The Psychology of Money by Morgan Housel

What drives our financial decisions? It’s not just numbers and spreadsheets—it’s human behaviour. In this episode of the Mind Set In Stone Podcast, we delve into Morgan Housel's insightful book, The Psychology of Money. 

This groundbreaking work explores the emotional and psychological forces that shape how we think about, earn, and manage money.

Join Dave and Poppy as they unpack Housel’s timeless lessons on wealth, greed, and happiness. 

From understanding the importance of financial humility to mastering the balance between ambition and contentment, this episode reveals how shifting your mindset about money can transform your financial journey.

Whether you're navigating investments or simply striving for financial peace of mind, this conversation will inspire a more thoughtful and intentional relationship with money.

Available now on your favourite podcast platform!

Thank you for tuning in to this episode of Mind Set in Stone Podcasts. If you enjoyed our deep dive, be sure to subscribe and leave us a review! Share your thoughts with us on social media, and let us know which book you’d like us to explore next. Until next time, keep your mind set in stone and your curiosity open.

This has been a Big L Riz Media Podcast—where big ideas meet lasting impressions.

Transcript

Welcome to Mind Set in Stone Podcasts where we dive deep into the most compelling books on the shelf. Join hosts Dave and Poppy as they uncover the stories, themes, and ideas that shape our understanding and inspire curiosity. Get ready to explore the big ideas that leave a lasting impact.

Let's get started.

Hey everyone welcome back today we're doing a deep dive into The Psychology of Money by Morgan Housel.

A great pick.

I think it's a book that can really change the way people think about building wealth.

You know what I find so interesting about Housel's approach?

What's that?

He kind of steps outside the typical like personal finance advice, you know, budgets and all that.

Yeah.

He really looks at the psychological factors, the ways our minds influence our decisions about money.

And that's exactly what makes this deep dive so interesting, I think.

Right.

Because like he starts the book with this story about a tech genius. This guy is flaunting his wealth, like carrying around a brick of $100 bills.

Yeah. You'd think someone that smart would have it all figured out.

Exactly. But he ends up broke.

Yeah. Impulsive decisions needing to show off, it all kind of catches up with them.

It's wild because it really shows you that even being super smart isn't enough when it comes to money.

No, it's not about intelligence alone.

Right.

It's recognizing that we're all human. We're all going to make emotional decisions sometimes.

Well, and especially when you contrast that story with the one about Ronald Reid.

Oh, the janitor.

Yeah, the janitor who quietly amassed millions.

I love that story.

It's incredible just by investing consistently in blue chip stocks for decades.

Simple discipline behavior over a long period of time.

Exactly. So, it's like it wasn't about market timing or some complex strategy. It was just consistency and discipline.

And patience.

Patience, yeah. That's huge.

Which really brings us to one of the core ideas Housel explores.

Okay, what's that?

Everyone has their own unique financial worldview, shaped by their own experiences.

Okay, so like someone who lived through hyperinflation in the 70s, right?

Yeah. They might view bonds totally differently from someone who's only ever known stable prices.

Makes sense.

Right. Our experiences really color how we see money and make decisions.

And he tells this powerful story. I don't know if you remember it.

Go on.

About a Chinese factory worker's nephew.

Oh, yeah.

Who actually defended sweatshops.

Because of his aunt's experience.

Yes. His aunt's life had been so much better since she started working in one compared to her previous life.

It challenges our assumptions.

It really does.

Yeah.

Like what we might consider good or bad when it comes to money and work, it's all relative.

Completely. It highlights the importance of empathy and, you know, trying to understand different perspectives.

Absolutely. Especially when we're having conversations about money with people from different backgrounds.

For sure.

And then Housel throws in another layer.

Okay.

Luck and risk.

Often overlooked in those like traditional success stories.

Right. Like Bill Gates. Yeah, he's brilliant, hardworking.

Of course, but.

But also, incredibly lucky.

To have access to a computer as a teenager.

At a time when coding was so new, how many teenagers even had that opportunity?

Right place, right time.

Totally. And then he contrasts Gates' story with that of his friend Kent Evans.

Who died in a climbing accident.

It's a reminder that we can't control everything.

No matter how talented or hard working we are.

So, it's like you're working towards your goals, but also acknowledging that luck and risk play a role.

Absolutely. And that's where understanding the long game comes in.

Okay. I like that. The long game.

Right. Like think about Warren Buffett. Most of his wealth was actually accumulated after he turned 50.

Really? I didn't know that.

Yeah. It's not just about investing well; it's about investing well for a very long time.

And this is where the power of compounding comes in.

Huge. Housel gives this mind-blowing example about Jim Simons.

Oh, the guy with the incredible track record.

Yes. Compounding at 66% annually.

Imagine that.

Housel asks us to imagine if Simons invested for as long as Buffett has.

And?

The result. 63 quintillion dollars.

That's insane. I can't even fathom that number.

It shows you the exponential nature of compounding.

Even small differences in returns over decades can lead to huge differences in outcomes.

Right. And this leads to this concept of long tales.

Okay, I've heard of that.

He uses art collector Heinz Berggruen as an example.

Oh yeah, Berggruen owned tons of art.

But the hits like the Picasso's and Matisse's, those were monumental.

So, it's like a few massive wins outweighing a lot of outcomes.

Exactly.

And he connects this to investing and even our careers.

Because just like Berggruen could afford to be wrong on most of his art purchases.

Because his big wins were so big.

Exactly. In finance and business, a few major successes can often make up for many small losses.

So, it's about recognizing that the path to success isn't always linear.

No, it's not.

There'll be setbacks, but a few big wins can change everything.

And this ties into one of the most misunderstood ideas about wealth.

What's that?

Saving. Housel argues that real wealth isn't about flashy displays.

It's about what you don't see.

The cars not bought; the vacations not taken. He even tells this funny story about Rihanna.

Oh yeah, she almost went bankrupt.

Right. And she had to be told that spending money means having less money, which seems obvious.

But we often miss it. It's like we think spending equals wealth.

When it's often the opposite.

But saving isn't just about like a future purchase, is it?

Not at all.

Housel suggests it's about owning your time.

Being able to change careers, retire early, or just not stress about money.

That's a huge return on savings that we often overlook.

Freedom and flexibility, those are valuable.

Okay, so we're saving, we're thinking long term, but what about the actual strategies?

Right. This is where Housel introduces the idea of reasonableness.

Over cold hard rationality.

Yeah. And he tells this wild story about Julius Wagner Jaregg.

Remind me.

The doctor who won a Nobel Prize for intentionally infecting syphilis patients with malaria.

To induce a fever and cure them? It's risky.

Some patients died, but it worked. It just goes to show sometimes the most effective solutions aren't always the most obvious. Right.

He connects this to finance by saying that sometimes the best approach is the one you can stick with.

Even when emotions run high.

Exactly. Like he mentions the study suggesting that young savers should use leverage. Logical in theory, but most people would panic and sell at the worst time if the market dipped.

So, sticking with the plan even when it's tough.

That's often-what matters most.

So much great stuff to think about already.

And we're just getting started. So much more to unpack in Housel's book.

I'm ready for it.

Let's dive back in after a quick break. Welcome back. I'm ready to jump back into some more of those counterintuitive ideas Housel presents.

Yeah, there are a lot in this book.

One that really stuck with me.

What's that?

Getting rich and staying rich are two completely different skills.

That's interesting.

Right. Like he contrasts Jesse Livermore.

Oh, the legendary stock trader.

Yeah, the guy who made a fortune during the 1929 crash.

I remember reading about him.

And then there's Abraham Germansky, a real estate developer who lost everything in that same crash.

Oh, wow. So, it's like two sides of the same coin.

Right. Livermore made billions betting against the market.

And Germansky got caught up in the frenzy and lost it all.

Exactly. And you'd think someone like Livermore with his market timing skills.

He'd be set for life.

Well, here's the twist. Livermore eventually lost everything too.

Really?

It just shows that wealth built on speculation and huge risks, it can be fleeting.

So, both Livermore and Germansky were good at getting rich.

But they lacked the skills to hold on to it.

So, what makes the difference then? What separates those who build lasting wealth?

From those who win big but lose it all.

Yeah.

It's about discipline and patience.

And the ability to weather those market storms.

Absolutely. Emotional resilience, not making impulsive decisions.

It's like a whole different mindset.

It is. Wealth preservation is a different game altogether.

This is where I really connected with Housel's idea about survival being key to financial success.

It's not always about hitting home runs.

It's about building a solid foundation that can handle the ups and downs.

Of the market and life in general.

Right. It's like building a house to withstand a hurricane, not just a strong wind.

I love that analogy.

Because unexpected events are going to happen.

Always. Being prepared is crucial.

He even talks about holding cash.

Which might feel conservative in a bull market.

But he can be a lifesaver during a downturn.

Prevents those panic sales that can destroy your portfolio.

Like an emergency fund for your investment.

Exactly. It helps you ride out the storm and avoid those fear-based decisions.

And he says the real return on that cash isn't the tiny bit of interest it earns.

It's the fact that it stops you from making those desperate moves that set you back years.

It's a total shift in perspective.

It is. We're so focused on chasing returns.

We forget about minimizing losses.

Which can be just as important, if not more so.

Absolutely. Okay, so we're playing the long game, we're holding some cash. But how do we plan for the stuff we just can't anticipate?

Right. The unexpected curveballs life throws at us.

That's where Housel brings up room for error.

Any financial plan needs that flexibility.

To handle surprises.

Because life rarely goes exactly as planned.

Right. It's like acknowledging the limits of what we can know.

And building in a margin of safety.

He gives this example, what if you're saving for retirement?

And you assume an 8% annual return?

But you only average 4%.

That's where room for error comes in. If you've factored that possibility into your savings.

You won't be derailed by a lower-than-expected return.

It's like having a buffer in your budget, so an unexpected expense doesn't throw everything off.

It's about increasing your chances of success by increasing your chances of survival. Makes sense.

Now, remember the long-tails idea.

Yeah, a few big wins can outweigh a lot of small losses.

Well, he circles back to that concept.

Okay.

And reminds us that it applies to more than just investing.

Our careers too.

Our careers, personal development, pretty much everything.

He's saying we underestimate how normal failure is.

And that being okay with those failures is key.

To getting those big wins that can change everything.

Like all those overnight success stories we hear.

They don't show the years of hard work and setbacks.

Exactly. It's okay to be wrong sometimes.

As long as we learn from it and keep going.

He uses Walt Disney as an example.

Oh yeah, his early career was full of flops.

Most of his early cartoons lost money.

But then came Snow White.

A massive hit changed everything.

Each failure was a stepping stone.

Leading to that huge success.

This applies to all of us.

Even those of us who are considered experts.

We're probably only right about half the time.

It's humbling, isn't it? We put successful people on pedestals.

But they've probably faced just as many failures.

The difference is they've learned to navigate those setbacks and keep moving forward.

He quotes Peter Lynch who said, If you're terrific in this business, you're right six times out of ten.

Really shifts your perspective on what success means.

Totally. Okay, so we've talked about surviving, managing risk, being okay with failure. But what's it all for?

What's the ultimate goal? Housel defines wealth as, the highest form of wealth is the ability to wake up every morning and say, I can do whatever I want today.

Wow. That's a powerful definition.

It's about freedom and flexibility more than just having a big bank account.

It's about control over your time and your choices.

And that's a return on investment you can't really measure.

Right. But it's often overlooked.

We get caught up in the material stuff, the cars, the houses, the fancy trips.

But those are just symbols.

The real value is in the intangible stuff, the freedom to shape your life, pursue your passions.

Spend your time in ways that matter to you.

He shares a story about his own experience working as an investment banker.

Oh yeah, he loved the work, but...

The long hours, the constant demands. It was one of the most miserable times of his life. It shows that even a well-paying job can be soul-crushing if you don't have control over your time.

And this is where he brings up the concept of reactance.

It's the psychological thing where people resist being controlled.

It explains why telling someone what to do often backfires.

We all crave that freedom and autonomy.

We want to feel like we're in the driver's seat.

Making our own choices.

And it all ties back to saving.

It's not just about a nest egg.

It's about control over your time.

The ability to walk away from a job you hate, take a break to pursue a passion project.

Or just have that peace of mind knowing you have a cushion.

Those are returns that are hard to quantify.

But they're incredibly valuable.

Options and flexibility, that's what it's all about.

Housel says the returns on savings that buy you freedom are often incalculable.

You can't measure them like interest rates.

But they can be like changing. Okay, so we're saving, we're building freedom. But here's another curve ball.

Housel argues that people with lasting financial success.

They often have this one trait in common.

What's that?

A propensity to not give a damn what others think about them.

Might sound harsh.

But it makes sense. It's about avoiding that trap of social comparison.

Especially when it comes to money.

It's so easy to get caught up in keeping up with the Joneses.

Especially today with social media and all that.

We're constantly bombarded with images of wealth and consumerism.

But real freedom comes from breaking free of those pressures.

Making choices that align with your values.

Regardless of what other people think.

Defining your own version of success.

Exactly. And that leads us to another one of Housel's key points. What was that?

Wealth is often what you don't see.

He challenges that idea that wealth is all about appearances.

The fancy cars, the big houses, the lavish vacations.

But true wealth, it's often hidden.

He describes it as, the nice car is not purchased, the diamonds not bought, the watch is not worn.

It's about having the resources.

But choosing not to spend them.

Delaying gratification. Prioritizing long-term security.

It's a challenging mindset in our consumer-driven world.

He tells this funny story about Rihanna almost going broke because she overspent.

Yeah, her financial advisor had to explain to her.

That spending money means having less money. It sounds ridiculous.

But it highlights a truth we often miss.

It's not about how much you spend.

It's about how much you keep.

True wealth is often built quietly.

Through consistent saving and responsible management.

Not through showy displays of spending.

He even says that saving doesn't require a specific goal. Really? You don't have to be saving for a house or retirement.

You can save just for the sake of saving.

It's about building that cushion.

That sense of security and freedom.

Knowing you have resources available when you need them.

I love this line. He says, saving money is the gap between your ego and your income.

It's about resisting the temptation to spend to impress others.

Recognizing that fulfillment comes from aligning your spending with your values.

Not from seeking validation through material possessions.

So much to absorb here. Okay, we're saving wisely, we're ignoring the Joneses. But how do we navigate those day-to-day ups and downs of managing our finances?

Right, because it can be stressful.

Housel offers a simple piece of advice.

What's that?

Manage your money in a way that helps you sleep at night.

It's about finding an approach that works for your psychology.

Your risk tolerance.

Some people are comfortable with more risk, others prioritize security.

There's no one right answer.

The key is finding a strategy that makes you feel confident and secure.

So, you avoid those impulsive or fear-driven moves.

That can sabotage your long-term goals.

And a big part of that, he says, is remembering that you're not a spreadsheet.

You're a person, a complex emotional being.

He encourages us to embrace our emotions.

Rather than trying to suppress them.

Be realistic about our psychology.

And find strategies that work for us even if they're not perfectly rational.

He gives that example of the study that suggested young savers should use leverage.

Logical on paper.

But in reality, most people would panic and sell if their investments took a hit.

It shows the limitations of pure rationality.

Especially when it comes to something as emotional as money.

And that's where embracing reasonableness comes in.

Finding that balance between logic and intuition.

Careful analysis and trusting your gut.

This is empowering because it gives us permission to experiment and find what works best for us.

Instead of blindly following some formula.

And you know what else goes along with this?

What's that?

Define the cost of success and be ready to pay it.

He emphasizes that nothing worthwhile is free. Building a business saving, consistently investing it, all takes effort.

There are sacrifices involved.

It's about reframing those costs as investments in our future.

So, they feel less like burdens and more like stepping stones.

Exactly. Shifting our focus from short-term pain to long-term gain.

Crucial for financial success.

Now this is where things get really interesting. He dives into the allure of pessimism.

Pessimism.

He quotes historian Deirdre McCloskey who said, for reasons I have never understood, people like to hear that the world is going to hell.

Why do you think that is?

Great question. Housel explores several reasons why pessimism can be so seductive.

Okay, I'm listening.

For one, negative events tend to be more dramatic and attention grabbing.

It's like a stock market crash making headlines, but a slow and steady bull market gets barely a mention.

Right. And our brains are wired to pay attention to threats.

So, we give more weight to negative information.

Even if it's statistically less likely to occur.

It's like we're primed to focus on the potential dangers.

Even if those dangers are relatively small.

And he also points out that progress often happens too slowly to notice.

While setbacks can occur in an instant.

Like that saying, it takes years to build trust, but only seconds to destroy it.

It's easy to get discouraged by short-term fluctuations.

But the long-term trend historically has been towards improvement.

He uses the example of the Wright brothers.

Their invention of the airplane was initially met with indifference.

It wasn't until a fatal crash during a demonstration that the public really took notice. It's like people needed that dramatic event to see the significance of their achievement.

But it's not just our brains. It's the world we live in.

We're bombarded with information, so much of it negative.

It's information overload.

Hard to sift through the negativity even if it's not representative of the big picture.

And then there's confirmation bias.

Once we have an opinion, we tend to seek out information that confirms it.

Even if it means ignoring contradictory evidence.

Creating those echo chambers that reinforce our beliefs.

Even if those beliefs are wrong.

So how do we combat this negativity bias? Housel suggests cultivating a sense of perspective.

Recognizing that the world is more complex than the headlines suggest.

Being aware of our biases, seeking out diverse perspectives.

Even ones that challenge our beliefs.

And remembering that the world is always changing and evolving.

What seems impossible today might be commonplace tomorrow.

It's a message of hope grounded in reality.

So how do we apply all this to our actual financial decisions?

That's where defining the game you're playing comes in. He argues that we often compare ourselves to others.

Who are playing a completely different game.

Leading to feelings of inadequacy or making us adopt strategies that don't align with our goals.

It's like comparing apples and oranges.

Right. You might see someone else's success and feel behind, but you might be working towards different things.

With different timelines and different levels of risk.

He uses the dotcom bubble as an example.

Some investors were caught up in the hype.

While others were playing a short-term game.

Focused on momentum and quick profits.

So, their decisions might seem irrational to someone with a long-term outlook.

But they made sense within their own game.

Exactly. So, define your game. What are your goals?

Your time horizon.

Your risk tolerance.

Once you've answered those questions, it's easier to tune out the noise.

And focus on what aligns with your plan.

You're not trying to keep up with someone else's scorecard.

Now this is where Housel takes us on this fascinating journey.

There too.

Through the history of the American consumer.

To understand how we got to where we are today.

Exactly how we developed our current ways of thinking about money.

I'm intrigued.

It's a story that spans decades, you know, from the post-World War II boom.

To the rise of consumerism and the growing gap between rich and poor.

He starts by setting the scene, August 1945, World War II ends.

A time of relief and celebration, but also a lot of uncertainty.

What would happen to all those soldiers coming home?

How would the economy transition to peacetime?

What would the new normal look like?

It was a turning point.

And the decisions made in those post-World War years would shape things for decades to come.

One of the biggest fears was another Great Depression.

With so many soldiers looking for work.

People worried about mass unemployment.

A decline in demand.

So, the government took action.

To stimulate the economy.

One strategy was keeping interest rates low.

Which encouraged borrowing and spending.

It was a big shift from the wartime focus on saving.

The government was actively promoting consumption.

As a way to boost economic growth.

And that was the birth of the American consumer as we know it.

It changed how we view money and spending.

Even today.

Housel points out that household debt in the 1950s grew 1.5 times faster than it did during the 2000s.

It was a borrowing spree fueled by those low rates and a cultural shift.

People wanted new cars, appliances, homes.

And they were willing to go into debt to get them.

It's like a dam breaking.

All that pent up demand and desire for things that had been unavailable during the war.

It all came rushing out.

And there's another factor.

What's that?

A hidden productivity boom during the 1930s.

The Great Depression forced businesses to become more efficient and innovative.

Just to survive.

So, you had those innovations from the 30s plus the pent-up demand plus cheap credit.

It all led to that massive boom in the 50s.

A time of prosperity and optimism.

And what's really remarkable is that the gains were shared more widely than ever before.

The gap between rich and poor actually narrowed significantly. Housel highlights that real income for the bottom 20% of earners grew by almost the same amount as the top 5% between 1950 and 1980.

It was a time when the middle class thrived.

And even those at the lower end of the income scale saw improvements.

This economic equality was reflected in society.

A sense of shared prosperity, the belief that anyone could succeed through hard work.

A stark contrast to the inequality we see today.

Housel describes it as a time when people measured their well-being against their peers.

And for most of that period, people had a lot of peers who looked like them to compare themselves to.

Even if they had different jobs, their lifestyles weren't drastically different.

It created a sense of community and shared purpose.

Something we seem to be lacking these days.

But as the 1970s arrived, things began to shift. The recession that started in 1973 brought unemployment to its highest level since the Depression.

And inflation surged.

It was a wake-up call.

It signaled the end of that post-war boom.

Fueled by cheap credit and pent-up demand.

And the global economy was changing, too.

The rise of Japan and China as manufacturing giants.

Housel argues that the economic winds were shifting.

But people's expectations were still stuck in that era of equality and shared prosperity.

It's like a mismatch between reality and expectations.

Leading to dissonance and tension.

And this tension played a role in the economic boom of the 1980s.

But it was a different kind of boom.

How so?

The benefits flowed mostly to the wealthy.

Housel cites stats showing that between 1993 and 2012, the top 1% saw their incomes grow by over 86%.

While the bottom 99% saw just 6.6% growth.

Wow. A complete reversal from the post-war trend.

And this widening gap led to a divergence in lifestyles.

The rich could afford those bigger homes, nicer cars, private schools.

While everyone else was trying to keep up.

And everyone was watching.

Bombarded with images of affluence.

Through advertising television, the internet.

Keeping up with the Joneses on steroids.

People still clung to that belief instilled by previous generations that Americans should live similar lifestyles.

Regardless of income.

But that belief was becoming increasingly out of touch with reality.

It created the sense of pressure and entitlement.

People stretching their finances to maintain a lifestyle they couldn't afford.

Housel gives that example of Peter the bank manager.

Who sees Joe the investment banker living large and feels entitled to the same lifestyle.

Even though their incomes are vastly different.

A scenario that plays out over and over again.

Fueled by images of wealth and the pressure to keep up.

Even if it means going into debt.

And this pressure is amplified by a culture that normalizes debt.

We've been told it's okay to borrow for a house, a car and education.

And while debt can be a useful tool, it can become a trap. Especially when used to finance a lifestyle you can't truly afford.

Housel highlights that even as interest rates dropped from the 80s through 2020, the percentage of income going towards debt payments actually went up.

And this was especially true for lower income groups.

It shows how debt has become a structural part of our economy.

And it's disproportionately burdening those who can least afford it.

And this, he argues, is one of the legacies of that post-World War II boom.

We've created a culture that links success with consumption.

And encourages us to keep up with the Joneses.

Even when it might not be the best financial decision.

So how do we reconcile this desire for a good life with financial responsibility?

That's where understanding the psychology of money is so valuable.

It's not about deprivation.

It's about finding balance.

Enjoying the present while securing our future.

Making conscious choices.

That align with our values.

Not just blindly following societal expectations.

Fast forward to today.

This is where Housel's insights about pessimism become even more relevant.

He says the era of this isn't working is likely to continue.

That feeling of dissatisfaction with the economic system.

Stagnant wages, rising costs, inequality.

It's feeling a search for radical solutions.

A desire for something new, even if we don't know what that something is yet.

It's a time of uncertainty and upheaval.

Reminds me of those historical periods that precede major societal shifts.

Housel reminds us that history is cyclical.

Periods of stability are often followed by periods of disruption.

And while we can't predict the future, it's clear we're in a time of transition. The choices we make today will shape the world of tomorrow.

So, what can we do? How do we navigate this?

Focus on what we can control.

We can control the economy or politics.

But we can control our own financial behaviors.

Saving, investing, wisely managing debt. Making choices that align with our values.

Cultivating resilience and adaptability.

Knowing that change is inevitable.

And being ready to adapt.

We can also focus on what truly brings us fulfillment.

The things that aren't about material possessions.

Finding joy and purpose outside of our financial circumstances.

So even with all the uncertainty and challenges, there's still room for hope. Recognizing that we have agency, that we can make choices that empower us.

And shape a brighter future.

Let's take a moment to process all this.

Because there's a lot here.

Then we'll delve into the final part of our deep dive. Housel gets really personal in the last chapters.

Oh yeah, he shares his own approach to money and investing.

His insights are relatable and inspiring.

I can't wait to hear them. All right, so let's talk about Housel's own money philosophy, how he puts all this into practice.

I was really curious about that too, you know. What does he actually do with his own money?

Well, he starts by saying there's no one size fits all approach.

Of course, everyone's different.

What works for one person might not work for another.

It's about finding what aligns with your own values, goals and rich tolerance.

Exactly, and he even shares this story about buying his house outright.

Which seems counterintuitive, right? Like, financially speaking, wouldn't it make more sense to get a mortgage at a low interest rate?

Yeah, and then use that money to invest in the market, potentially get higher returns.

That's what traditional advice would say.

But for him and his wife owning their home free and clear, it gave them this peace of mind. That was worth more than any potential gains from leveraging their assets.

It's a good reminder that financial decisions aren't just about the numbers.

Sometimes it's about prioritizing your emotional well-being.

That sense of security and freedom.

And I love that he's so open about his own limitations as an investor.

He admits he's not a stock-picking genius.

He doesn't try to time the market.

Instead, he keeps it simple.

Low-cost index funds.

Letting them grow over time.

He believes in the power of compounding.

And the long-term growth of the market.

It's so refreshing to hear someone advocate for simplicity.

Especially in a world that's obsessed with complexity and beating the market.

He reminds us that you don't need to be a financial wizard to build wealth.

Nope. Consistency and patience. Those are the keys.

Letting time do its thing.

Time is your greatest asset when it comes to investing. Now here's where things get really interesting. He talks about being skeptical of financial advice.

Even from experts.

Even from experts.

He says financial professionals often have their own agendas and biases.

It's like that story he tells about the dentist.

Performing unnecessary procedures on a patient.

A powerful analogy for the importance of questioning assumptions.

Doing your own research.

Not just blindly following someone in a position of authority.

He believes that the best financial advisor is often your own gut.

Develop your intuition and judgment.

Don't be afraid to trust yourself.

But of course, this doesn't mean being reckless. It's about understanding your own risk tolerance.

Finding that balance between being cautious and seizing opportunities.

He reminds us that the goal of financial success shouldn't be about amassing a fortune at any cost.

It's about finding that sweet spot.

Between security and a fulfilling life.

Recognizing that money is a tool.

To help us live the life we want.

Not the end goal in itself.

In the last part of the book, he lays out some of the principles that have guided his own journey.

His own personal rules of the road.

Exactly. And he starts with frugality.

Living below your means.

Sounds simple, but it's foundational.

Focus on what you keep.

Not just what you earn.

And he warns against lifestyle inflation.

As your income goes up, don't just increase your spending.

Save and invest that extra money.

Let it keep working for you.

He also emphasizes diversification.

Not just in your investments.

But in your income streams too.

Spreading your risk can lead to more stability over time.

And of course, he reiterates the importance of patience and long-term thinking.

The biggest rewards go to those who can delay gratification.

Let their investments compound.

And finally, he reminds us about giving back.

Using your success to make a positive impact.

Through philanthropy or social entrepreneurship.

Or just being generous with your time and resources.

True wealth isn't just about what we accumulate.

It's also about how we use it to make a difference.

So, as we wrap up this deep dive into the psychology of money, what are some key takeaways for our listeners? I think the biggest one is this financial success isn't just about mastering formulas or following the latest trends.

It's about understanding ourselves.

Our biases, our fears, our dreams.

And finding an approach to money that aligns with who we are.

Finance is personal and emotional.

Not just about spreadsheets and calculations.

It's about finding that balance between logic and intuition.

Planning and adaptability.

Ambition and contentment.

Housel's book really challenges us to examine our own relationship with money.

And take control of our financial well-being.

It's a reminder that true freedom isn't just about the numbers in our bank account.

It's about using our resources to live a meaningful and fulfilling life.

On our own terms.

If you're looking for a fresh perspective on money, one that goes beyond the typical advice, I highly recommend checking out The Psychology of Money.

It's a book that will stay with you long after you finish reading it.

And it might just change the way you think about your own financial life.

So, until next time, keep those minds engaged and keep exploring the world around us.

We hope you're leaving with fresh insights and a spark of inspiration. Remember to subscribe, leave a review, and check back for more episodes as we dive into new worlds of thought, one book at a time. Until then, keep your minds set in stone and your curiosity open.

This has been a Big L Riz Media Podcast, where big ideas meet lasting impressions.