Life Lessons Simplified from The Psychology of Money.

Insights from the book “The Psychology of Money by Morgan Housel”

  • Perspectives around money
  • Getting trumped by risk and being okay with it
  • Unlocking luck through risk taking
  • What’s ‘enough’ with money ?
  • Unleashing the power of compounding with patience
  • Making money by doing what you love and renting freedom with it.
  • Money as magnifying glass for your qualities.

The Psychology of Money has been one of the most influential and talked about books in the personal finance space recently. The lessons that it packs have garnered a lot of praise. While the adults continue to obtain its benefits, we can’t leave the young and hungry behind. So, here are some major lessons from the book, keeping the Gen-Z in mind.

Most of your decisions are made standing on the tip of the iceberg while being oblivious to its depth.

Different scenarios make up for different perspectives, meaning, your friend who was brought up in a less fortunate financial household than you might be more cautious and conservative with money, while you would be wondering why in the hell are they so uptight about it. Similarly, if your friend was brought up in a more financially sound household, spending a bit of premium on experiences might seem absurd to you, but would make perfect sense for their mental health and quality of life.


  • Be thoughtful and open-minded towards new perspectives on money psychology.
  • Don’t reject or embrace a perspective right away, think!

Fear and uncertainty can often trump research and open-mindedness.

Fear is, without a doubt, one of the most powerful human emotions. The number of decisions that you take influenced by fear and uncertainty might blow you away!

Try to recall how many times you watched a particular movie or series just because you feared being left out of the conversation among your friends. Or maybe how many times you got motivated to study at 3 in the morning fearing being left behind among your peers in your academics or career.

Fear and uncertainty are everywhere, and they push you to make certain decisions. When you’d start with investing, there’ll be times when you’d buy assets out of sheer FOMO(Fear of Missing out), irrespective of your research and analysis.


  • Even though you might feel that you’re all about being logical with your money, there’ll be times you’d spend or invest irrationally.
  • The key would be not to go rolling down on fear-induced decisions and make a stop at the quickest most comfortable moment.

“Luck and risk are both the reality that every outcome in life is guided by forces other than individual effort…they both happen because the world is too complex to allow 100% of your actions to dictate 100% of your outcomes.”

We’ve all been there, witnessing luck play out, sometimes fortunately and sometimes, unfortunately. You can rather think of it as a collection of consequences of actions taken by people around and far from you that may indirectly affect your life.

When it comes to money, your plans won’t play out 100% as you thought they would. Think of buying a product on sale, and then the company slashes its price even further the next day. The most infuriating thing about “luck” is that we can’t do anything about it.

Similarly, risk plays a huge role in money psychology. Most often, high risk is linked to high reward. But the problem is that most of us are inherently wired to resist risks at sight. This creates an unfair advantage for people who can take and stand risks, for example, buying from brands that offer insane value for money but don’t have a public trust yet.


  • The best way to deal with luck is to not deal with it. Don’t sweat it if luck lets you down, or become arrogant when it lifts you. Just acknowledge its effect and continue compounding your efforts.
  • The risk may seem very uncomfortable at first, but you can slowly train your mind by taking small risks, for dealing with uncertainty gives you major props over others.

“There is no reason to risk what you have and need for what you don’t have and don’t need.”

The previous point pressed upon the importance of taking risks, this one presses upon when not to take them. As humans, we rarely are satisfied. We want one thing, and when we get it, we want something else.

Imagine getting paid for your side hustle or your first internship, the feeling of having your wealth is for sure exciting. But there are two sides to you now. One that wants to invest this newly earned money into something meaningful, something that will pay you back in any form. The other side wants you to spend it all away on junk food, entertainment, and those expensive sneakers you couldn’t afford.

Now, spending on entertainment and superficial things aren’t all that bad, but if your expenditure on weekend parties leaves you broke for the rest of the week and incapable of investing, then that might read trouble. 

Good investments are those that grow on compounding and patience and bear fruit for the longest period.

You would have encountered a concept called Compound Interest in your Maths class and thought, “Huh, why do we have to study this!”. For the record, most students feel the same way, it’s only when they get to their adolescent years and hear people saying that it’s the Eighth Wonder!

Compounding is the secret sauce in almost all fields, resulting in exceptional returns. Great investments are built based on compounding. This fact is integral to being good and successful with investing. Starting, you’d come across many get-rich-quick schemes. Spoiler: They don’t work.


  • Investing requires you to be patient and humble. Going out of the way to earn some quick bucks at the expense of your current investments can be a big letdown.
  • Even without expertise at investment, you can get significant returns if you’re clear-headed and leave it to compounding.

Money enables you to have control of your time and that is priceless.

When you’re young, the most important asset that you have is time. You’re also most likely not under the pressure to financially contribute to your family. This is the perfect phase to grow and hone your skills that will earn your bread in the future.

But, it may happen that you’d get lured into a job that offers you some money while making you work at something that doesn’t align with your interests. This is a red flag. Not only can it end up wasting your time without any productive outcome, but also disrupt your desire to have a career.


  • Money gives you the freedom to use your time as per your conditions. But first, prioritize investing in skills that will enable you to make money doing what you like.
  • Remember that earning money without being able to experience the freedom of choices it allows you to have, is as bad as not having those choices in the first place.

If you read this far, you’d have noticed how these lessons are not based on crazy theories and weird calculations, but rather simple behaviors and habits.

To put it simply, money will just bring out your inner qualities in a more visible format, which are your expenses and savings. So, if you want to use money as a tool for your benefits, you’ll have to look inside yourself and hone the beast within!


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