I consider myself somewhat financially savvy. But the emotional side of dealing with money is something that most of us – including me – struggle with.
“”The psychology of money“from Morgan Housel has helped me work through some of the mental aspects of money management that I hadn’t gotten to grips with. This is what caught my eye the most.
There is no single “right way” to get hold of money
You don’t have to look far beyond your immediate circle of family members and friends to see that different people handle their money differently. Some seem to be hardworking Save and invest for the futurewhile others live in the present with no financial schedule.
I fall on them save and invest End of the spectrum. But I was tempted to try the Joneses many times. However, with the help of this book, I realized that there is no right or wrong way to manage your money. You just have to do what is consistent with your values.
For me, that means saving a large part of my income with the goal of saving Financial freedom sometime in the future. But everyone has to figure out what works for them. Not everyone wants to pursue FIRE (financial independence / early retirement). Likewise, not everyone wants to spend most of their income on material items.
The “right” way to spend is different for everyone. I’ve found that nobody makes crazy money decisions – everyone only makes the best decisions they can make based on the information available and their values.
Reasonable monetary decisions are better than rational monetary decisions
If you dive into the weeds of efficient money management, you are likely to encounter questions that balance dollar-and-cent logic with priorities for peace of mind.
A hotly debated question is whether to invest more or to repay your mortgage early. Personally, I’ve always been a little bit at a conflict about it.
I could see the logic that in the long run, I might be better off investing in priority rather than paying off my mortgage at a low interest rate. But my heart told me that if I made more progress in paying off my mortgage debt once and for all, I would sleep better.
Chapter 11 of the book, entitled “Reasonable> Rational,” helped me clear up this internal debate. I realized that if it helps me sleep better, no matter what the numbers say, repaying my mortgage early is a wise choice for me. In any case, I am making a wise decision with my money.
Take the time to learn what “enough” money means to me
Have you ever been surprised when an undeniably rich person decides to do something seemingly crazy to make more money? Tax evasion and Ponzi schemes come to mind. I never understood why someone who seemed set on life would risk everything for a little extra money.
Housel explains in the book why rich people do these greedy acts – they never realize how much money was “enough” for them. No matter how much money you have, if you haven’t decided you have enough, it will never be enough. If you never have enough, you can never stop chasing the next dollar.
With that in mind, I took some time to find out what “enough” means to me. As someone who is strive for financial independenceI decided to set a reasonable number that would provide “enough” for my family. But I don’t mean to chase every dollar forever.
read the book
If you’re looking for some thought-provoking read that will help you question the way you handle money, me I can only recommend “The Psychology of Money”. While you won’t learn the basics of personal finance, this is useful read for anyone trying to figure out the best ways to deal with money in their unique personal financial situation.
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