Learning about personal finance is a must. You do your future self a huge favor when you invest your time and money in learning about finance. I know this and that’s why I make it a priority to read at least 2-3 personal finance books every year.
One of the books that I read this year is Psychology of Money by Morgan Housel. In today’s book review video, I’m reviewing this non-fiction book as quickly as possible.
But before that…
What is this book about? It’s quite unlike your normal personal finance books that might give you a stepwise methodology into how you can be rich. The book pursues the subject differently by trying to look at what makes people wealthy or poor.
The idea of the book is that how well you do with your money doesn’t depend on how smart you’re. It actually depends on your behavior!
And then the book dives into looking at the behavior of rich and poor people. It’s more like a study of people’s behavior with money over time. The author believes that financial success isn’t science. He calls it a ‘soft skill’ that depends on your behavior and also, about the thought process your family and people have had across generations.
Another idea discussed in the book is that to understand the psychology of money and why some people earn so much and still are under debt, you actually have to look at the history of greed, insecurity, and optimism.
He then tells you what no personal finance book has ever told me before – he basically tells you not to judge yourself on the basis of the standards all the financial gurus propagate. He says ‘things are never as good or as bad as it seems.’
He also introduces the role of luck and the role of risk in your financial journey. Through several captivating stories, the author has tried to tell you about the very psychology of money.
Then, he talks of consistency and compounding of the actions that can bring massive results. He talks of how compounding isn’t intuitive and how we almost never think of it or truly grasp its power due to our lack of understanding about compounding and our lack of patience to ‘shut up and wait!’.
Then he talks of paranoia and optimism in financial planning and how both ways of living can pan out. He also talks about the truly important things about a person’s financial life. Is it really the money, the bank balance that’s important, or would you trade your money for being able to do what you love, to take control of your life, and to spend your time with people you love?
He discusses how true wealth is actually hidden, due to its very concept and definition. Thus, most people go after the rich as their role model and end up being doomed for it’s the wealthy you should be inspired from for true financial success but they’re simply hiding. You cannot really find them and get inspired.
He then talks of being rational vs reasonable, and tells you how being rational, as is often expected by financial gurus, isn’t really an easy-to emulate human behavior. Most humans won’t be happy with being rational. Rather, they should be reasonable.
He talks of how financial goals change over time as you as a person change and thus, it’s crucial to not beat yourself up about it. He talks of giving yourself time, practicing humility, and aiming at independence than just loads of money.
Throughout the whole book – the psychology of money, the author has used several stories of real people to establish the concepts he introduced and to be honest, I felt it was a truly incredible read. Mostly.
Why incredible? Because, after the very famous book Rich Dad Poor Dad, this is the second book I’ve read that discusses the psychology and way of living for true financial success than actual steps. Now, I love both kinds of books – but I feel it’s important to dive into a book like this every once in a while.
Moreover, it just strengthened my belief in myself about what I’m trying to do with my financial life, it made me realize how we are often too harsh on ourselves and try to be rational rather than reasonable. The book gave me confidence and understanding about my own money behaviors and I feel that it has put me at peace and made me inspired. That’s why I feel it’s incredible.
But, there are a few chapters in the book that was incredibly boring too. I had to struggle through them, and it was that bad that I wanted to tell the world that it’s just over-hyped. Do not read it.
However, the truth is it does have some boring chapters that bring down your overall energy and enthusiasm about the book but the overall impact of this book is great. It’s not your regular personal finance book and if you have loved Rich Dad Poor Dad, I am sure you’re going to love this too. Mostly.
Overall, I gave it 3.5 out of 5 stars, I would give it 4.5 if not for those boring painful chapters.
What do you think?