The Psychology of Money: Top 50 Lines from the Book:

One of My Favorite Authors Morgan Housel❤️

Photo by Morgan Housel on Unsplash

This masterpiece was published in 2020 by Morgan Housel. The book’s main point is that having money success has less to do with intelligence and more with behavior.

The following are the 50 top quotes I collected from this book:

1. Financial success is not hard science. It’s a soft skill, Where how you behave is more important than what you know.
2. History never repeats itself; man always does.
3. Every financial decision a person makes makes sense to them at that moment and checks the boxes they need to check. They tell themselves a story about what they’re doing and why they’re doing it.
4. Luck and risk are siblings. They are both the reality that every outcome in life is guided by forces other than individual effort.
5. It is important to remember when judging success — both your own and others: “Nothing is as good or as bad as it seems.”
6. The accidental impact of actions outside of your control can be more consequential than the ones you consciously take.
7. But realize that not all success is due to hard work, and not all poverty is due to laziness. Keep this in mind when judging people, including yourself.
8. Studying a specific person can be dangerous because we tend to study extreme examples — the billionaires, the CEOs, or the massive failures that dominate the news — and extreme examples are often the least applicable to other situations, given their complexity.
9. You’ll get closer to actionable takeaways by looking for broad patterns of success and failure. The more common the pattern, the more applicable it might be to your life.
10. Bill Gates once said, “Success is a lousy teacher. It seduces smart people into thinking they can’t lose.”
11. The trick when dealing with failure is arranging your financial life in a way that a bad investment here and a missed financial goal there won’t wipe you out so you can keep playing until the odds fall in your favor.
12. As much as we recognize the role of luck in success, the role of risk means we should forgive ourselves and leave room for understanding when judging failures.
13. The hardest financial skill is getting the goalpost to stop moving.
14. Modern capitalism is a pro at two things: generating wealth and generating envy. Perhaps they go hand in hand; wanting to surpass your peers can be the fuel of hard work. But life isn’t any fun without a sense of enough.
15. Happiness, as it’s said, is just results minus expectations.
16. The point is that the ceiling of social comparison is so high that virtually no one will ever hit it. Which means it’s a battle that can never be won.
17. “Enough” is realizing that the opposite — an insatiable appetite for more — will push you to the point of regret.
18. Reputation is invaluable. Freedom and independence are invaluable. Family and friends are invaluable. Being loved by those who you want to love you is invaluable. Happiness is invaluable. And your best shot at keeping these things is knowing when it’s time to stop taking risks that might harm them. Knowing when you have enough.
19. You don’t need tremendous force to create tremendous results.
20. If something compounds — if a little growth serves as the fuel for future growth — a small starting base can lead to results so extraordinary they seem to defy logic.
21. Buffett’s fortune isn’t due to just being a good investor, but being a good investor since he was literally a child.
22. The point is that what seems like small changes in growth assumptions can lead to ridiculous, impractical numbers.
23. It’s about earning pretty good returns that you can stick with and which can be repeated for the longest period of time. That’s when compounding runs wild.
24. There are a million ways to get wealthy and plenty of books on how to do so. But there’s only one way to stay wealthy: some combination of frugality and paranoia.
25. Getting money is one thing. Keeping it is another.
26. Keeping money requires the opposite of taking a risk. It requires humility, and fear that what you’ve made can be taken away from you just as fast
27. Planning is important, but the most important part of every plan is to plan on the plan not going according to plan.
28. When we pay special attention to a role model’s successes we overlook that their gains came from a small percentage of their actions.
29. “It’s not whether you’re right or wrong that’s important,” George Soros once said, “but how much money you make when you’re right and how much you lose when you’re wrong.”
30. The highest form of wealth is the ability to wake up every morning and say, “I can do whatever I want today.”
31. The ability to do what you want, when you want, with who you want, for as long as you want, is priceless. It is the highest dividend money pays.
32. Doing something you love on a schedule you can’t control can feel the same as doing something you hate.
33. People like to feel like they’re in control — in the driver’s seat. When we try to get them to do something, they feel disempowered.
34. Take it from those who have lived through everything: Controlling your time is the highest dividend money pays.
35. When you see someone driving a nice car, you rarely think, “Wow, the guy driving that car is cool.” Instead, you think, “Wow, if I had that car people would think I’m cool.”
36. You might think you want an expensive car, a fancy watch, and a huge house. But I’m telling you, you don’t. What you want is respect and admiration from other people, and you think having expensive stuff will bring it.
37. If respect and admiration are your goals, be careful how you seek them. Humility, kindness, and empathy will bring you more respect than horsepower ever will.
38. Wealth is what you don’t see.
39. We can’t see people’s bank accounts or brokerage statements. So we rely on outward appearances to gauge financial success.
40. It’s not hard to spot rich people. They often go out of their way to make themselves known.
41. Like everything else worthwhile, successful investing demands a price. But its currency is not dollars and cents. It’s volatility, fear, doubt, uncertainty, and regret — all of which are easy to overlook until you’re dealing with them in real-time
42. The question is: Why do so many people who are willing to pay the price of cars, houses, food, and vacations try so hard to avoid paying the price of good investment returns?
43. I have observed that not the man who hopes when others despair, but the man who despairs when others hope, is admired by a large class of persons as a sage
44. There is an iron law in economics: extremely good and extremely bad circumstances rarely stay that way for long because supply and demand adapt in hard-to-predict ways
45. We need to believe we live in a predictable, controllable world, so we turn to authoritative-sounding people who promise to satisfy that need.
46. The more you want something to be true, the more likely you are to believe a story that overestimates the odds of it being true.
47. It can’t be overstated: there is no greater force in finance than room for error, and the higher the stakes, the wider it should be.
48. I don’t know what I don’t know. So I am just as susceptible to explaining the world through the limited set of mental models I have at my disposal.
49. Hindsight, the ability to explain the past, gives us the illusion that the world is understandable. It gives us the illusion that the world makes sense, even when it doesn’t make sense
50. Risk is what’s left over when you think you’ve thought of everything.

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