YOUTUBE 📚 CREATOR LAUNCH ACADEMY 📚 PATREON

*Everyday individuals trying to build wealth, and people who want to bypass the various (avoidable) traps and pitfalls that derail the financial progress of many others trying to do the same thing.

*Young professionals and first-time investors who want to learn the keys to lasting financial prosperity, including the value of time and compounding, emotional regulation, and world-class patience.

*High-earners who still struggle financially due to lack of knowledge or self-discipline, and who want to master the practical and psychological sides of money, so that any mistakes they may have made in the past don’t have to define their future.

Doing well with money has a little to do with how smart you are, but a lot to do with how you behave. Exploring exactly how this plays out in real life is Morgan Housel's focus here, and in this book, he covers 20 of the most important logical flaws, biases, and causes of bad behavior that make the world of money such a circus.

One of his greatest observations is that knowing what to do tells you nothing about what happens in your head when you actually try to do it, and he also explains why people make decisions with money that may seem crazy to us, but actually make perfect sense to them.

No one is crazy, says Housel, it's just that we've each learned different lessons about money depending on our worldview, how we were brought up, and the individual experiences we've had, alongside other factors.

What's more, teaching behavior is hard to do, no matter one’s intelligence level. You can think of finance and investing and everything technical that comes with it as hard skills, or skills that can be acquired through education, practice, and repetition, and the psychology of money as a soft skill; “soft” being character traits and interpersonal skills that characterize a person's relationships with other people.

Morgan Housel is a partner at The Collaborative Fund and a former columnist at The Motley Fool and The Wall Street Journal, but The Psychology of Money came out of nowhere to sell more than eight million copies since 2020, and the original article from which the book originated has also been read more than a million times.

Clearly, the themes in this book speak to something vitally important in human life, and Housel’s simple, accessible breakdown of the ways in which we all think about and handle money resonated with massive numbers of people all over the world.

In this book breakdown, we're going to be looking at why gaining control over your time is one of the highest dividends money can pay, and the parts that luck and risk play in the formation of our strategies for life. We're going to investigate the impact of desire on our financial planning, and why you should aim to be "mostly reasonable," as opposed to being coldly rational when it comes to making financial decisions.

We're also going to be working on making you "antifragile" by making sure you eliminate any “single points of failure” that currently exist in your life, and I'm going to be introducing you to one of the most effective investment strategies ever devised, otherwise called: "Shut Up and Wait."

Perhaps most importantly, we're going to try to understand the financial perspectives of others, and what their previous life experiences and current circumstances may have taught them about how money works.

Having been born in the 1990s, inflation means nothing to me (or at least it didn’t really affect my psychological development, from childhood to today), but to someone born in the 1960s, it may still be a clear and present danger that they're all too familiar with.

Forty percent of Americans also say that they couldn't come up with $400 in an emergency. Yet, on average, the lowest-income households in America spend $412 a year on lottery tickets(!), four times the amount of those in the highest income groups.

Put the two together, and it's the same people spending $412 on lottery tickets that couldn't come up with $400 in an emergency - which probably seems crazy to you and I.

But you probably aren't in that income group. So it may take some work to understand why those people think that buying lottery tickets is a good idea. And it’s not necessarily because they’re dumb. As Housel says, we can imagine the internal dialogue of at least some of those people going like this:

I promise that the book, and this breakdown, are much more upbeat than the previous paragraph, but that's the kind of psychological insight that The Psychology of Money can provide you with, not to mention the specific strategies and recommendations that are likely to help you feel much better about money, amass much more of it, and invest it much more intelligently.

While you're reading it, you're also likely to experience waves of sanity and clarity just washing right over you. I'm mixing my metaphors here, but go ahead and grab your paddle and let's head for the circus!

#1: Behavior is More Important Than Intelligence

Behavior and intelligence are two absolutely different things. Someone who's incredibly bright, yet has zero patience and is prone to emotional waves and crashes is going to do a lot worse in the stock market - and with money in general - than someone who is perhaps less bright, but who does certain things well.

Geniuses go broke every day, and being intelligent is no defense against bad luck and risk. In many ways, we create our own luck - and stack our own probabilities - by the actions we take.

Where the stock market is concerned, sometimes the best thing you can do is nothing. Just wait. It'll go back up. As of this writing, there has never been a 20-year period in history where the market has lost money, so if you just keep dollar-cost averaging over time, then, historically, you have a 100% chance of making money.

It's the geniuses who freak out when their portfolios drop 25% and sell everything who end up losing money when the market recovers naturally.

#2: Doing What You Know is Much Harder Than Knowing What to Do

The above (Key Idea #1) contains some excellent financial advice - just shut up and wait - but how hard is this in reality? Really. Really. Hard! Even if you know that the stock market has always recovered in the past and will most likely recover this time as well, it can be exceptionally difficult to see the money that's earmarked for your children's education and your own retirement evaporate within the span of a few months.

It's the psychological toll of knowing that what you do in this moment will affect your own well-being and the future well-being of everyone that you care about that makes it so hard to look your family in the eye when your market positions are tanking and everything seems so uncertain.

That's what I loved so much about this book - it directly addresses those things that happen inside your own mind when you try to do what's right for the people you care about. And it also gives you backup, motivation, and most importantly, data to help you weather these internal storms and chart your own course - regardless of what's happening on the battlefield of your own mind.

#3: People Learn Very Different Lessons

A recurring theme in The Psychology of Money is a recognition of the basic fact that people will take financial actions that make sense to them, knowing what they know, in their particular circumstances, even though those actions might look crazy to others.

Mere decades make a difference here. Someone whose first memories were formed during a period of high uncertainty, high inflation, and crashing stock prices are likely going to come away with an entirely different belief system around how money works, compared to someone whose upbringing occurred during the boom years. They will probably have completely different views regarding money.

Both people could be equally smart, well-meaning, and everything else, but they will just think differently about money based on their own particular life experiences and based on how the people who influenced them felt about money.

Not only is this important for our own peace of mind, in that we don't have to jump around from podcast to podcast, racing to copy every other billionaire's investment strategy; it also means that we can give each other a break, and perhaps indulge in some empathy regarding how others deal with money.

#4: 100% ≠ 100%

Sometimes luck just isn't on your side. Other times, you could do everything completely wrong - I mean seriously, what were you even thinking!? - and things will turn out perfectly fine. This is because luck exists (or maybe better yet, probability exists), and the only thing that you can plan for is for your plan not to go according to plan.

The interplay between risk and luck is too opaque, too mysterious ever to be planned out in advance. A case in point brought up by Housel is the story of Kent Evans, a childhood friend of Bill Gates whom everyone thought was going to ride right alongside Gates, straight to the top.

Million-to-one odds placed Bill Gates in the exact perfect position to deepen his coding expertise before anyone else when his school in Seattle provided him with one of the very first computers. Just like the million-to-one odds that resulted in Evans being killed in a mountaineering accident at just 17 years old.

If there's a lesson in all this, it's that attachment to plans or outcomes can lead to pain and dashed expectations - not that you shouldn't try. Make plans, set goals, work towards the outcomes you're trying to bring to life, but always with a clear-eyed view of the role of luck in human affairs, and the ultimate fragility of those same humans.

#5: Certainty Doesn’t Exist (And Never Will)

Carrying forward the last point, it's also important to realize that certainty doesn't exist - will never exist - in a constantly changing universe, and we can never afford to wait for conditions to be perfect before we act.

We will always have blind spots, the rules of the game always seem to be in flux, but all meaning and radical achievement lies on the opposite side of risk and uncertainty. If you are sure to succeed, it probably isn't worth doing.

#6: Focus on Patterns, Not Anecdotes

Oh man, this is an important one too. Especially with the rise of "Top 5 Things All Billionaires Do Before Breakfast" videos on YouTube and similar examples of survivorship bias. 

Seriously, if we someday found out that Elon Musk eats fried muktuk stuffed with tire rubber for breakfast every day, you can bet that sales of old tires and whatever muktuk is will go through the roof, with everyone clamoring to digest this one "secret thing" that's the key to all of Elon's success.

Plenty of billionaires are good people who've built sustainable businesses on solid fundamentals and have added a lot of good to the world, but others have had to check their conscience at the door in order to make their fortunes!

Housel gives several examples of business magnates from other eras who have trodden all over the laws that apply to everyone else, and who now have their names on the sides of buildings! Depending on your point of view, they were either "resisting outdated laws," or were blatant criminals who just didn't get caught.

Following their example would be ridiculous! Much better to look at broad patterns, and the themes that keep recurring in the lives of people who have achieved outsized success.

Reading is one of them. Absolutely, reading is one of them. Show me a side-by-side of successful people who read versus successful people who don't - it's not even close. So yeah, reading is something that you're going to want to do.

Many successful people also have some form of mindfulness practice that keeps them grounded, focused, and energized. Almost all of them will get lots of sleep and not put toxic shit in their bodies. These are patterns, themes, common threads that tie all these success stories together, and if you adopt many of these practices yourself, you're going to be favored by the gods of probability.

#7: The Hardest Financial Skill

It's the nature of desire to keep slipping away from us. Once we get what we used to want, we often find that there's something else that we want next, just waiting for us over the next ridge.

In a previous book breakdown, I introduced you to what Naval Ravikant, the legendary investor, had to say about desire. He tries to limit the number of desires that he has operating in his life at any one time, and he recognizes his main desire - whatever it is - to be the "axis of my suffering." Whenever you desire something, it's like agreeing to be unhappy until you get what you want. And I mean, we go around desiring things all day, and then we wonder why we're unhappy!

Morgan Housel is right on with his assessment as well: one of the hardest things you'll ever do is to decide when enough is enough. And you really have to do this if you want to be sane. In a world that's always telling you that you aren't quite enough as long as you don't possess this thing, you have to be intentional about planting those goalposts firmly in the ground and not backing down an inch.

#8: The Key to Warren Buffett’s Success

#9: Become Antifragile

Another wise investor, Nassim Taleb (man, who ever knew these guys were so smart!?), has a series of books that I've recommended below, one of which directly concerns the point that Housel is making here. In Antifragile, Taleb goes into detail about how to protect yourself from random, cataclysmic events - what he calls Black Swans.

In his view, you can either be "fragile," "robust," or "antifragile." Fragility is when you are harmed by these random events; robustness comes about when you're just about in the middle of the road and these Black Swans are no big deal, and antifragile is when you gain from disorder. An example will make this clearer.

Say that there are three scandals, each affecting a politician, a construction worker, and a writer. The politician, whose career could be utterly ruined by such a scandal is therefore fragile because the Black Swan event - the scandal - threatens to wipe him out. The construction worker is relatively robust because odds are, he can just find another construction job in another town maybe, where no one knows about the scandal that affects him.

The writer, however, is antifragile because even a storm of negative publicity means that a ton of people are talking about her book, which is going to keep her book in the news, which is going to lead more people to check it out, if not just to see if it's really as incendiary as people say. So she gains from something - disorder, a negative event, a Black Swan - that wipes out the politician. Your muscles are also antifragile because you can break them down in the gym by lifting heavy weights and they will grow back bigger and stronger. That's antifragility!

As much as possible, you want to be antifragile. Or at least robust. In general, you want to avoid having "single points of failure" in your life, where just one mistake, one angry boss, one Black Swan can completely wipe you out. In stock market terms, you want to be diversified across different asset classes, such as stocks, bonds, real estate, etc.

This isn't necessarily financial advice, but there's a lot of money to be made during recessions and downturns when stocks all go "on sale" and you can buy them at rock-bottom prices before the market recovers. That's how fortunes are made in the stock market. If you have cash available, you can take advantage of this. But if you have everything invested in tech stocks and they plunge by 50%, you're much more fragile to Black Swan events and you won't have the cash to buy cheap stocks that will later go up in value.

There's a lot more I could add here, but in the interest of space, I'll move on. I'll close by saying though, that the less you need this particular plan to work out in every single way, the less fragile you are. Flexibility, options, and contingency plans will always serve you well.

#10: The Best Thing Money Can Buy

Elsewhere in the book, Morgan Housel says, "The highest form of wealth is the ability to wake up every morning and say, 'I can do whatever I want today.'" I'm inclined to agree!

Speaking from experience here, it's awesome to have autonomy and relative control over how your day unfolds, and I believe that it's a goal worth shooting for, no matter who you are. It's also attainable.

I still do things I don't want to do (nobody wants to do heavy barbell squats), but I generally start my day at around noon, when I wake up (with no alarm), make my way downstairs to brew some coffee, after which I spend a few hours reading before getting down to work - and writing these book breakdowns for you!

It's magical, there's really no other word for it, and I wouldn't be sitting here telling you about it if I didn't think that you could achieve more control over your calendar as well. It really is money's greatest intrinsic value.

Now, I'm absolutely not ignoring the realities of economic life for many people - the dependents, the responsibilities, the student loans, and everything else that makes life so tough for so many different people. I'm just saying that gaining control over your time is one of the single greatest things you could do for yourself, and it's so completely worth shooting for.

Remember, I worked for years as an overnight security guard at a hospital; I've mopped floors at restaurants; I remember earning pennies for articles that I spent hours meticulously crafting.

But having made it to the other side, I can say, unequivocally, that being in control of your own life - and time is what your life is made of - is just incredible. You may be close, or you may have a little ways to go yet, but it's one financial goal that's totally worth shooting for.

#11: The Fastest Way to Have Less Money

This one Key Idea has been pretty much tattooed on my brain ever since I first read The Psychology of Money, and it's informed so much of my financial thinking forever after. If you keep just this one short sentence at the top of your mind, you're going to make much better financial decisions than 99% of the population.

Not only will spending money recklessly on luxury items drain your bank account and scuttle your future prospects like nothing else, but it's also just completely counterproductive, as Morgan Housel explains.

He calls it the Man in the Car Paradox, and the gist of it is that we hardly ever actually look at the people driving really nice cars and think that they’re really cool people. We only see the car and think how cool other people would think we are for owning it.

Even if you do end up buying some insanely expensive car, hardly anyone is going to care about you specifically; they're going to be thinking about themselves, and how much other people would "respect" them for having one just like it! You can see how crazy this is. I know Morgan Housel says that "no one is crazy," but this is pretty damn close.

Not only that, but owning expensive things doesn't really tell you anything about the true financial status of the person displaying those things. It's not like they have a digital readout of their bank balance next to their license plate. All you really know about someone who drives a $100,000 car is that they have $100,000 less than they used to...or $100,000 more in debt.

The bottom line is that the people who will admire you for the stuff you own are not the kinds of people you want to admire you, and you can save yourself a ton of hassle, stress, not to mention money, by just avoiding that whole circus.

#12: The Opposite of Being a Millionaire

#13: Wealth is What You Don’t See

"Rich" is what you can see, but "wealth" is what you don't see. It's very easy to spot rich people, but exceptionally difficult to spot wealthy people.

That also goes a long way towards explaining why it's so hard for many people to build real, lasting wealth, because it's incredibly difficult to learn from what you can't see, and what you don't see modeled by others.

Many of the loudest voices on social media are displaying atrocious spending habits that would end disastrously for anyone who found themselves copying those habits.

Contrast those behaviors with the quiet guy next door with the 10-year old car and the sensibly-sized house who's been diligently saving and investing, has everything he wants (because he's pruned his desires), and still has millions in the bank that he's not flashing screenshots of to anyone who will look and "like." You should talk to him about index funds rather than looking online to find out who will lend you the most money for a car.

It's relatively easy to look rich, but Housel would advise seeking out wealthy role models instead and learning from them. They're likely to say things like "If you have to do mental gymnastics to figure out whether you can afford something, you can't afford it," and other sage advice.

#14: One Financial Factor You Have Direct Control Over

This one's controversial, because while it's true that you can build wealth without a high income, it will also take an extra-long time to materialize, at the end of which you may have much more money, but you'll also be quite a bit older, and perhaps even unable to fully enjoy the wealth that you've built up.

That being said, having a high savings rate - saving more of your income - is one of the only things you can directly control. You're not going to be able to control the economy, the job market, the stock market, etc., but you can absolutely decide to spend less and save more, cutting expenses where you can and really taking control of your saving. This is within your locus of control, and it's one of your greatest areas of leverage.

It's not all about how much money you make, either - although that's definitely one key variable in your wealth equation. Rather, it's about how much you keep, and those are two completely different things.

#15: Own Your Future

When you own your time, you own everything. Yet how many people do you see who are more worried about squandering their money than they are about squandering their life?

No price is too high for the privilege of owning yourself, and the sooner you can develop more autonomy and control over how your day unfolds, the happier you're going to be. That means buying your time back, for example by hiring people to do the most time-consuming tasks that you'd rather not do yourself, or by stepping fully outside the rat race itself.

In the latter case, Housel is making the point that if you've saved enough money, you can essentially buy back all of your time, and not have to spend any of it doing work you don't enjoy or spending it with people you don't like.

This is a powerful place to be, but many people see it as out of reach. I think the important thing here is to keep the ultimate goal in mind, and just keep making meaningful progress over time.

Every rep counts - every dollar saved can be put towards buying your ultimate freedom - and instead of letting this massive goal demotivate you, think about how great it feels to have this goal in the first place and to be on your way to achieving it.

#16: Your Biggest Competitive Advantages

#17: Aim to Be “Mostly Reasonable”

The "mostly-perfect" system that you actually use is going to be much more effective than the absolutely perfect system that you never use. Rational money skills work the same way. Sometimes it makes sense to do things that don't necessarily make rational sense. Let me show you what I mean with a personal example.

In my own life, I set aside $1,000 a year for parking tickets, random fines, late fees, lost money...whatever. If I was being coldly rational, I would just do everything in my power never to get a parking ticket, always return everything on time, and make sure that every dollar that left my bank account was perfectly accounted for, but this is unrealistic! Life happens, and sometimes you'll get hit with unexpected expenses or costs that you didn't see coming.

If I didn't have that fund set aside, I might get angry - at myself, or, more likely, at some poor customer service rep - and just let that whole incident ruin part of my day. But because I have that $1,000 set aside, I can just absorb the hit, resolve to do better next time, and move on with my life! It's the same money either way, but because it's in a different "category" in my mind, I've essentially written it off as "sanity money."

Maybe you have friends that are always pushing you to invest in safer index funds rather than "gambling" on crypto altcoins, but if you're young enough that you'll have time to recover from a financial loss (and you're not investing with money you can't afford to lose), then maybe you just want to have fun guessing which altcoins are going to 10x this year. It may not be completely "rational," but as long as you've got a backup plan you're going to be fine.

#18: Stay in the Game

Really quickly, this means that there has never yet been a 20-year period where the stock market has lost money. If you're invested primarily in index funds, which track the performance of the market as a whole, the above means that you're almost guaranteed to make money if you just wait long enough.

#19: History is Not a Map of the Future

I'm going to openly contradict Key Idea #18 by saying that nothing whatsoever is guaranteed. Historically, it's always been the case that the stock market has recovered and come back stronger after recessions and downturns, but history is not a map of the future!

Most stock market analysts couldn't predict 6 o'clock at 5:30, and there's a reason why they all have that disclaimer about "past performance not being a guarantee of future results." The future is opaque, wide open to transformation and disruption, and that's just a feature of our universe that we all have to live with.

#20: The 0.000000000004%

#21: Never Underestimate the Power of Compounding

#22: Play the Right Game

#23: The Bright, Extremely Wealthy Future of Humanity

One of today's greatest chroniclers of human progress is Harvard professor Steven Pinker who, in his book Enlightenment Now, showed the world just how proud we should be of all our current progress, regardless of the fact that we still have so much work left to do.

In the book, he cites the fact that:

Seriously, just take a moment to reflect on how absolutely amazing that is. We are lifting people out of poverty at an astounding rate, and life expectancy across the world has shot up to the highest it's ever been in the history of humanity.

Further progress isn't guaranteed, of course, and we have to work together every single day just to make sure that we don't backslide into our former ways, but I mean, ask yourself: "In what time period would you rather be alive than today?"

If you only watch the news and listen to the Negative Nancies of the world with their endless bitching and complaining, you'll miss the blazing spectacle of human progress and flourishing that's unfolding before our very eyes.

Sure, the world still faces massive, extremely challenging problems, but when hasn't it? And who's more capable than us of solving them?

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