In the introduction to The Psychology of Money, Morgan Housel writes “It’s not a long book…most readers don’t finish the books they begin because most single topics don’t require 300 pages of explanation. I’d rather make 20 short points you finish than one long one you give up on”. I was already taken with the book on page two, but this statement solidified it.


The Psychology of Money is the best book on money I have read, and it has a lot do with the fact that Housel has kept it short and to the point. He includes no unnecessary detail or jargon that make finance books difficult to read. It’s interesting, useful, and universal. The advice and lessons gleaned in this book can be applied no matter where you live and have a timeless quality about them. That’s because they tap into our psychology when it comes to money not current market trends. 


Read it if you want to understand your relationship with money better, want to have a better relationship with money, build real wealth and buy the most valuable thing money can buy – freedom. 


As the name suggests, this book is about psychology – how people’s financial decisions are not made purely with a spreadsheet, but rather at dinner tables, through conversations – shaped by unique world views and emotions. This means that while there are universal truths about money, a lot of advice is going to depend on what you want and when you want it. It’s not a one size fits all. So instead of a how-to list, I’m sharing some of Morgan Housels recommendations to make better decisions with money – a list which if you find value in, you’ll find more in his book.


How to Make Better Decisions with your money


1. Less ego = more wealth

Saving money is the gap between your ego and income, and wealth is what you don’t see. Wealth is giving up what you can buy today in order to have more in the future. No matter how much you earn you will never build wealth unless you can put a lid on how much fun you can have with your money right now. 

2. Manage your money in a way that helps you sleep at night

When making any financial decision ask yourself “does this help me sleep at night?”. Everyone has different goals but if your decision helps you sleep better, it’s the best decision for you. 

3. To be a better investor increase your time horizon

Time is the most powerful force in investing. With time, little things grow big and big mistakes fade away. 

4. Become ok with things going wrong

It’s possible to be wrong half the time and still make a fortune. This is because a small number of things account for the majority of outcomes. Practically, this means you should measure the full results of your portfolio rather than individual investments. When you measure individual investments, it can make winners look more brilliant than they are, and the losers look more regrettable than they were. 

5. Use money to gain control over your time

The biggest dividend that exists in finance is the ability to do what you want, when you want, with who you want for as long as you want. Controlling your own time has the biggest impact on happiness so make decisions with that in mind. 

6. Be nicer, less flashy

No one is impressed with your possessions as much as you are. You gain more by being nice than having nice things. 

7. Save for savings sake

You don’t need a reason to save. Life is full of surprises and savings that aren’t earmarked for anything helps you deal with life’s inevitable surprises. 

8. Define the cost of success (to you) and then be ready to pay for it

Nothing worthwhile is free. Most financial costs – uncertainty, doubt, and regret – don’t have a visible price tag. View these as fees rather than as fines.

9. Avoid the extreme ends of financial decisions

Everyone’s goals and desires change over time and the more extreme your past decisions were the more likely you are to regret them as you evolve. 

10. Embrace a little risk

Risk pays off over time but that doesn’t mean all risk is good. Avoid risks that could ruin your reputation, relationships, or ability to take future risks that will pay over time. 

11. Define the game you’re playing

Make sure your actions are being influenced by your end game and not being influenced by people playing a different game.

12. Respect the mess

Smart, reasonable, and informed people can disagree in finance because everyone has different goals and desires. Remember there is no one right answer, just the answer that works for you. 

The Psychology of Money by Morgan Housel is published by Harriman House and distributed by Pan MacMillan. It is available here.

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