This time we are going to talk about a book – “The psychology of money” by Morgan Housel.

In this book, the timeless lessons are given on wealth, greed and happiness.

Morgan has written 20 short and practical chapters in this book. All chapters, will give you insight along with stories, like how can you invest smartly, How the finance world works and where we are wrong when it comes to perspective.

This is a book which you should read multiple times, each chapter will give you something that is new and applicable to your life. Let me share some of the best insights from this book:

Everyone has their own story

People see their world from their own perspective or from other’s perspective. The truth is no one wants to see the reality. Hence, they tell themselves a story which is comfortable for them. What Morgan is trying to imply is – we can not follow someone’s strategy – while making investment decisions. As everyone has different perspective and goals while investing.

One person might be investing for hobby, and one person might be in a need of money.

Takeaway is – learn from people, but make your own story, follow your own strategy for investment. Don’t blindly follow other people when it comes to finance.

Careful risks

When it comes to investing risk is unavoidable. But you can definitely set some limits to take risks. Never invest all your money. While investing, you have to make sure – that all your fortune does not get wiped out – due to some bad decisions. Take careful risks. You should always have backup plan while making financial decisions.

As the world is unpredictable, you never know – when the times comes when you need more money. Careful risk is the key to smart investing.

Get rid of social comparison

If you see people buying fancy cars, big houses and going on vacations – don’t get influenced by that. You are only seeing what they want you to see. You don’t know how much loan they are paying, all the worries they might be facing while sleeping at night, and what are their actual financial goals.

On your side, situation might be different. You don’t need fancy cars or any other luxury to show off people what you are worth. That’s just you – making decisions and spending your money because of social comparison.

A lawyer – wanting to be partner of the company – might need fancy cloths and keep up the appearance, but a writer working from home, you don’t need to spend your money on fancy clothes.

All you need is right perspective when it comes to spending.

We can be wrong

Your all investment decisions would not be right. Most of the time investors’ 90% decisions are wrong. They become rich because of their 10% right decisions. So don’t be hard on yourself. Yes, we can be wrong sometimes while making right financial decisions.  

All we need to do is have patience, and wait for the right 10% decisions, which will fulfill our financial dreams.

Wealth is what you don’t see

There was a time when famous singer Rihanna went broke. Her manager said at that time,

“Did I need to tell her that the more you buy, the more your wealth will be gone?”

When you buy something or spend money on something, that money is gone. It’s not your wealth anymore. Its just a piece you just bought.

Yes, we need to remind ourselves, that by spending money on materialistic things, our wealth is not increasing.

You might ask – How to stay wealthy then?

I would say question should be – what is wealth? And you will get your answers.

Wealth is money earned but not spent. Wealth is hidden – your saving, your investments, your fund etc.

Well, guys “The psychology of money” book will give you many timeless lessons which you can implement even after 10 years. As they are timeless. You see what I did there.

The most important lesson you need to remember from this book is:

“Doing well with money has a little to do with how smart you are and more to do with your

behaviour around money. You don’t have to be a genius to be good with money.”