The Psychology of Money Summary
The Psychology of Money is a wonderful book that explains the strange ways that people think about money.
Table of Contents
It explains how we can make an improved association with money and take wiser financial decisions.
Psychology means the study of the mind on both conscious and subconscious levels.
If we know the psychology of money we can do wonders in this life. So, let us understand this with the review of this book.
This book has 19 lessons from which some of my favorites I will be sharing with you.
Lessons To Learn From Book
This awesome book teaches us many lessons.
If we follow and implement these lessons in our life then we can never stay empty handed.
Some of the lessons are discussed below:
True Wealth Is What You Don’t See
This is the first lesson that describes that we can’t see true wealth.
If we see someone’s big house, car, glory, or expensive vacation then we have seen the outcome but what is the cost behind it, what is the loan, we do not see how much a person is taking to get a car.
So, here the author tells us that we are unable to see true wealth.
If you do not spend then how it will show that you are successful, you are rich?
But, the psychology of money says that what you spend is an expenditure that is not wealth.
This is highlighted by the author but what perception we have made is that how much anyone spends shows richness and success.
This perception is wrong.
The author says that the expenditure makes you poor as money is spent. So, the association that we have made to show off money is wrong. True wealth never shows, what shows or is visible is the expense.
Difference between rich and wealthy
The money in your bank account will beautify your life. This is wealth.
Being rich means you have a high current income but you expense it in buying depreciation toys.
Remember, these depreciation toys will never increase your money.
So, take out yourself from this perception fed by society to expense money to show that you are rich.
Realize, that the more you expense more you lose wealth.
This is just a trap that is fed into our minds that to become rich we have to expense it.
Shift your control on wealth creation which is a step towards wealthiness.
Being rich offers you chances in the short-term, but being wealthy provides you the easiness of having more of the items you want – freedom, time, possessions – in the future.
In chapter 9 author says that the expense to show others is the easiest way to become poor and society also validates that how much you expense shows how much rich you are.
Instead, the one who is expending is depreciating his money.
Build a passive income for money
In this book, there is one hidden message and that is to ask yourself why you want to earn money.
Suppose you earned $400 from somewhere then ask yourself what you want to do.
Either you want to buy a car, expense it on vacation, buy a mansion or you want to invest somewhere to get passive income monthly so that your life can run smoothly.
The answer to this question will tell what your psychology toward money is.
We can buy slavery or we can buy freedom from money.
But, the fact is that unconsciously we are buying our slavery instead of freedom.
Freedom is the combination of 4 things time, work, location, and decision.
If we buy a car then we will get no time as we have to work more for earning money as we have expended the money.
We can’t go on vacation (location) as we have to work as we can’t make a wished decision.
Mostly, depreciating toys like buying mansions, and fancy cars are done to get respect and admiration from others.
They are not the need.
This does not mean that you should not buy a car or a house or go on vacation but first build a passive income for that.
Simply, buy it when you can afford it.
Afford means when you buy anything tension free without thinking about money example if you buy a bar of chocolate for the kid if it fell you say no worry and you buy another without a second thought this is called afford but if you buy a car then and it is destroyed than can you dare to say no worries I will buy a new one?
If yes then you should buy it because you can afford it.
Work on the intellect for earning money
Another lesson we get from this book is that we pay a prize for everything.
Every benefit has a cost nothing is free.
If you buy a house, a car, or anything then it has a prize label but there is something whose label or price tag is not visible and if you do invest in it then you can make a lot of money and that is your mind.
Work on intellect, and learn new things, if you didn’t, pay for this prize then you may suffer.
Afterward, you may regret that you have the same potential as those who are earning a lot.
So if you do not invest in intellect then you have to pay a huge price for it.
Hence, this is the price tag that you can never see or it’s invisible. This may be the reason to stay poor.
Know when you are enough
The best lesson of this book is when the author says that you all must know when you are enough.
We know it’s enough for everything like food, exercise, for fun but we do not understand enough for money.
If a person has surplus money but does not have health, time to spend that money.
Why? Because he doesn’t use enough money.
Decide which and how much money is enough for you?
So that you can stop selling your time, and stop hampering your health for money.
Add and decide enough for money.
The author says we move our goalposts forward.
If your goal is 2 million you reached then you make it 20 million and the biggest reason for this is social comparison.
The author has given the example that there is a baseball player who earns 5 million dollars a year he is by any definition rich but another basketball player on his team has signed a 12-year contract with some team for 430 million dollars so he is getting 36million dollars a year.
So the one who is earning 5 million dollars a year thinks he is not rich because of this social comparison.
The author makes it very clear that enough does not mean that you stop working or stop earning but do not hamper your health, do not share your extra time, and do not put your reputation at risk for earning more.
Enjoy life and the time with loved ones.
Do not miss to read this awesome book.