The Psychology of Money: A SheMoney Book Review

Happy New Year! I want to take this moment to thank you for subscribing to SheMoney, and I am sending you all of my best wishes for health and happiness in the coming year. In that vein, here is what I know for sure: money plays a big role in our overall health and happiness. How much money you have certainly is a factor, but just as important is your ability to earn, manage, have agency over, and engage with your financial resources. Financial wellness plays a much bigger role in our health and wellbeing than many of us realize, and that is why right now, this minute, today, this year, I invite you to set an intention about you and your money. To help you with this, I’m offering one up as an example:

This year, I am committed to taking action to advance my financial wellness. I am committed to evaluating my thinking when it comes to money, making more informed decisions around money, and working towards building a resilient financial foundation for a secure and fulfilling future.

Please feel free to print out this intention or create one of your own. And if you want to take this process a step further here are free, downloadable, worksheets with space to create more specific intentions within the 7 Money Move Framework: Earning, Saving, Investing, Spending, Borrowing, Giving, and Protecting. (Note: there are two, one around wellness and one for the money moves, so scroll down for both when you use the link) Examples of more specific intentions might include negotiating a $5,000 raise (earn), automating savings or setting up an investment account. If intention setting is a new practice for you, and especially if you are skeptical and think manifesting is a pile of bologna, I invite you to dig into the wealth of research in the area of positive psychology, goal setting and behavioral science. My motto is simple when it comes to setting clear intentions: it certainly can’t hurt, and it might just help, so why not? When I reflect on my life, what I know for sure is that having a clear vision for what I wanted and where I wanted to go really helped me get there.? What also helped was privilege and opportunity.

While everyone’s history, current financial situation, and future goals are personal, there are some things we can ALL do when it comes to money to advance our financial wellness. Here is my top piece of advice:

GET CURIOUS!

It’s that simple. Get curious about money. Personally, money curiosity is the main reason why I studied finance in college, it’s why I (mostly) loved my career as a bond trader and finance professional, and it’s why I write this newsletter. More generally, curiosity is the fundamental trait that has enriched my personal development and professional success.

When you really think about it, money is an absolute constant in all our lives, and its role in creating the world we live in is vast, complex, and important. You don’t need an invitation to learn more about money, you just need to do it. And here’s a simple how. Read books about money. Want to take it a step further? Start a book group that reads and discusses books about money. That is what we are doing here at SheMoney. We are going to suggest a book each quarter, create discussion points, host a conversation about it, and invite you to create your own smaller groups to continue the discussion.

To kick off this new SheMoney initiative, I went to my stack of money-related books and stared at the titles. The one that jumped out at me to pick for our first book club read?? The Psychology of Money - Timeless Lessons on Wealth, Greed, and Happiness by Morgan Housel. I chose this book because there is something in it for everyone no matter where you are on your financial journey.

About the author: Morgan Housel is a partner at The Collaborative Fund and a former columnist at The Motley Fool and The Wall Street Journal. He is a two-time winner of the Best in Business Award from the Society of American Business Editors and Writers, winner of the New York Times Sidney Award, and a two-time finalist for the Gerald Loeb Award for Distinguished Business and Financial Journalism. You will find many podcasts where Morgan is a guest, and he started his own financial podcast in 2023.?

Published September 8th, 2020 by Harriman House, with over 4 million copies sold to date.

My brief summary of the book:

I love the premise of this book, which Housel describes on page 2: “Doing well with money has little to do with how smart you are and a lot to do with how you behave. And behavior is hard to teach, even to really smart people.” Amen to that. Housel makes the case that financial success is not a hard science, but rather it’s a soft skill, which he calls the psychology of money. The book is a deeper dive into a report he wrote outlining 20 of the most important flaws, biases, and causes of bad behavior that he has seen affect people when dealing with money. (read it, so good!) Well organized and engaging, this 240 page book is a quick read, with many engaging stories to bring his observations, insights, and recommendations to light. He debunks a lot of money myths, especially as it relates to investing, and he suggests that keeping it simple is likely the best strategy for most people.? Review from BookShop.

Why I loved this book:

This book explains, and normalizes, why the topic of money, specifically managing our money, is so challenging and so personal. Our views around money are so informed by our own unique history and experiences, as well as the times in which we live. The author gives so many examples to bring this to life, and in so doing, he invites us to check-in with our own story, beliefs, and behaviors without shame and blame. He encourages us to step out of the place of judgment around both our own financial choices and circumstances, as well as those of others, into a place of curiosity and understanding. And while this is not a personal finance book aimed at answering very specific financial questions, I think you will be more likely to pursue those answers if you are motivated to do so. That motivation is deeply connected to unpacking the role you want money to serve in your life, as well as demystifying the journey to achieve financial freedom.??

"Investing is not the study of finance. It’s the study of how people behave with money." Morgan Housel

Housel believes, as do I, that we make financial decision making, and especially investing, more complicated than it needs to be. Simply put, money is a tool and a resource that we all need to live our lives, and there are a few core principles that will help with this. The biggest one? Save. Save and start investing those savings as soon as you possibly can. Another big one? Don’t spend money you do not have on things you do not need.? See the section below for my favorite quotes, and I love this one, “control over doing what you want, when you want to, with the people you want to, is the broadest lifestyle variable that makes people happy. Money’s greatest intrinsic value-and this can’t be overstated-is the ability to give you control over your time.” I believe that money is the means and not the ends. This book is all about embracing that idea.?

There is so much discussion in the book about the things we can control and the things we cannot when it comes to money. I really appreciated the discussion on the role that luck and risk play in financial outcomes, as compared to effort, education, and thoughtful decision making. We live in a culture where we give so much weight to successful outcomes, when more often than not, luck and good timing are the main?reasons for it. This book serves as a measure against unrealistic expectations when it comes to opportunities for wealth creation, and instead offers practical strategies to achieve it. He invites us to ask ourselves the question: how much is enough? More importantly, he invites us to push back against a culture that says more is better.?

While I love the whole book, pages 207 to 210 is my favorite part. This is where Housel provides a short list of recommendations that can help you "make better decisions with your money". These recommendations are awesome, and they are full of common sense wisdom that will help you be kinder to yourself when it comes to money. Hopefully, they will inspire you to do the next right thing when it comes to money, which is as simple as saving more, spending less, and start investing in a low-cost, market based index fund as soon as possible, and don’t stop. In other words, do dollar cost averaging. And if you don’t know what that is, don’t worry. Housel explains it all in a way that is easy to understand.

If I had to summarize why I picked this book, it would be because it is not what so many financial books are, which is a long list of dry definitions and to dos, all of which leave you overwhelmed and confused on where to start. Instead, this book is a study in human nature when it comes to money that is both engaging and motivating. It invites us to think about our thinking when it comes to money, and proposes the idea that if we feel less overwhelmed and more confident, we will be more likely to do the next right thing when it comes to caring for our financial wellbeing. I couldn’t agree more. The path to financial freedom can be a long one, so start now and stick with it.?

Final Note..

While I really loved this book overall (which is why I picked it for this newsletter), I was hard pressed to find stories, quotes, and examples within it that were not by and/or about white men, and given that SheMoney is a financial newsletter with a gender lens, I have to call this out. Also, there was also little or no mention of financial trauma, which deeply impacts our beliefs and behaviors around money, so I highly recommend you go back and read our interview with Chantel Chapman to learn more about this topic. Once again, get curious! If you find that you have an aversion to money, or that you shut down around financial topics that are preventing you from getting curious, you might have some financial trauma to explore as avoidance is indeed a trauma-response.?Finally, for so many people, the core issue when it comes to money is just not having enough of it to cover life’s basics. In the chapter where Housel encourages us all to save, he says that “past a certain level of income people fall into three groups: Those who save, those who don’t think they can save, and those who don’t think they need to save.”? What about a different category? The ones that are not past "that certain level of income". These are gentle critiques in what is, overall, a great book!

For the upcoming book group discussion I will bring a gender-lens, a SheMoney lens, a Jacki Zehner lens, to the key take-aways of the book and I believe I have some pretty unique insights.

Quotes: "I love the saying that people don’t remember books; they remember sentences.: - Morgan Housel (So true Morgan!)

When I read a book I underline, write comments in the margins, and pull my favorite quotes as I make my way through it. With this book, my list of quotes was very long and I am including only my top 10.?

1) “Two topics impact everyone, whether you are interested in it or not: health and money.” Page 5

2) “Money is everywhere, it affects all of us, and confuses most of us.” Page 6

3) “Few people make financial decisions purely with a spreadsheet. They make them at the dinner table, or in a company meeting. Places where personal history, your own unique view of the world, ego, pride, marketing and odd incentives are scrambled together into a narrative that works for you.” Page 19 ( I would add.. or doesn’t work for you)?

4) “If you give luck and risk their proper respect, you realize that when judging people’s financial success - both your own and others - it’s never as good or as bad as it seems” - Page 28

5) “There is no reason to risk what you have and need for what you don’t have and don’t need.” Page 41

6) “The hardest financial skill is getting the goalpost to stop moving.” Page 41

7) “Life isn’t any fun without a sense of enough. Happiness, as it’s said, is just results minus expectations.” Page 41

8) “The ability to do what you want, when you want, with who you want, for as long as you want, is priceless. It is the highest dividend money pays.” Page 83

9) “Wealth is just the accumulated leftovers after you spend what you take in. And since you can build wealth without high income, but have no chance of building wealth without a high savings fare, its clear which one matters more.” Page 105

10) “Saving is a hedge against life’s inevitable ability to surprise the hell out of you at the worst possible moment” Page 107

Book Group Questions:

Want to have a book group around “The Psychology of Money”? Here are some suggestions to get you started.

1. What is your earliest memory as it relates to money?
2. What did you learn about money from your parents or primary caregiver?
3. What did you learn about saving and investing??
4. How do you feel about your current financial situation?
5. What role do you think luck and risk played in your current financial situation?
6. What does having ‘enough’ look like for you?
7. How do you feel about investing? Do you do it? Where did you learn about it??
8. What is your biggest fear when it comes to money?
9. What support do you think you need when it comes to more thoughtfully managing your financial resources??
10. What are your biggest takeaways from the book??

Join us for a a SheMoney Book Club conversation about The Psychology of Money next month! Click the invite below to register.

I welcome your comments about Morgan Housel's The Psychology of Money and this review. What are your favorite quote sor takeaways from the book?

Once again. Happy New Year.