The upshots of Psychology of Money

The book – ‘Psychology of Money,', nudges you to reconsider personal finance, investing, and company's success through the prism of psychology and behavior. All of these branches of study, in general, have their origins in Maths, data, and calculations. However, the book particularly emphasizes on how everything from your personal background and experiences entails you to achieve Financial Independence.

It also shows you how to develop a better relationship with money and take good financial decisions. According to the author, humans are not just ROI-optimizing machines, instead, he shows you how your psychology can work in the favour of attaining your financial goals.

Fundamental Takeaways

Goals should be a moving target:

It is extremely clear to have a goalpost that moves. Once you've accomplished your goals, you'll move on to the next one. And the cycle continues indefinitely. This is frequently fueled by comparing yourself to others, and you're usually comparing yourself to someone at a higher position on the career ladder than you.

Getting Money vs Keeping Money:

Getting Money and Keeping money are two completely different talents. While making money entails taking risks, working hard, and maintaining a positive attitude, keeping money is a different art. It facilitates risk mitigation, avoiding greed, and remembering that things can be taken away from you at any time.

Cash is not your enemy:

If you're young and make more money than you spend, the best way to optimize your long-term investment gains is to invest the maximum amount of your money in a diversified portfolio typically consisting of low-cost index funds. Therefore, cash is not your enemy. It’s simply how you deal with it.

Long Tails:

The majority of the time, the investing decisions that you take don't matter. It's the judgments you make on a few days when something huge happens - a massive downturn, a volatile market, a speculative bubble, etc. which makes the actual difference.

Investment Results:

According to the book, one should evaluate how well he/she has done by focusing on their individual investments with respect to their entire portfolio. It further adds that good decision is not always rational and that sometimes it is necessary to remember that you are an emotional being with distinctive demands.

Ideally, the book comprises of 19 short stories demarcating some examples of how beautifully finances can be managed along with some experiences and factual tales. Though, we will not be able to cover every chapter’s summary, don’t you worry! We are coming up with an invigorating series of chapters and its correlation with the products for your weekend reads.

Already excited? Keep watching this space to know more!

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