Book title and author: The Psychology of Money: Timeless lessons on wealth, greed, and happiness by Joesph E. Powell. B08G5625Q6 reviewed 8-27-23

Why I picked this book up: I have been spending more time thinking about money and a psychologist so they go together

Thoughts: Ad. How many times have you thought about starting a diet or quitting smoking without doing anything about it? Or lapsed back into bad habits after hitting a rough spot on the road to recovery? To uncover the secret to successful personal change, three acclaimed psychologists studied more than 1,000 people who were able to positively and permanently alter their lives without psychotherapy. They discovered that change does not depend on luck or willpower. It is a process that can be successfully managed by anyone who understands how it works. Once you determine which stage of change you’re in, you can: create a climate where positive change can occur maintain motivation turn setbacks into progress make your new benefifificial habits a permanent part of your life This groundbreaking book offers simple self-assessments, informative case histories, and concrete examples to help clarify each stage and process. Whether your goal is to start saving money, to stop drinking, or to end other self-defeating or addictive behaviors, this revolutionary program will help you implement positive personal change . . . for life. The National Cancer Institute Found this program more than twice as effective as standard programs in helping smokers quit for 18 months.

Some golden nuggets:
Psycholology of Money: Timeless Lessons on Wealth, Greed and Happiness by Morgan Housel is a timeless work about how our feelings, emotions and interactions with money often results in different outcomes for different people – because people are different. So, insights into how to think and behave about money is instructive.

This book is full of great insights written to possibly guide us

Quotes that hit home from various chapters are presented below. There are many more quotes possible to review but then you’d miss the message between each quote. I strongly suggest getting the book to see how these below snippets string together into a powerful story about how we think and behave towards money.

Quote:
• 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.
• Luck and risk are siblings.
• Yes, but I have something he will never have … enough.
• There is no reason to risk what you have and need for what you don’t have and don’t need.
• The hardest financial skill is getting the nuggets goalpost to stop moving.
• $81.5 billion of Warren Buffett’s $84.5 billion net worth came after his 65th birthday.
• Buffett began serious investing when he was 10 years old.
• His skill is investing, but his secret is time. That’s how compounding works.
• But good investing isn’t necessarily about earning the highest returns, because the highest returns tend to be one-off hits that can’t be repeated. It’s about earning pretty good returns that you can stick with and which can be repeated for the longest period of time. That’s when compounding runs wild.
• Getting wealthy vs. staying wealthy.
• Getting money is one thing. Keeping it is another.
• Planning is important, but the most important part of every plan is to plan on the plan not going according to plan.
• No one is impressed with your possessions as much as you are.
• When you see someone driving a nice car, you rarely think, “Wow, the guy driving that car is cool.” Instead, you think, “Wow, if I had that car people would think I’m cool.”
• Humility, kindness, and empathy will bring you more respect than horsepower ever will.
• Spending money to show people how much money you have is the fastest way to have less money.
• Money has many ironies. Here’s an important one: Wealth is what you don’t see.
• Past a certain level of income people fall into three groups: Those who save, those who don’t think they can save, and those who don’t think they need to save.
• Building wealth has little to do with your income or investment returns, and lots to do with your savings rate.
• The value of wealth is relative to what you need.
• Past a certain level of income, what you need is just what sits below your ego.
• People’s ability to save is more in their control than they might think.
• Things that have never happened before happen all the time.
• The thing that makes tail events easy to underappreciate is how easy it is to underestimate how things compound. How, for example, 9/11 prompted the Federal Reserve to cut interest rates, which helped drive the housing bubble, which led to the financial crisis, which led to a poor jobs market, which led to tens of millions to seek a college education, which led to [over a trillion dollars] in student loans with [a high percentage of default rates].
• The correct lesson to learn from surprises is that the world is surprising.
• The most important part of every plan is planning on your plan not going according to plan.
• The purpose of the margin of safety is to render the forecast unnecessary.
• The End of History Illusion is what psychologists call the tendency for people to be keenly aware of how much they’ve changed in the past, but to underestimate how much their personalities, desires and goals are likely to change in the future. [Thus, their history of change won’t change anymore into their future].
• Every job looks easy when you’re not the one doing it.
• Successful investing looks easy when you’re not the one doing it. Hold stocks for the long run … but do you know how hard it is to maintain a long-term outlook when stocks are collapsing?
• Price … not dollars and cents … it’s volatility, fear, doubt, uncertainty … all of which are easy to overlook until you’re dealing with them in real time.
• Beware of taking financial cues from people playing a different game than you are.
• When investors have different goals and time horizons – and they do in every asset class – prices that look ridiculous to one person can make sense to another, because the factors those investors pay attention to are different.
• The interesting thing about [absolutely pessimistic] stories is that their polar opposite – forecasts of outrageous optimism – are rarely taken as seriously as prophets of doom.
• Pessimism just sounds smarter and more plausible than optimism.
• …progress happens too slowly to notice, but setbacks happen too quickly to ignore.
• The more you want something to be true, the more likely you are to believe a story that overestimates the odds of it being true.
• We don’t know what we don’t know.
• Coming to terms with how much you don’t know means coming to terms with how much of what happens in the world is out of your control. And that can be hard to accept.
• Less ego, more wealth.
• If you want to to do better as an investor, the single most powerful thing you can do is increase your time horizon.
Unquote.

There’s a lot of wisdom alone in the various quotes above. There’s even more wisdom reading how they string together to see the larger story line to understand your psychology of money applied in your own life.

Why I finished this read: Good, short book that was interesting

Stars rating: 4.5 of 5 stars ( )

In the Psychology of Money, Morgan Housel teaches you how to have a better relationship with money and to make smarter financial decisions. Instead of pretending that humans are ROI-optimizing machines, he shows you how your psychology can work for and against you.

Great read for any level as it stays away from extensive economic science. It relates with stories, quotes, and personal experiences to bring it to life. Short on time? Skip to chapter 20 for a recap. ( )

Excellent, easy read that is probably the best book I've read on personal finance. I highly recommend it, esp. for young people. For me, the top 5 nuggets of wisdom are:
- the ability to control your time is the biggest dividend you get from money and wealth
- live below your means and save/invest that money every month, every chance you get.
- no one is as impressed by your stuff (house, car, etc.) as you are
- keep a buffer for contingencies and the unexpected so that you don't have to dip into your investments, which lets them keep compounding
- compound interest is the most powerful force in the universe.

Each chapter has a nugget like those above, and it was hard to choose just five. ( )

Good information on how our attitudes influence our dealings with money. But, not as good as Sarah Newcomb's Loaded: Money, Psychology, and How to Get Ahead without Leaving Your Values behind. ( )