of this is the individual retirement account. The 401k plan was created in 1978. Roth IRAs were introduced in 1998. The concept of index funds was introduced in the 1970s.

2. Luck & Risk

   • Things are never as good or as bad as they seem.
   • Luck and risk represent the fact that although every outcome in life is determined through individual effort, many factors are beyond our control. The two are so closely related that you cannot respect one without believing the other.
   • Make sure you don’t take for granted that all outcomes can be attributed to effort and decisions.
   • Observe broader patterns than focusing on any one person or case study.
   • When we study a specific person we tend to see extreme examples. Examples that represent extreme situations are often the most complicated and therefore least applicable to other situations. If the outcome is extreme, it’s rare that we’ll take its lessons into our own lives. It was more likely that the outcome was determined by extreme luck or risk.
   • The best way to deal with failure is to arrange your financial situation in a way that missed financial goals here and bad investments there won’t ruin you, So You can keep playing until the odds are in your favor.

3. Never Enough

   • Example: People like Rajat Gupta and Bernie Madoff had everything but still wanted more. These people ruined themselves because they weren’t able to restrain themselves.
   • You should not risk what you already have for what you don’t need.
   • Getting the goalpost to stop moving is the most challenging financial skill.
   • Modern capitalism is good at doing two things: making money and making people jealous.
   • In general, happiness is a matter of results minus expectations.
   • Being “enough” does not mean being too little.
   • The idea of “enough” may seem conservative, a word used to limit opportunities and potential.
   • Knowing when to stop is realizing that constant desire for more leads to regret.

4.  Confounding Compounding

   • Whenever something is compounded, any tiny growth fuels future growth. 
   • Even when you start from a very small foundation, extraordinary results can be achieved that defy logic. 
   • It seems so unlogical sometimes, but you just underestimate what might happen, when growth happens, and what that growth leads to.
   • $81.5 billion of Warren Buffett’s $84.5 billion net worth came after his 65th birthday. Our minds cannot handle such absurdities.
   • Investment is his skill, but his secret is time. Compounding works similarly.
   • Investing success depends on your ability to consider a longer time horizon. Time is an extremely powerful force in investment.
   • Making good investments is not always about earning the highest returns, as we know many of the highest returns come from one-off hits that can’t be repeated. 
   • You have to be able to earn a pretty good return and repeat it for the longest period. 
   • Getting Wealthy vs. Staying Wealthy
   • Wealth can be achieved in various ways; the self-help industry is full of ways to do so. You can only stay wealthy through a combination of frugality and paranoia.

5. Tails, You Win

   • It’s possible to make a fortune even if you’re wrong half the time.
   • Investing and business often work this way. Long tails—the farthest ends of a distribution of outcomes—have tremendous influence in finance, where a small number of events can account for the majority of outcomes..
   • Anything that is huge, profitable, famous, or influential is the result of a tail event-an outlying one-in-thousands or millions event. It is also said that the biggest, most profitable, famous, and influential things get the most attention. Most observers pay attention to a tail, you might underestimate how powerful and rare they are.

6. Freedom

   • Knowing that you can do whatever you want, whenever you want, the way you want, for as long as you want is priceless. 
   • A prosperous life is one in which you wake up every morning and say, “I have the freedom to do whatever I want today.”
   • Controlling your time is the greatest investment you can make.
   • It’s not about your salary. It’s not about the size of your house. It’s not about your reputation. Being able to do the things you want with the people you want is the most important lifestyle variable.
   • The most significant common factor of happiness was simplicity. 

7. Man in the Car Paradox

   • No one is impressed with your possessions as much as you are
   • In most cases when you see someone driving a nice car, you don’t think, ‘Wow, this guy’s cool.’ What you think is, ‘If I had that car they would think I’m cool.’
   • It’s like signaling to people that we’re rich and everyone should like us and admire us. Most people tend to ignore the person in possession of the object of envy and focus solely on the possession.

8. Wealth is What You Don’t See

   • Showing off how much money you have is the quickest way to lose it.
   • The only way to achieve personal financial security is not to spend money that you already have. The only definition of wealth is the accumulation of it.

9. Save Money

   • Growing wealth mainly depends on your savings rate, not your income or investment returns
   • The gap between what you have and what you want increases when you learn to be happy with less money
   • Low expenditures mean saving more money, and more savings means living better than if you spent more.

10. Reasonable > Rational

11. Surprise!Room for Error

12. You’ll Change

13. Nothing’s Free

14. You & Me

15. The Seduction of Pessimism

16.  When You’ll Believe Anything

You can go read or listen to the complete book to learn more about the other chapters.

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Where I can download The Psychology of Money PDF / Audiobook Free?

A unique feature of this book is that it bridges the gap between personal finance and psychology.

This book explores the psychological aspects of personal finance, which are rarely explored. Saving, investment strategies, and decision-making have all been widely recognized as vital aspects of personal finance, yet no book has ever focused on this aspect.

This book is on top of the bestseller list on Amazon as well as having the highest rating. 

When it comes to reading this fantastic book, investing money in it is completely worth it. But if you don’t want to spend the money and still want to read the book. You can read it free by completing the registration process on the below website. 

An audiobook is also a good option to finish a book in a short time with the same experience.