Trying to get back into reading more books after a few months of losing my way at the end of 2021 and beginning of 2022. The Psychology of Money was a good one to get back into reading as it’s full of interesting anecdotes but also impeccably organized along 20 five-or-so-page chapters. While not earth-shattering in its conclusions, it’s a very good roundup of a healthy way to think about wealth and your personal finances. Far better than the average business book and never once did I have the urge to hurl the book across the room like Rich Dad, Poor Dad. Here are the main points, as gathered by the author in the final chapter:
- be humble in the face of success, compassionate when things go wrong
- less ego, more wealth (saving is forgoing egotistical spending)
- manage your money in a way that helps you sleep at night
- single biggest improvement to investment performance is increasing time
- You can be wrong half the time and still make a fortune because the few right stocks will overperform so much the mistakes become irrelevant
- Use money to gain control over time
- Be nicer and less flashy
- Save, not just for something specific, but for the unknowns that will bite you in the future
- Define the cost of success and be ready to pay it. Consider costs as fees, not fines.
- Worship room for error. If it keeps you in the game, it will pay back manyfold thanks to compounding.
- Avoid the extreme ends of financial decisions. Your goals will change over time so don’t box yourself in with extreme decisions from the past.
- Embrace risk, as it pays off over time, but avoid any potential ruinous risks. Black swan events do happen.
- Define the game you are playing and don’t be influenced by others who are playing a different game.
- Respect the mess. There is no one single answer in finance, just those that work for you.
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No. 1 of 50 books I intend to read and review in 2021.
Patrick Sherriff is an Englishman who survived 13 years working for newspapers in the US, UK and Japan. Between teaching English lessons at his conversation school in Abiko, Japan, he writes and illustrates textbooks for non-native speakers of English, releases Hana Walker mystery novels, short stories, essays and a monthly newsletter highlighting good fiction published in English about Japan. Saku’s Random Book Club is his latest project to spend more time with books.