Hello Readers! Welcome to my new article, where I will provide you with The Psychology of Money Book PDF.
I know you all are searching for this book, PDFs because of someone’s recommendation. This book changed your perspective about the Psychology of Money. And that’s why this book’s name is The Psychology of Money PDF.
The Psychology of Money Book PDF has a total of 19 chapters. This tells you slowly the Psychology of Money. Morgan Housel made specific chapters on every problem related to money that people faced in his growing phase. This is what I feel after reading the book, and of course, you guys are also feeling the same thing.
We can say this book is very similar to the Rich Dad Poor Dad book. Because, in both books, the author tells us about money. The authors of both books, Robert Kiyosaki and Morgan Housel, are very famous because of their thoughts on Money.
Download The Psychology of Money Book PDF
| Book Information | Detail |
|---|---|
| Name | The Psychology of Money Book PDF |
| Author | Morgan Housel |
| No. of Pages | 236 |
| Size | 2.14 MB |
| No. of Chapters | 18 |
| Quality OF PDF | 100% Clean |
| Link | DOWNLOAD |
Summary of The Psychology of Money Book
Chapter 1: No One’s Crazy
Each of us can experience only a small part of life. It is based on this experience that we think that we know how this world works. But the real thing is that whatever we experience in our lives depends on our circumstances. Our conditioning and many other factors. For example, a person who has grown up in poverty will have a very different perception of risk and reward from a person who has grown up in wealth.
In 2006, the National Bureau of Economic Research conducted a study on the data of the last 50 years to see on what basis people take risks. He found that the risk-taking ability of any person depends on his personal history. And not on his education or intelligence. Every person’s financial decision is completely different, which completely depends on his circumstances and experiences. People make any decision regarding money only based on the information they have at that time.
Chapter 2: Luck And Risk
Luck and risk are two sides of the same coin. Luck has a big role in our success, and it affects our lives to a great extent. For example, in 1968, Lakeside School in America was one of the few schools in the world. That had a $3000 computer.
That year, around 330 million children were studying in high schools all over the world. Out of which only 300 children were studying in Lakeside School. Bill Gates was one of them. Bill Gates says that if he had not gone to Lakeside school, Microsoft would not have been there today. Along with Bill Gates, there was a boy named Kent Evans in Lakeside School, who was a very good friend of Bill Gates. And was a very good computer student, just like Bill Gates.
Which could have made a company like or bigger than Microsoft, but unfortunately he died in an accident during mountaineering. This is an example of bad luck. Because the possibility of a child studying in high school being killed while mountaineering was one in a million. Similarly, if any of your investments fail. Then it may be that the reason behind it is not you but your Luck.
Chapter 3: Never Enough
Kurt Vonnegut and Joseph Heller were both American writers. Once, both of them went to a billionaire’s party. There, Kurt told Joseph that the host of this party was a fund manager. And he earns as much money in a day as Joseph has not been able to earn even from his world-famous novel to date.
Hearing this, Joseph said that yes it is right, but I have something that he will never have…. That is Enough. There is a tendency of the human mind that it is always in search of more. No matter what we have, we always compare ourselves by looking at others and always want things that others have. Enough does not mean here that you become happy with very little and spend your life in difficulties.
Rather, here Enough means that you should have this clarity. About how much money will be enough for you, instead of just running after money. There are some such things as reputation, freedom, family, friends, love, happiness, etc. It is foolish to keep running after earning money by keeping those on hold.
Chapter 4: Confounding Compounding
If you want to understand the meaning of compounding in easy language. Then we can say that re-investing your earnings on any investment is also called compounding. In this, you get interest on its interest along with the principle. Warren Buffett had a total net worth of $84.
5 billion when this book was written, of which $81.5 billion came after his 65th birthday. Buffet started investing at the age of 10. What if Buffet started investing at the age of 30, would he have gotten the same return? Had he started investing at age 30 instead of 10, his total net worth would have been just $11.9 million instead of $84.5 billion. Compounding requires time. Buffet is successful not because it is a very good investor. But because it has remained a good investor for a very long time.
Chapter 5: Getting Wealthy vs. Staying Wealthy
To stay rich, it is necessary to be a little crazy and economical. Jesse Livermore was a trader from America. During the Great Depression of 1929, when the money of investors from all over the world was sinking. Livermore earned more than 3 billion dollars in such difficult times. Even after this, he kept making big bets. Unfortunately, within 4 years, he lost all his wealth and took his own life. Like Livermore, many people earn money but are unable to keep this money.
To earn money, there is a need to take risks, be optimistic, and believe in your efforts. To save the same money, there is a need to avoid risk. Be economical and accept that luck also has an important role in your success. Being economical here does not mean that you live like a pauper. It just means that you don’t spend your money without any reason and don’t get ostracized.
Chapter 6: Tails, You Win
Long-term investments have the biggest impact on your returns. But it is almost impossible to know which investment will give the best return in the long run. No person can always make the right decision. To be a good investor, you need to be correct only 6 times out of 10. That is, failure is also a part of success.
For example, the early days of Walt Disney were very difficult. By 1930, Disney made more than 400 cartoons. But none of them were very successful and because of this, Disney’s first studio was bankrupted. But that all changed when Disney released Snow White and the Seven Dwarfs. Snow White and the Seven Dwarfs earned Disney over $8 million in just 6 months, more than the company’s total to date. When you accept and accept the fact that it is not always necessary to be right to be rich. Then you can become rich even after failing many times in life.
Chapter 7: Freedom
The best form of wealth is that in which you can do whatever you want to do. Angus Campbell was a psychologist at the University of Michigan. He researched to know what is that thing that gives real happiness to people. He found in his research that everyone wants different things. But there was one thing that was common in most people, and that was complete control over their lives. To be happy, having control over your life is more important than a good salary, a big house, and a prestigious job.
When you do something that you do not want to do. It is obvious that you hate that work, but even when you do your favorite work in a schedule or environment. On which you have no control, you will start hating that work. American sociologist Karl Pillemer interviewed thousands of American elders. And asked them what were the most important lessons they learned throughout their lives. Almost all of them did not give much emphasis on working hard or earning more money. Rather, he talked about making good friends and spending quality time with his family.
Chapter 8: Man In The Car Paradox
When you see someone driving a nice car. It does not come to your mind Wow, how cool is the owner of this car, but the first thing that comes to your mind is that I wish I had this car. How cool do you think I am? The difficulty here is that you think that if you have nice and expensive things, then people will appreciate you. Whereas if you put yourself in the place of others, then you will not praise the owner himself. We humans have this thinking that if we are rich, then people will praise us and like us more.
But other people do not like you based on your richness, but by making your richness a benchmark. They think that if they too were rich like you, then people would also appreciate and like them. Money cannot get you the respect or appreciation you feel. Humility, kindness, and empathy are such things that make you more favorite and respected in the eyes of people than wealth.
Chapter 9: Wealth Is What You Don’t See
Most of the people who drive expensive fancy cars are not rich. They spend most of their money on their expensive cars. Instead of saying that such people have money sense. An expensive car shows that such people do not understand money at all. We humans often judge people based on external information, such as which car someone drives, how he lives in the house, what kind of clothes he wears, etc.
But in reality, true wealth is invisible or unseeable. These are such assets that are not converted into external showy things. Being rich just reflects your current income. Being Wealthy means how much is your current savings and investments. So that later you can spend your money without any hassle. Being Rich does not mean that you are Wealthy. One of the biggest reasons behind the desire to look rich is that it is very easy to find such rich role models. They are easily visible. It is very difficult to find a Wealthy role model because wealth is always hidden.
Chapter 10: Save Money
Accumulating the money left over after your spending is called wealth. To collect wealth you do not need a high income but you need high savings. The value of your wealth depends on your desires and needs. There is a gap between your savings, your ego, and your income. The best way to increase your savings is not to increase your income but to increase your humility.
If you reduce your desires then you will spend less and you can reduce your desires. Only when you do not pay much attention to what people think about you. You don’t need any reason to save money. Saving without any goal gives you flexibility in the long run and you have more options for everything. Flexibility gives a competitive advantage. This means you can wait for a good job or take the time to learn a new skill.
Chapter 11: Reasonable > Rational
The Author says, You are not a robot, you are human and therefore it is normal for you to make mistakes. You cannot make your financial decisions by being completely rational. You should pay more attention to being more reasonable than rational. Because it is more realistic and also increases your chances of becoming rich in the long run. According to the Home Bias phenomenon. Most people prefer to invest in their country’s companies. Because they have complete knowledge about familiar companies and it is completely reasonable to do so.
Chapter 12: Surprise
History is a study of surprising events that happened in the past. But investors and economists around the world look to it as a guide to the future. You have to accept that you cannot look at historical trends as a map of the future. Investing is not a hard science, so it is not necessary that what has happened in the past will be the same in the future.
This is a field where many people often make wrong decisions due to limited information. Now if we look at the history of the stock market recession, then during the year 1800, recession used to come every two years. At the beginning of the 20th century, this gap increased to 5 years. If we look at the data of the last 50 years, then this gap is about 8 years.
This gap may become more or less in the future. That’s why you can never predict when the next recession will come by looking at the history of the recession. That’s why while making your financial decisions, never close your eyes. And make predictions of your future by looking at the events that happened in the past.
Chapter 13: Room For Error
It is almost impossible to forecast or predict anything perfectly. Often keeping a margin of error there is no need for forecasting. But we are not very good at keeping a proper room for error. There are some reasons for this because of which we fail to keep proper room for error:
- 1st Generally the human mind is more attracted to those people or things that give them complete certainty. Instead of paying more attention to room for error. We usually pay more attention to those people who say such things with full confidence. That this week the stock will go up or this candidate will lose the election, etc.
- 2nd We are often able to see room for error in the lives of others but are unable to see room for error in our own lives.
According to a Harvard psychology study. When we see the renovation of others’ homes. We always think that they must have spent 25-50% more than their budget. But when we estimate the renovation of our own house. We feel that We did all the work within our budget. When you do financial planning, the answers to some questions should be very clear in your mind.
For example, if the market goes down by 30%, will you sell your stocks or not? If an average stock market returns 2% less than the normal scenario, are you saving enough for your retirement? To overcome these risks, always keep room for error regarding your future returns. For example, the author of this book, Morgan Housel, always assumes that the market return will be 1/3 compared to the average, and with this thinking, he does his financial planning.
Chapter 14: You Will Change
It is easy to imagine your future goal. However, the human mind cannot understand it properly even with realistic stresses and challenges. For example, according to the Federal Reserve, only 27% of college graduates do jobs related to their subject. There is a psychological phenomenon called the End of History Illusion. According to this people are usually aware of how much they have changed since the past, but they underestimate how much they will change in the future. To figure out how much you can change, keep two things in mind:
- 1st Never plan to be happy with low income, nor plan to work for continuous hours.
- 2nd Accept that you can change your mind anytime. Our reality keeps changing with time, so we should also be ready to change our goals and strategies according to the situation.
Chapter 15: Nothing’s Free
Most things are more difficult in practice than in theory. We humans tend to be overconfident and usually we do not see the effort and cost involved in something. Every task seems very easy from the outside. Because the challenges that come with any work are faced by the one who does that work. Investing not only takes your money, but it also involves volatility, fear, doubt, uncertainty, and regret.
You have to pay the price of volatility to get good returns. If you do not pay this price, then you will get much less return than your expectation. There are many psychological fees in investment. You see them as a fee and not as a fine. Fines can usually be unnecessary and unjustifiable or unreasonable but fees are always necessary and justifiable or reasonable. Volatility, uncertainty, and fear are one way the admission fee for long-term investment.
Chapter 16: You And Me
We usually make many decisions by looking at others, including financial decisions. But the thing to note is that everyone plays their own different game. That’s why never compare yourself to a person playing a game different from yourself. The goal and investing period of every investor is different. For example, how much money you will pay for the share of Google, depends on how much time you want to invest.
For example, if you do day trading, then you would like to buy it at such a price that you can make a profit on the same day. If you want to sell it after 1 year. Then you will want to buy it at the right price by analyzing the market. If you want to keep it for 30 years then you will consider whether it will be ok to buy it at its current price. And whether Will it be able to give you the return you expect after 30 years. Therefore, while doing financial planning, do not blindly copy others. Because you do not know why the person in front is investing in something or for how much time he is investing.
Chapter 17: The Seduction Of Pessimism
Usually, we pay more attention to pessimism than to optimism. Optimism is usually seen in such a way that whatever happens will be good and you do not need to do anything in it. But this is just a matter of saying. In actuality, optimism is a belief that means that even though there may be many obstacles in the way. The odds mean that adverse circumstances will be in your favor in the long run. We usually do not pay much attention to optimization because pessimism is easier than optimization for several reasons:
- 1st We pay more attention to the words of people who tell us that we are in danger rather than that we are safe.
- 2nd Today’s media show more pessimistic news than optimistic news because they also know that people are more attracted to such news. 3rd Usually the progress of anything is slow but the same destruction or failure happens very quickly. Because of this, we ignore progress while paying more attention to any recent negative event. Because of this, the pessimism of the short term outweighs the optimism of the long term.
Chapter 18: When You’ll Believe Anything
Stories are more powerful than statistics. Morgan Housel, giving the example of the US says that there were very few changes in America. Before and after the financial crisis of 2008.
Rather, by 2009, many things have become better than before, such as improvements in health care and medicine. Technology has become better than before, and the influence of social media has increased greatly. But when Morgan saw the figures, the ground slipped from under his feet. Between 2007 and 2009, the US economy suffered a loss of $16 trillion. And more than 10 million people lost their jobs.
This happened because till 2007 people believed that housing prices would rise further and bankers and financial markets were all stable and accurate. But by 2009, people lost faith in this story. And it was the only thing that had changed a lot and that was the thing that mattered the most. The world of our financial world depends more on stories than anything else.
Chapter 19: All Together Now
This chapter is in a way a summary of the entire book and some actionable ideas have been told in it. So that we can make a good financial decision.
- 1st: Follow humility when good things are happening to you in life and follow forgiveness and compassion when things are going wrong.
- 2nd: Less ego means more wealth. Saving is in a way a gap between your income and ego.
- 3rd: Manage your money in such a way that you can sleep comfortably at night without any worries.
- 4th: If you want to become a good investor then increase your investing time because time is the biggest power of investing.
- 5th: Do not be afraid of making mistakes because you can accumulate wealth even by making mistakes half the time.
- 6th: You do not need any specific reason to save. So do save because it gives you flexibility and freedom in the future.
- 7th: Use your money to control your time because having complete control of your time is very important for a happy life.
- 8th: Do not fall in the pretense of others, but focus on becoming a wealthy person.
- 9th: While doing financial planning, do not blindly copy others because you do not know why the person is investing in something or for how much time he is investing.
