Money Mindset Training – The Psychology Of Money Is A Must-Read

I read a lot of personal finance, but somehow missed Morgan Housel’s The Psychology of Money when it debuted in 2020. I learned of Housel when a blog of his was spotlighted by Todd Tressider at Financial Mentor, one of my favorite personal finance resources:

Is the goal financial, or is it just to become independent? Do you want more money, or do you want to no longer need to think in terms of money?

Todd Tressider

Tressider then linked to a Housel post on The Highest Forms of Wealth, a short but powerful piece that made me want to read more of his work, hence my discovery of The Psychology of Money. I highlighted so much from the book that I ended up with dozens of quotes. I even asked Scott to read it!

Morgan Housel is currently a partner at Collaborative Fund but spent years as a journalist with The Motley Fool and The Wall Street Journal. That hard-won journalism training shows in the well-structured but breezy, accessible style of the book. The Psychology of Money is not a how-to guide on money management. Rather, it’s a collection of stories about money – 20 in all — that highlight how mindset and behavior trump specific finance knowledge.

Here are three of my favorite takeaways from the book:

1 – Respect the downside of risk

The line between bold and reckless can be thin.
– Morgan Housel in The Psychology of Money

Planning is important, but the most important part of every plan is to plan on the plan not going according to plan.
– Morgan Housel in The Psychology of Money

Room for error – often called margin of safety – is one of the most underappreciated forces in finance
– Morgan Housel in The Psychology of Money

2 – Knowing when you have enough is tough, but worthwhile

The hardest financial skill is getting the goalpost to stop moving.
– Morgan Housel in The Psychology of Money

“Enough” is not too little….”Enough” is realizing that the opposite – an insatiable appetite for more – will push you to the point of regret.
– Morgan Housel in The Psychology of Money

One of the most powerful ways to increase your savings isn’t to raise your income. It’s to raise your humility.
– Morgan Housel in The Psychology of Money

3 – The value of money is in the options it gives you

Controlling your time is the highest dividend money pays.
– Morgan Housel in The Psychology of Money

Wealth is an option not yet taken to buy something later. Its value lies in offering you options, flexibility, and growth to one day purchase more stuff than you could right now.
– Morgan Housel in The Psychology of Money

The ability to do what you want, when you want, for as long as you want, has an infinite ROI.
– Morgan Housel in The Psychology of Money

Other finance books on my forever shelf

Before we opened a Roth IRA for each of our kids, I asked them to read The Courage To Be Rich by Suze Orman. It’s my go-to recommendation for a solid personal finance primer, and Orman’s priorities (her famous tagline, “People first, then money, then things”) match our own. We also have two daughters, and I thought they would especially enjoy advice from a self-made woman. Another helpful point of relevance is that Orman majored in social work in college, which is what our oldest studied for both undergraduate and graduate school.

In lieu of Suze Orman, I almost mandated Ramit Sethi’s I Will Teach You To Be Rich. I’m a big fan of Sethi’s work, and if you haven’t yet seen his Netflix series, I highly recommend it. Ultimately, I chose Orman over Sethi for my kids because Sethi’s early writing voice was very tech bro-style, which I didn’t think my daughters would appreciate. If you can get past the voice, Sethi’s book is a good one on the basics for your reference shelf.

Other favorites:

1. Bill Perkin’s Die With Zero is the best antidote I have read for procrastination. If you tend to postpone big dreams and hoard your money instead, you won’t after reading this book.
2. Todd Tressider’s How Much Do I Need To Retire is my favorite on the subject of retirement. His explanation of sequence-of-returns risk is eye-opening.
3. My all-time favorite money-theme book is about real estate, but also thinking strategically and dreaming big:  The Millionaire Real Estate Investor by Gary Kell, Dave Jenks and Jay Papasan. Its main thesis is memorable and a clear beacon to follow: think a million; buy a million; own a million; earn a million. I regularly use it to coach myself: “How does [this action] get me closer to $1 MM/ year?”