The Psychology of Money

The Psychology of Money

Timeless lessons on wealth, greed, and happiness doing well with money isn’t necessarily about what you know. It’s about how you behave. And behavior is hard to teach, even to really smart people. How to manage money, invest it, and make business decisions are typically considered to involve a lot of mathematical calculations, where data and formulae tell us exactly what to do. But in the real world, people don’t make financial decisions on a spreadsheet. They make them at the dinner table, or in a meeting room, where personal history, your unique view of the world, ego, pride, marketing, and odd incentives are scrambled together. In the psychology of money, the author shares 19 short stories exploring the strange ways people think about money and teaches you how to make better sense of one of life’s most important matters.



The book talks about the difference between getting wealthy and staying wealthy. The author says that many people acquire wealth but fail to preserve wealth and hence it is important to learn how to preserve wealth. As per Housel,” Preserving wealth requires humility and the fear that what you have made can be taken away from you just as fast. It requires frugality and an acceptance that at least some of what you have made is attributable to luck, so past success cannot be relied upon to repeat indefinitely.

The author talks in detail about the role of luck in investing in many places in the book. He quotes his conversation with Robert Schiller, winner of the Nobel Prize in Economics, to whom he once asked, “What do you want to know about investing that we can’t know?”. In response to this question, Schiller said, “The exact role of luck in successful investing”.

The author keeps on surprising with his wonderful understanding of money in different chapters of the book. But the exclusive chapter on saving, which is chapter 10, has many interesting aspects about savings. Emphasizing the significance of savings, the author says “The first idea- simple, but easy to overlook-is that building wealth has little to do with your income or investment returns, and lots to do with your savings rate.” He adds that you don’t need a specific reason to save. He has also mentioned something which is an eye-opener. Past a certain level of income, what you need is just what sits below your ego. The author also highlights the need for knowing what is enough, when it comes to money.