Book review: The Psychology of Money

Full title: "The Psychology of Money: Timeless lessons on wealth, greed, and happiness" by Morgan Housel, published in 2020.

It was the last book I read in 2024, and it is an easy read on a difficult topic we face every day. Although the advice given might sound like a common sense, it is good to see it in a structured way with some statistical facts and anecdotes to persuade the reader.

I liked how this book underlines that the way people, as individuals and institutes in general, interact with money stems from human psychology, rather than hard mathematical figures.

The last chapter gives summary of all lessons in the book, and I would like to add my personal highlights and takeaways:

1. Save money even if you do not have any big spending goals. We often underestimate our future expenses, and even in the positive scenario having extra savings brings flexibility and freedom.
2. Nowadays our working days do not end when we clock out. Most of the white-collar workers think about their work all the time, dream about their work at night and ruminate over the challenges, so it is important to find a healthy balance and look for freedom and peace of mind when choosing the work and building your personal finance strategy.
3. Your kids do not want your money anywhere as much as they want your attention and your time. Rather than following the idea of "giving them all they need", it is important to build memories together.
4. When you look at the person with expensive items, you might feel envy, and usually what you envy is not the material things, but the feelings it evokes: respect, high social status, and admiration. It is important to remember that just obtaining these expensive items does not bring these virtues automatically. There is a difference between being wealthy and rich, and a difference between earning respect and trying to buy it.
5. A lot of our decisions are socially driven. Our expenses are not an exception. It is important to understand what our innate desires are, what is our long-term vision and how it aligns with our behavior short-term. Choose your games wisely.

For some of the readers this book might sound too obvious, especially for those experienced in budgeting and investing, or the ones who already hit big financial milestones, but I think it is a must-read for young adults who are just starting their financial independence journey.

It is an informative book which helps to build healthy relationship with money and shows how some common-sense decisions might help us build secure foundation to grow our wealth without esoteric approach or some magical thinking about getting rich overnight.