2023-07-15
LIFE MGMT
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Pyschology of Money
by Morgan Housel
Publisher Note:
Doing well with money isn’t necessarily about what you know. It’s about how you behave. And behavior is hard to teach, even to really smart people.
Money?investing, personal finance, and business decisions?is typically taught as a math-based field, where data and formulas tell us exactly what to do. But in the real world people don’t make financial decisions on a spreadsheet. They make them at the dinner table, or in a meeting room, where personal history, your own unique view of the world, ego, pride, marketing, and odd incentives are scrambled together.
Troy Note:
This book taught me more about money than all the other books and conversations I've ever had in my life. The most critical thing it taught me was what money means to me or what I hope to do with it, beyond the basics of paying my bills. I learned that my hope for money is to have peace of mind. This might seem obvious but I could not have verbalized that before reading this book.
Further, now that I know this about myself, I have used this understanding to fuel all of my spending. Meaning, before I buy something I ask myself if having this thing will bring me peace of mind. If the answer is no, as it was when I almost bought $180 pair of headphones Anfer showed me, I don't pull the trigger. If the answer is yes, as it was when I bought a backup bike computer because they one I've been using for the last twenty years is getting harder to find, I make the purchase with zero hesitation.
Passage(s) of Note:
My Daughter is about a year old as I write this. She’s curious about everything and learns so fast.
But sometimes I think about all the stuff she can’t comprehend.
She has no idea why her dad goes to work every morning.
The concept of bills, budgets, careers, promotions, and saving for retirement are completely foreign to her.
Imagine trying to explain the Federal Reserve, credit derivatives, of NAFTA to her. Impossible.
But her world isn’t dark. She does not wander around in confusion.
Ever at a year old, she’s written her own internal narrative of how everything works. Blankets keep you warm, mom snuggles keep you safe, and dates taste good.
Everything she comes across fits into one of the a few dozen mental models she’s learned. When I go to work she doesn’t stop in confusion, wondering what salary and bills are. She has a crystal clear explanation of the situation: Dad isn’t playing with me, and I wanted him to play with me, so I’m sad.
Even though she knows little, she doesn’t realize it, because she tells herself a coherent story about what’s going on based on the little she does know.
All of us, no matter our age, do the same thing.
Just like my daughter, I don’t know what I don’t know. So I am just as susceptible to explaining the world through the limited set of mental models I have at my disposal.
Like her, I look for the most understandable causes in everything I come across. And like her, I’m wrong about a lot of them, because I know a lot less about how the world works than I think I do.
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