208-992-3313 [email protected]

Review: Psychology of Money

Book written by: Morgan Housel

The book’s tagline is “Timeless Lessons on Wealth, Greed, and Happiness”.  It is a fun read to explore your personal views on money and the tradeoffs that are part of daily life.  As we look at ourselves, everyone has a relationship with money for better or worse.  Morgan Housel explores this relationship through a series of anecdotes and stories. 

The first chapter acknowledges that we are all unique in our view on money.  Someone who grew up poor will have a different perspective on investment risk than someone who grew up with money available.  Additionally, the author makes the point that our personal view of money is especially shaped by our experiences early in our adult life.  Someone who graduated college into a recession would have a different feeling on investing from someone who graduated into a hot job market.  I can see looking at my experiences with money from high school to getting established on my own has a high impact on my own views on money.  Personally, I am a do-it-yourselfer around the house.  I learned this as a necessity as a young adult as a way to save money.  To this day, I tend to consider ways to do home projects myself long before I call someone in. 

Pay special attention to the last chapter, the author shares how he invests his money.  Interestingly, he began his career as a stock analyst whose job was to spot undervalued stocks.  He admits at that time his investment portfolio was a varying handful of 20-30 selected stocks.  However, today he invests simply in low-cost index funds and has his house paid off (great work).

The Psychology of Money is for someone who is interested in the study of how our quest for and utilization of resources (money) impacts our thought processes.  Frequently we tend to operate in predictable ways, but sometimes our actions are opposite of what we really want and this is where we need to be cautious.  For someone who has enjoyed any of the Freaknomics books, this book brings it a little closer to home and how we operate as an individual.