The Psychology of Money - Timeless Lessons on Wealth, Greed, & Happiness

The Psychology of Money Summary by Morgan Housel

Do you know that earning money is not a big deal but managing and investing money is a big concern? Morgan Housel’s book “The Psychology of Money “shows you how to develop a better connection with money and make better financial decisions.

The Psychology of Money was written by Morgan Housel with the hope to inform the people about the nature of money. We tried to explain the book summary of “The Psychology of Money” in the easiest language.

Also, the Psychology of Money by Morgan Housel explains Timeless Lessons on Wealth, Greed, & Happiness. The title or sub-points was taken from the book without editing words.

Each title contains meaningful words. But by chance, if you will not able to understand the points then we mentioned the conclusion of the book summary which helps to understand the money concept. In your existence life follow each step to gain knowledge about practical money concept experience.

No One’s Crazy

The writer wants to say with this statement that the people who manage money are not fools. The most important skill which humans should know is “the power of managing money”. Billions of people taking classes for knowing how to manage money.

You can read about what it was like to lose everything during the Great Recession, but you’ll never know the mental scars that survivors are now dealing with. It’s important to remember that unless you’ve lived through and seen the effects of a financial crisis, you’ll never understand why people act the way they do.

In simple words, No one’s crazy who manages money for future uncertainty. Don’t be foolish while spending money on things. Adopt skills to manage money through investment and saving.

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Luck & Risk

The writer writes risk and luck are connected with each other. Without taking a risk in business or investment nothing will possible. If you will take a risk then maybe by luck you win the chance also maybe you lose unluckily.

Both words connect with each other. If you lose the chance then it does mean you will not win ever. Just you need to focus more than an early stage. So, the conclusion is clear take risks as much as you can wear.

Never Enough

These are guys who had it all—wealth, power, and freedom—only to lose it all because they lacked a sense of proportion. There’s no reason to take a risk on what you have and need in exchange for what you don’t. Stopping people from moving appears to be the most difficult financial skill.

Although, the writer suggested having lots of money or wanting to have it is not a good thought. But getting money at every cost is not an excellent thought. It is human nature that “we never feel satisfied with the having material”. We wanted more and more, which cause our having material as well.

The psychology of money book tells “wanted extra things is good but for any cost is not best skill to attractive money toward ourselves”. 

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Getting Wealthy vs. Staying Wealthy

Somehow getting wealth is easy. With casual jobs or professionals, we can get money. But trouble comes when we go to manage money for future saving, investing and expenses purposes.

Housel said that “whatever you have money invests 60-70% out of them in investment purpose, 15-20% keeps with you to handle expenses and up to 10% use for savings.”

Maintaining wealth is no piece of cake. When it comes to producing money, the capacity to stick around for a long time without wiping out or being forced to give up makes all the difference. Compounding works best when an asset has years to expand.


The capacity to get up every morning and say, “I can do whatever I want, when I want, with whom I want, for as long as I want,” is the highest form of prosperity. This is the highest dividend money can pay, more than your paycheck, more than the number of hours you work, more than the prestige of your profession, more than anything else.

Man in the Car Paradox

People seek money to show that they want to be loved and admired by others. However, those other individuals frequently overlook you for admiration, not because they don’t think riches are admirable, but because they use your wealth as a barometer for their own need to be liked and admired.

Be safe these kinds of people and also do not inform anyone about your exact wealth quantity.

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Wealth is What You Don’t See

This book tells that investing money is an excellent option to get a high ROI but also saving is too important. We should save money and used it to purchase wealth. While wealth is invisible but plays a vital role in a troubled time. Wealth should be purchased in the form of gold, diamond, and platinum jewellery. At the time of trouble, wealth reduces 40% issue.

We should not count wealth as money but having it is the blessing of God. People treat wealth as an asset of human beings.

Save Money

Building wealth is more about your savings rate than it is about your income or investment results. More importantly, wealth is measured in terms of what you require. A high savings rate implies you can spend less than you could otherwise, and spending less ensures your savings go further than they would if you spent more.

Reasonable > Rational

“When making financial judgments, don’t try to be coldly rational,” Housel writes. “Simply aim to be reasonable.” Reasonable is more realistic, and you’ll be more likely to keep to it in the long run, which is what matters most when it comes to money management.” Remember, you’re not a spreadsheet. You’re a living being.

Room for Error

When projecting future returns, leave space for mistakes. Housel estimates that the future returns on his assets will be 13 percent lower than the historical average over his lifetime. As a result, he saves more than I thought the future will be similar to the past. It’s his safety margin.

Many times things did not happen according to us but still, we should be prepared ourselves for both consequences of investing advantages and disadvantages. Mistakes make you perfect in your work never be afraid to lose the chance. 

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You’ll Change

This phenomenon is known as the End of History Illusion because we are such lousy forecasters of our future selves. We recognize how much we’ve changed through time, but we vastly underestimate how much our personality, desires, and goals will change in the future.

“Imagining a goal is simple and enjoyable,” Housel writes. It’s a completely different thing to imagine a goal in the context of the realistic life stresses that come with competitive pursuits.” Remember to avoid the extremes of financial planning and accept the possibility of changing your mind when making long-term decisions.

Try to change the method or adopt new methods to attract money. Investing money in more than 10 sources make multiple options for getting money.

Nothing’s Free

I totally agree with this. Everyone knows we have to give up something for something. Not a single person works for you free of cost.

Housel writes we should take the price for work. He is not saying take money for help, just ask for money for those people who got work from your side free of cost. Do not give a chance somebody to take advantage of your profession. If you are doing something related to your profession then ask to pay you.

You & Me

Few things in life are more important than knowing your own time horizon and refusing to be swayed by the acts and behaviors of others who are playing other games than you.

This book says to focus on other who is investing money and attracting money fast. Then follow the instructions and methods of successful people to attract money. If you will focus on me (ourselves) then you will be able to find the right way of getting money.

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The Seduction of Pessimism

In finance, pessimism gets more attention than optimism, making it more desirable. “It’s easier to create a narrative around pessimism because the story elements tend to be fresher and more current,” Housel adds.” “Optimistic narratives necessitate examining a long period of history and events, which people sometimes overlook and require more effort to piece together.” According to Housel, true financial optimism is anticipating bad things to happen and being surprised when they don’t.

When You’ll Believe Anything

The more you want something to be true, the more you’ll trust a story that exaggerates the chances of it being true. Few people believed there would be another world war after World War I concluded. Many things in life we believe to be real because we urgently want them to be true, writes Housel. These are what he refers to as “appealing fictions,” and they have a significant impact on how we think about money, specifically investments and the economy.

Always keep in mind, that whatever you believe, the same thing happens to you, so before believing or thinking about negative things remember this point.

The  psychology of money book quotes

“Getting money is one thing. Keeping it is another.”

“Money is everywhere, it affects all of us, and confuses most of us.”

“Spending money to show people how much money you have is the fastest way to have less money.”

“Things that have never happened before happen all the time.”

“Planning is important, but the most important part of every plan is to plan on the plan not going according to plan.”

“Doing something you love on a schedule you can’t control can feel the same as doing something you hate.”

“Progress happens too slowly to notice, but setbacks happen too quickly to ignore.”

“There is no reason to risk what you have and need for what you don’t have and don’t need.”

“There are many things never worth risking, no matter the potential gain.”

“Good investing is not necessarily about making good decisions. It’s about consistently not screwing up.”

“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.”

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Your soft skills are more important to your financial success than your technical abilities. That’s why also invest your money in expanding your knowledge of your soft skill. If you feel that you raise your highest soft skill knowledge then invest money in collecting assets. Assets should be fixed which alternatively help to produce more money.

For example, Sam purchases a fixed asset (land) for the rupees of 20 lakhs and resales it for 25 lakhs and again he purchased land for rupees of 20 lakhs and resales it for 25 lakhs likewise he collects extra 10 lakhs.

This is called the golden investing method.

People have different views about money

We believe we understand how the world works, yet our understanding is actually quite limited. Each of our individual experiences represents only a small part of the total human experience across generations. That’s why the behavior of money depends on the utility consumer.

Our life experiences shape our worldview. As a result, people of all ages, backgrounds, and life experiences have diverse perspectives on money. Someone who grew up in poverty or starving will have a different perspective on “risks” and “rewards” than someone who grew up in an affluent environment and never had to worry about money.

Someone who lived through World War 2 or a recession would have a different perspective on money than someone who grew up in a stable economy. Others’ financial actions may appear irrational to you, but they make complete sense to them. You can never really comprehend someone’s financial insecurities by reading about them; you must personally feel them.

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By Varsha Tiwari

Varsha Tiwari is a Tutor, Content Writer, Digital Marketer, and Professional Blogger from India. She found WordPress when she needed a website for her first business and instantly fell in love with it. When not building websites, she was creating content for her interest in writing and enhancing skills of writing sense. She have 2+ years of experience in the online marketing and writing industry.

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