Book Notes #021 - The Psychology of Money by Morgan Housel.

Rating 5/5 ⭐️ (Must-read)

Topic: Non-Fiction: Finance, Investing, and Smart Thinking.

“To grasp why people bury themselves in debt you don’t need to study interest rates; you need to study the history of greed, insecurity, and optimism.”- Morgan Housel.


  • Main Ideas - Great.

  • Examples and Stories - Great

  • Engagement - High


“...Financial success is not a hard science. It's a soft skill, where how you behave is more important than what you know. I call this soft skill the psychology of money.”


🍀 1) LUCK & RISK.

Luck and risk are both the reality that every outcome in life is guided by forces other than individual effort... They both happen because the world is too complex to allow 100% of our actions to dictate 100% of our outcomes.

  • Be careful when assuming that 100% of outcomes can be attributed to effort and decisions.

The more extreme the outcome, the less likely you can apply its lessons to your own life because the more likely the outcome was influenced by extreme ends of luck or risk.


Building wealth has little to do with your income or investment returns and lots to do with your savings rate.

  • Wealth is just the accumulated leftovers after you spend what you take in. Learning to be happy with less money create a gap between what you have and what you want.

Savings can be created by spending less. You can spend less if you desire less. And you will desire less if you care less about what others think of you.

⚾️ 3) YOU & ME.

Beware of taking financial cues from people playing a different game than you are.

  • Bubbles do their damage when long-term investors playing one game start taking their cues from those short-term traders playing another game.

Identify the game you are playing. Is it a short-term game or a long-term game? If It's a long-term game, don't get your advice from people that think short-term.


  • “People from different generations, raised by different parents who earned different incomes and held different values, in different parts of the world, born in different economies, experiencing different job markets with different incentives and different degrees of luck, learn very different lessons.”

  • "Studying history makes you feel like you understand something. But until you’ve lived through it and personally felt its consequences, you may not understand it enough to change your behaviour.”