Just recently, I finished reading The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness by Morgan Housel. It is easily one of the best books I’ve ever read about personal finance. It isn’t your typical ‘how to’ personal finance book. It dives deep into the psychological aspect of how people think differently about money, how they spend and save money, and the risks associated with money. Housel also discusses a few of the historically wealthy Americans and how they achieved their riches. He even dives into how some very wealthy people get so greedy that they end up breaking the law and end up in prison trying to get richer. Alternatively, he starts the book out by writing about Ronald Read, a mechanic, gas station attendant, and janitor who amassed an $8 million fortune by his death in 2014. Read built his fortune by “spending less money than he earned and saving the difference.” How you view money and treat it is a big part of how your personal finances are now and will be in the future. Can you get your mindset right to build wealth? Below are a few quotes from the book with a little extra food for thought.
“Wealth is what you don’t see.” – For the vast majority of the people you know, even your closest friends, you don’t know how if they are wealthy. You don’t see how much (or little) they are saving and investing each month, whether it is in a retirement account or not. The neighbor driving a paid off car that is 10 years old may be worth millions, while someone driving an expensive car or living in an expensive house might be pinching pennies living paycheck-to-paycheck and saving nothing. Don’t judge a book by its cover.
“Manage your money in a way that helps you sleep at night.” – Money causes stress. You don’t always have to make the perfect or best money ‘choice’ that comes up in the spreadsheet or is recommended by a professional. For example, if you don’t sleep well with a three- or six-month emergency fund, then increase the amount in your emergency fund to cover nine or twelve months of expenses. Excess debt can cause stress. Any debts, even manageable debts, can cause people stress.
“No one is impressed with your possessions as much as you are.”– If you’re buying things in an effort to ‘keep up with the Joneses’, then you are falling victim to the Diderot Effect. Don’t buy things to impress other people.
“The most important part of every plan is planning on your plan not going according to plan.” – Plans and people will change over time, and life will throw you curveballs (or a global pandemic). Having a plan is great. Understanding that your plan isn’t set in stone and is likely to change many times is even better.
Here are a few more quotes that stand incredibly well on their own with no further explanation.
“People with enduring personal finance success – not necessarily those with high incomes – tend to have a propensity to not give a damn what others think about them.”
“You don’t need a specific reason to save.”
“Use money to gain control over your time.”
“Every bit of savings is like taking a point in the future that would have been owned by someone else and giving it back to yourself.”
Wrapping Up
Becoming wealthy is an achievement we can all accomplish, but it takes financial discipline, time, and a desire to be wealthy. I didn’t say it will be easy, and in almost every case, it won’t be easy. However, if you think you can’t save money and become wealthy, remember Ronald Read. His story should inspire all of us and show us how anyone has the ability to build wealth.
Whether you are starting your financial journey or in the latter stages, I highly recommend reading The Psychology of Money: Timeless Lessons on Wealth, Greed, and Happiness.
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