A friend told me about The Psychology of Money, published in 2020 by Morgan Housel, and I am happy that he did. It is fantastic. You would be hard pressed to find a more entertaining and understandable book on the relationships people have with money.
Think of it as People magazine meeting Sigmund Freud.
When I thanked my friend for the recommendation, he told me that he has read it 4 times! I later discovered that my 26-year-old son has a copy by his bedside. It is a must for all Roadside Scholars of any age.
A few of Mr. Housel’s pearls of wisdom are:
No One is Crazy. Peoples’ views of money vary widely. What is crazy to you might make sense to me. Someone growing up in poverty will think about risk and reward differently than Beyonce’s daughter. Takeaway: judge others and yourself gently.
Shoot for Reasonable not Rational. Many economic theories assume that everyone behaves rationally at all times. In the real world it is impossible to be 100% rational. Mr. Housel suggests that “reasonable” is a fine standard to shoot for. The Roadside Scholar agrees. Takeaway: reasonable is achievable, rational is not.
Allow Room for Error. No one has a crystal ball to accurately predict the future. Allow a for a margin of safety in your financial strategy. Takeaway: structure your financial life so that a range of outcomes can produce fantastic results.
Use Your Money to Gain Control of Your Life. Mr. Housel believes that control of one’s time is the ultimate goal of financial independence. I would broaden the idea a bit by suggesting that the implicit goal of building wealth is expanding one’s range of lifestyle choices, of which controlling one’s time is just one. Takeaway: wealth is a means to an end and not the end objective. Use it to improve your life today not just in retirement.
Roadside Scholar Tip: Study the lessons and examples in The Psychology of Money. You will not regret the effort.
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For more information and easy to understand explanations of important money matters go to www.theroadsidescholar.com or purchase The Roadside Scholar: Amazing Money Lessons from Behind the Fence.
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*3 Dividend Aristocrats You Can Safely Buy That Are Set to Fly, The Dividend Sensei, March 4, 2021.