The Psychology Of Money

A fantastic book on personal finance and investment precisely because it takes a high level and does not attempt to give specific advice. Morgan’s take on the difference between being rich and being wealthy particularly resonated with me. Rich is what people see, and is more or less correlated with your salary, whereas wealth is what people do not see: bank accounts, investments, properties. When aspiring for wealth, we often miss the mark and go for being rich instead. This is the equivalent of attempting to get off a treadmill by cranking up the speed.

The other point that Morgan brings up that I thought a lot about is how impactful compound interest is on the growth of wealth. I’ve always understand its inherent value, but he gives great examples of how leaving money alone is 99% of growing wealth. Being able to fend off market downturns and panic to cash in money that is growing is imperative.

Lastly, his overall thesis that wealth equals independence is the biggest take away from this book. Don’t think of accumulated wealth as anything other than freedom. Even if you are saving for some large purchase, the money saved could also be used to float you between careers so you don’t have to take a job you don’t want. Having money available in a downturn is a vaccine against desperate decisions.