The psychology of money is written by Morgan Housel. It is one of the best books on money making and wealth creation.
The psychology of money deals with evergreen lessons on wealth.
Most people even our parents don’t understand how money works in a proper way. This is why almost in all houses discussing money is a kind of taboo.
Many people think that managing money, invest it and make a profit out of it is a very mathematical procedure.
But the reality is, people just don’t take money-making decisions on spreadsheets. It is difficult to teach the behavior of money making but it’s certainly not impossible.
In this book, the author shares 19 short stories about how people think about money and it also teaches them to make better decisions on money-making and life in general.
There are parts where the author has also explained how luck and risk play a big role factor while making money.
Huge businesses can go into severe loss just because of a luck factor.
Take this pandemic, for example, most fine dining restaurants in any city have suffered huge losses. No matter how good your food is or what ambiance you have, people were still not coming instead there were home delivering their dinner.
The only reason behind this was bad luck. People didn’t feel safe to go out in times of pandemic, as fine dining restaurants are a luxury, not a necessity. The necessity part was already being fulfilled by the home delivery options.
The author also tells you about the importance of compounding. He also mentions a story about a janitor who had millions left in his bank account which were revealed just after his death, all because of the power of compounding.
Regarding interests, the author says that the best investment is that investment that lets you sleep at night.
Some takeaways from the book :
1) Are you ready to pay the price for high returns?
In this part, the author talks about investments in the stock market for the long run. The stock market is a volatile market, so the stocks which have the behavior of going volatile sometimes fetch very good returns.
As they say about stock markets, high returns, high risks.
So are you willing to pay the price of having patience in the market for few years and let your stock price grow?
According to you even if the stock gave good returns in the long term, would it be ok for you to invest this much time in the stock?
These types of questions you need to ask yourself and work according to the answers you get.
The author conveys here that every rich person wants to be rich than the other person. He basically meant that people are never satisfied with themselves, this could be money or anything.
Remember there will always a bigger fish. You need to accept sometimes that this is enough.
3) Your saving is income minus your ego.
4) Do not underestimate the role of luck.
The psychology of money , is less than 200 pages. It is written in plain simple English, easy to read and understand.
This book talks about the thought process of making money which everybody can relate to very easily. Though this book doesn’t cover fundamental analysis of investments or anything like that still it’s a good book I believe.
I believe every people who are interested in creating wealth should read this book once.
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Caitlin has done her Masters’ in finance. She loves to write about finance, money making and on tech that would affect us in near future. When she is not writing in her favorite coffee shop, Caitlin spends most of her time reading, cooking, traveling the world, visiting Walt Disney World, and catching her favorite Broadway shows. If you want to know more about her, do follow her on Twitter. Just click on the Twitter icon in this box.