The Psychology of Money

I read The Psychology of Money by Morgan Housel on March 18, 2024

A lot of what Housel says is common investing advice, but I would argue he is a better explainer than most. If someone doesn’t know much about investing, this would be a great place to start.

The Psychology of Money’s insights are centered around two main themes: hubris and time.


Don’t think you can outperform the market; most people don’t and even if you do, who’s to say it wasn’t luck? We tend to credit ourselves in successes and blame factors outside of our control in failures.

People get overly obsessed with material wealth, often thinking others will think better of them. But when has anyone looked at someone driving a nice car and thought that the driver was cool? In the more likely scenario, others are more concerned with thinking how cool others would think of them if they were driving that car and aren’t thinking about the driver at all, making it all the more stupid to take out debt to create a facade of wealth; no one will really even care.

Even if we might feel confident in what we will be doing in the future, odds are we don’t. Give your future self flexibility. True wealth isn’t about having the most money; it’s the ability to have autonomy and control over your life and time. Money helps, but getting greedy may lead to your (or your bank account’s) destruction.


We cannot predict the future. People are terrible at predicting the market, so don’t think you can. The main thing we learn from history is not what might happen in the future, but that the world is full of surprises. Expect these surprises and save money for the sake of saving and make investments that let you sleep at night. Compounding interest and operating on the time-scale of decades, not days, pays dividends. Even if one can rationally figure out the best investing strategy (some have suggested that young people take out loans to increase retirement investment), you must ask yourself if a decision is reasonable, not just rational. If investing in something causes you to lose sleep, it’s not worth it. You are a human and have feelings; make the best investing decisions for you.