Personal Learnings from "The Psychology of Money" by Morgan Housel

As a broke university business student in 2024, I spent my summer break diving into "The Psychology of Money" by Morgan Housel. Not for the first time, but for the second. Yes, I read it last summer too, and guess what? It enlightened me just as much the second time around. Here’s my personal learnings and review of the book for people my age who keep a keen interest in personal growth and financial wisdom.

1. Long-Term Thinking: Your Future Self Will Thank You

Okay, picture this: You’re planning to leave the country for better opportunities (we all know the struggle in Pakistan), but you also want to splurge on outings with uni friends and that fancy food at your favourite café. Housel says, "Hey, think about your future self!" Long-term thinking isn't just for old people planning retirement; it's for us too. If you invest time and money wisely now, you'll have way more freedom and options later. Personally, I also need to work on this and start applying this by setting small, achievable financial goals that align with my bigger life plans. Trust me, your future self will thank you for every bit saved and invested.

Key Quote: "Planning is important, but the most important part of every plan is to plan on the plan not going according to plan."

2. Risk and Uncertainty: Embrace the Chaos

Housel's take on risk and uncertainty is pure gold. Instead of fearing the unknown, we should understand and embrace it. Life is unpredictable, and that’s what makes it exciting. For instance, planning to save enough to move abroad involves a lot of uncertainty. It's like a wild ride, but every risk taken brings us closer to our dreams. You have to remind yourself that calculated risks can lead to amazing opportunities.

Key Quote: "The biggest risk is not taking any risk."

3. Behavioral Finance: Know Thyself

This was a game-changer. Housel talks about how our emotions and biases shape our financial decisions more than we realize. Recognizing this can help us make smarter choices. If you notice a pattern in you that is often swayed by fear of missing out (FOMO), leading to impulsive spending on outings and gadgets, you need to acknowledge it and start making more rational decisions, like prioritizing needs over wants.

Key Quote: "Financial success is not a hard science. It's a soft skill, where how you behave is more important than what you know."

4. Frugality and Humility: Less is More

Let’s face it, being a student means living on a budget. But Housel shows that frugality is actually a superpower. It’s all about spending less than you earn and valuing experiences over material things. I’ve started embracing a minimalist lifestyle, focusing on what truly matters. Trust me, the less you care about keeping up with the local Kardashians, the more you’ll save and the happier you’ll be.

Key Quote: "Spending money to show people how much money you have is the fastest way to have less money."

5. The Power of Compound Interest: Time is Your Best Friend

If there’s one thing you take away from this book, let it be the magic of compound interest. Starting early, even with small amounts, can lead to significant growth over time. It's about investing a tiny portion of your income and watching it grow, that is incredibly satisfying. It’s not about getting rich quickly, but about building wealth steadily.

Key Quote: "Compounding is the greatest mathematical discovery of all time."

Your Thoughts?

Reading "The Psychology of Money" has been a transformative experience, offering practical wisdom that goes beyond finance. So, fellow Gen Zers, what books have influenced your approach to money and personal growth? Have you stumbled upon any hidden gems that changed your perspective? I would really appreciate any good recommendations! Share your thoughts in the comments. Let’s start a conversation and learn from each other!