The Psychology of Money

A Book Club Review

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This last December, I was gifted The Psychology of Money.

I was genuinely excited to read this because it had been a while since I’d dove headfirst into a good self-help book—and financial books are some of my absolute favorites.

Truthfully, I also needed a book for my first Book Club article.

This book, in particular, I’d learned, was so popular that it had sold over 2 million copies since it was first published in 2020. At the time of writing this article, it also had been featured on Amazon’s top 20 charts for 11 weeks straight—so it had to be good, right?

The author, Morgan Housel, also brought a TON of credibility to the table by having been a columnist for both The Wall Street Journal and The Motley Fool. So, I gave it a go. What could it hurt?

I’m happy to report that I finished this book, and now I’d like to share my thoughts on it with you.

Let’s start with the basics first.

Length/Readability

Some books intimidate me. You know the ones—novels twice the size of Harry Potter and The Order of the Phoenix. I can read them, but I know that sometimes 900 pages isn’t exactly easy to pull off. It’s a true commitment.

The Psychology of Money isn’t like that, though—not at all. The publisher has it listed at 256 pages, including all the fluff (copyright, blank pages, end notes, etc.).

Actually, between all 20 chapters and the postscript, it is only 238 pages. Right in my comfort zone and perfect for personal development. (By the way, don‘t skip the postscript, it’s worth it!)

The author even mentioned in the “Introduction” that he’d prefer readers to finish his chapters. With this in mind, he structured his book into 20 short stories—similar to essays—that can be read separately at any given time.

From what I could tell while reading, each chapter was about 10 pages long, though there are a couple of exceptions.

Still, how Morgan Housel structured his work makes it easy for anyone to start and finish this book without guilt.

Notable Stories & Topic Variety

Given Housel’s background, it’s really no surprise that most of the stories he uses to convey his message are centered around the stock market.

The stock market has never been my thing, but does that make his stories any less valuable? No, absolutely not.

Every single one of Housel’s examples has an important lesson to teach. So while you may need to keep your phone next to you so that you can Google what quantitative easing means, it will all be worth it in the end.

This book isn’t all about the stock market, though. Housel often uses historical examples and famous figures to get his points across.

If you’re interested in finding out about the role luck & risk played in Bill Gates’ success, how our habits as consumers were molded after the events of World War II, and how many modern-day worker’s lives might resemble John D. Rockefeller’s (in a sense)—then this is the book for you.

There are many more intriguing stories to look forward to as well.

Important Points

Going through this book, I noticed a few key points that really stuck with me.

It’s not that I didn’t necessarily already know these things, but they are essential to me. Sometimes, I need to be reminded of them. (I’m only human, after all!)

Avoid Lifestyle Creep

Maybe you’ve heard about it before, but lifestyle creep is a very real thing.

The concept is as simple as it gets: Earn a little more, buy a little more.

As harmless as that sounds, it’s a widespread problem that creates a GIANT financial mess for many people.

Often when people receive an increase in income, they also increase their lifestyle. Many buy more than they can afford, rack up debt, and cannot save money.

They then think they need to earn more money to solve the problem, so the cycle begins again.

But a pivotal step to financial success is to avoid lifestyle creep altogether. Keep your lifestyle the same, live beneath your means, and save and invest as much as possible.

The Compound Effect

Compounding is basically a miracle.

In general, the idea is that you start with something small—and over time—it multiplies, causing exponential growth. This can be applied in many aspects of our lives.

In fact—Darren Hardy, a New York Times best-selling author, wrote an entire book about The Compound Effect and how we can use it to improve our lives.

Likewise, in The Psychology of Money, Housel writes about the effects of compounding in finance.

Whether it’s compound interest or dollar cost averaging—compounding benefits you—and it only works if you stick with it over time.

Plan for Mistakes

It’s always good to have a plan. Just remember, like Jack Sparrow says, “They’re more like guidelines anyway“.

Life happens, things change, and plans change. That’s why it’s important to strategize and plan for when things go wrong.

Assuming the worst and one falls off track, your plan is there to help get you focused and to help get you back on the right path.

So, we really need to break the psychology that makes us believe that plans are set in stone, because they’re not.

In this case, it’s more like a money map, anyway.

Let Freedom Ring

I’d never felt more unhappy than when I worked two retail jobs with “flexible” schedules.

If you come from a similar background, I’m sure you understand that the “flexibility” in that term only benefits the employers.

You know—the flexibility to abuse the employees and schedule them 6, 7, 8, or 9 days in a row.

Or the flexibility to schedule an employee to close and open the following day with less than 8 hours between shifts.

Oh, and let’s not forget about the flexibility to guilt trip an employee for asking for a day off to go to the doctor or to take care of their sick kid.

All of this is made possible by the unspoken threat that they can ruin the employee’s life if the employee doesn’t do what they want—because they might lose their job, source of income, and livelihood.

What a con.

The only reason I bring this up is that this is the case in many employer and employee relationships, and it’s a terrible life to live.

When we start thinking about money differently, changing our psychology towards it allows us to see the truth.

The lives most people live are not free. They are dictated by someone else and by fear itself.

When we start improving our finances, we’re buying our own freedom—little by little.

They may seem like minor improvements at first, but they make a significant impact.

Over time it all compounds, and it can feel like the weight of the world has been lifted off your shoulders.

Final Thoughts

All in all, I enjoyed reading The Psychology of Money. It’s a quick read with some generic yet valuable lessons.

It’s important to note that aside from the biographical stories that Morgan Housel shares, there really wasn’t any new information in this book for me—and that’s okay.

As I mentioned before, I read self-help books to help my mindset. Even when I’m reading information that I already know, it helps keep me motivated.

Sometimes it even gives me a proverbial swift kick in the butt. In this case, I’m freshly inspired to revamp my budget and double down on my saving and investing.

But of course, that won’t be the case for everyone.

If you’re a beginner in the area, there is plenty of knowledge in the book to get you started and to help you become familiar with the financial world.

If you want to get started, you can buy The Psychology of Money by Morgan Housel here at Amazon.com.

This article was originally published on OhHeyItsRay.com

Oh Hey, It’s Ray is a real estate investor, entrepreneur, and former real estate agent. She lives happily with her husband and two children in the Pacific Northwest. See more from Ray at her YouTube channel and on Ohheyitsray.com