Book Review
Ray Hoger | Member , ARTA Pension & Financial Wellness Committee
The Psychology of Money : Timeless Lessons on Wealth , Greed , and Happiness
by Morgan Housel , Harriman House , 2020 .
“ The premise of this book is that doing well with money has a little to do with how smart you are and a lot to do with how you behave . And behaviour is hard to teach , even to really smart people .” Morgan Housel introduces his book with this quote and demonstrates it endlessly throughout its twenty chapters . Housel is a former financial columnist for The Wall Street Journal and contributor to the investment advice website Motley Fool . He is considered an expert on behavioural finance . Although this book is by an American author with American financial products ( e . g ., 401K versus our RRSP , Internal Revenue Service versus Canada Revenue Agency ), the behavioural analysis and advice is international in scope ( with over 500,000 copies sold in over twenty-five different languages ).
“ Money is everywhere , it affects all of us and confuses most of us .” Housel tries to clear up some of the confusion and provides endless examples using facts , research , and stories of people whose names may ring a bell , including Cornelius Vanderbilt , John D . Rockefeller , Bernie Madoff , Bill Gates , and Warren Buffett .
Despite Housel ’ s assertion that money confuses most of us , he has the ability to take this difficult , seemingly incomprehensible topic and present it in a clear , easy-tounderstand fashion . He begins by pointing out that our view of money is dictated by what we have experienced in our own personal view of the world , particularly early in our adult life . Did we grow up with poverty , high inflation , or suffer through a recession or depression ?
The first seven chapters discuss ideas of luck versus risk , striving to have more and more , getting wealthy versus staying wealthy , how we define wealth , and deciding how we control our time . We are treated to a smooth narrative which seamlessly weaves facts , figures , and names from history with a
dash of psychology that will leave you thinking , “ Well of course , that makes perfect sense !”
“ Wealth is What You Don ’ t See ” is the title of Chapter 9 . This and several following chapters deal with not spending to show your wealth . Housel explains the significant difference between being rich and being wealthy , and why wealth should be the goal but is also so hard to see . Our egos can often lead us to make less than optimal choices about how much , where , and when we choose to spend our financial resources . Housel looks at history and how it is sometimes used to predict future events . The chapter titled “ Surprise !” explains why this is not the case for financial decision making . Following chapters detail suggestions on how to think about and plan for our financial futures . From planning with the idea of “ room for error ” ( estimate lower revenues and higher expenses ) to changing personal goals over time , we are presented with ideas and suggestions to help deal with all kinds of present and future challenges .
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