Morgan Housel on the psychology of money
Housel argues that money is driven by behavior, not math: people's choices make sense given their own experiences, personalities and fear of future regret, so what is right for one person can be wrong for another. He sees wealth as relative and comparison-driven, warns that money can become a psychological liability or social debt, and favors decisions that make you happy over ones that only satisfy a spreadsheet. He adds that money is basic life literacy and that you should form your identity before success arrives.
16 points · 7 appearances · 2022–2026
How the view evolved
Everyone is different, so money decisions should differ → Bad money decisions come from copying other people's goals
In 2022 he framed people's differences as something to accept in money debates; by 2026 he names chasing a goal that is right for someone else as the main cause of bad financial decisions.
Up next
2022–2026
“And the wider the channel is, the more that you can endure. And so much about compound interest, not just with money, but with relationships and careers and friendships, comes down to what can you endure? How many unknowns and the depths of those unknowns can you endure and survive? And so much, I wrote this in Psychology of Money. If you have to like sum up doing well financially in one word, I think it's survival. That's true in your career. That's true for savings. That's true for investing. Absolutely. It's just survive. It's just what can you endure? What can you put up with? And when you view it like that, you realize that like every dollar that you save is a claim check of independence that will serve you not just in the future but today.”
2022–2026 · changed view
“What I think is true is that on average, people who have more money tend to have fewer bad days, but I don't know if they have more better days. I think it is more likely that when you have more money, you are less likely to wake up and be like, man, things are not going well. But that doesn't necessarily mean that you're going to wake up grinning ear to ear. Now, that's a lifestyle improvement. If you have fewer bad days, that's like great. Your life is better. That's obviously better than the alternative, but it's not happiness. It's a very different thing. And I think it can throw some people off when they aspire to happiness or they think that what they're achieving in the money they're making should make them happy. Sometimes it does. Very often it doesn't. And they wake up and they're like, 'What happened?' Like I thought this was going to make me happy, but I'm not. So, I think there's a level of expectation setting where it's like I think money can be more like a vaccine where like it can prevent a lot of misery, which is great. Vaccines are wonderful. Like we don't have polio. It's a great thing, but maybe that's a good analogy because you and I don't wake up in the morning being like, 'Oh, I'm so glad I don't have polio. So grateful for the fact we don't do that.' We don't think about it. And I think that's a lot of what money can do. It is a lifestyle improvement, but don't think it's going to make you waking up ear to ear, grinning ear to ear.”
2023–2026
“The definitions are my own, so I'm just making this up, but I think rich is when you have enough money to make your mortgage payment, make your car payment, you can pay off your credit card bill every month. Like, you can afford the things that you're buying, technically. Wealthy, I think, is when you have a degree of independence and autonomy. The weird thing here is that wealth is the money that you don't spend. That's what wealth is. Like, the homes you didn't buy and the car you didn't buy. It's money that you saved and invested that is going to give you independence. And that's a hard thing for people, I think, to wrap their head around, that wealth is what you don't see. Because I can see your house, I can see your car, I can see your clothes, but I have no idea what your net worth is. I can't see your brokerage account. I can't see your bank account. So wealth is always hidden, and it throws a lot of people for a loop. Because if I was looking for a role model of physical fitness, well, I can see your fitness. I can see your weight and your muscle tone, what not. It's all visible. But when you're looking for a financial role model, who do you look up to? And a lot of people, particularly young people, will look up to the guy in the mansion with the Ferrari. But that guy, for all you know, is living paycheck to paycheck. A lot of those people are. And the person who is actually wealthy and independent might be the person in the modest house driving the modest car, that you would actually want to be. If you want to be wealthy instead of just rich, you want to be independent instead of just making your monthly payments, the people that you actually want to look up to are some of the hardest people to identify in society.”
2023–2026
“For a lot of people, not everybody, but for a lot of people, the more you are showing off or you just desire to show off, a lot of it is a wound that was inflicted upon you and you're like, I'm going to get back. And so, and sometimes too, you're not even showing off for other people. You're doing it for, you're doing it to prove to yourself.”