The book review of Psychology of Money.
BOOK REVIEW
Author – Morgan Housel
Country – UK
Genre – Personal Finance
Pages – 241 (Indian Version)
Publisher – Harriman House Ltd
Published in – 2020
Cost – Rs 399 INR
Illustrations – 4 (Adequate) Keeping in mind the genre of the book.
Who would benefit – Students, Entrepreneurs & Common Populace
Strength of Book. The book Psychology of Money is logically divided into 20 Chapters. These chapters are well written and are gripping. Another good part of the book is the smooth transition from one chapter to the other. Though the author claims that any chapter can be read at any point of time. The flow of the book is logical and rational. Less number of pages make it readable for students and common people as well. The use of words and language is easy to comprehend and one does not require a dictionary too frequently.
Weakness of Book. Long and dragging postscript of the book Psychology of Money is the least interesting part. As compared to the easy language and the gripping text of the book, the postscript is quite opposite. And any chapter can be read to start with but it is seldom feasible for the reader. The flow within the book is connected and requires understanding of the previous chapter before moving on to next one.
About the Author. Morgan Housel is an investor, financial advisor and an author. He is associated with Collaborative Fund and has previously written for Motley Fool and for Wall Street Journal. From the Society of American Business Editors & Writers he has been adjudged best for a record two times. For the Gerald Loeb award he was a finalist twice. He is an expert in behavioral finance.
Summary of the Book. The book Psychology of Money is divided into 20 chapters.
1. No One’s Crazy. It explains that some situation which is reasonable for one might be crazy for the other. Any decision taken by a person is logical given his conditions and understanding.
2. Luck & Risk. Any person’s present condition is a great amalgamation of his luck and the risk taken by him. Author draws appropriate examples from the life of Bill Gates. The book tells that broad patterns are to be studied and not individuals.
3. Never Enough. He explains that psychology plays a major part in personal satisfaction level of a person. He brings out the social dilemma of a person. One needs to understand when is it enough for him/her and stop the pursuit.
4. Confounding Compounding. The magic of compounding will work if one gives enough time to it. Consistency is the key to be rich.
5. Getting Wealthy vs Staying Wealthy. The author explains that the ability to stick around for long is the key to be outstanding in any field. Be it finance or career. It is long chain of avoiding bad decisions and bad situations. Author speaks about having the margin of safety and be financially unbreakable.
6. Tails, You Win. A fallout of the margin of safety is that most of the things are not going to work well. But still when we need to be able to stick around doing average things. To not panic is the key.
7. Freedom. The psychological aspect of return on investment deliberated upon. Mental freedom is the highest return that one can get on the money. To not sell those stocks when times are tough.
8. Man in the Car Paradox. Big Boy Toys and not to pursue them. To abandon the showoff mentality.
9. Wealth is what you don’t see. The more money you spend, the less wealth you have. The author draws out the analogy between diet-exercise and money. Look modest and be actually wealthy.
10. Save Money. It is not the oncome but the savings that will determine your financial future. There need not be any specific reason to save. Savings are a fallout of spending less.
11. Reasonable > Rational. This book establishes the mentality to minimize the risk and be reasonable.
12. Surprise! Come what may the events around the world will still surprise you. To be prepared for the outliers is not in one’s hands. It is seldom studied or seen. History is not all that will be guide, some surprises will be a part.
13. Room for Error. It teaches that one should always be ready for the things not going according to the plan. To have a Plan B and Plan C.
14. You’ll Change. The author brings out that any decision taken today may not hold its relevance tomorrow. We must avoid our tendency to change our mind. Time is required for things to work. To not be a ‘First Gear Man’ is the key.
15. Nothing’s Free. The book brings out that to be rich is not only efforts in career but mental efforts also count. To have the patience for the time to let the money compound is the price. It explains to embrace the volatility of market as the fees and not just withstand it. To be content that it was required.
16. You & Me. We all are different and so our decisions have to be different as well. The author explains the psychology being the market crash. How people with different mentality and with different needs try to play the same game.
17. The Seduction of Pessimism. It is easy to notice that falls are in a moment but the rise takes time. So, the author brings out that volatility and loss will be a part of the long path to growth. To be pessimistically optimist.
18. When You’ll Believe Anything. The author brings out in an interesting way that we must know that there is no short path to success. The stories of success and the intrigues to invest are all there because we want to be rich soon. We must not divulge from long path to richness.
19. All Together Now. In this part the author brings out the key points of the book in a nutshell.
20. Confessions. The author gives examples from his personal finances. It is an attempt to show that in a person’s life how the lessons from the book can be considered.
Recommendations. Medhini recommends that the book is must have copy for all. To keep revisiting the book at all stages of life. To organize discussions on the topic. This book will help to make peace with the things that are not in control. And To plan the financial journey ahead.
Read the book review on Prisoners of Geography. To buy the book Psychology of Money click here.