Book Review — The Psychology of Money

Cross-posted from Goodreads

The book presents a collection of simple and neat ideas around how to think about managing your money. Notice my emphasis on “how to think about managing” rather than “how to manage.” I guess the title itself makes it abundantly clear that rather than discussing “proven” formulae for increasing your wealth it will talk about the psychological or emotional part of wealth management.

It’s much like how the book Never Split the Difference: Negotiating As If Your Life Depended On It discusses the various tactics of negotiating in the light of human behavior and emotions. So, rather than giving you step-by-step techniques to increase money, it tries to convince you to change your mindset and lifestyle in order to be wealthy. The author nicely backs his arguments up with some good real-world stories and examples. I found it thought-provoking enough to take away a lot of ideas for my own good, and note them down in my personal diary.

If I were to reduce the book to one or two lines, it would be this — the only way to get rich is to save more, be consistent and patient with your investments, believe in the power of compounding, and the ideal financial goal is to be able to do whatever the fish you want to do in life.

The postscript chapter on how the American economy became the biggest in the world through self-sustenance and internal growth is an interesting read. Not to be skipped!