The Psychology of Money Quotes

“Become OK with a lot of things going wrong. You can be wrong half the time and still make a fortune, because a small minority of things account for the majority of outcomes. No matter what you’re doing with your money you should be comfortable with a lot of stuff not working. That’s just how the world is. So you should always measure how you’ve done by looking at your full portfolio,”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness

“Save. Just save. You don’t need a specific reason to save. It’s great to save for a car, or a downpayment, or a medical emergency. But saving for things that are impossible to predict or define is one of the best reasons to save. Everyone’s life is a continuous chain of surprises. Savings that aren’t earmarked for anything in particular is a hedge against life’s inevitable ability to surprise the hell out of you at the worst possible moment.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness

“Define the cost of success and be ready to pay it. Because nothing worthwhile is free. And remember that most financial costs don’t have visible price tags. Uncertainty, doubt, and regret are common costs in the finance world. They’re often worth paying. But you have to view them as fees (a price worth paying to get something nice in exchange) rather than fines (a penalty you should avoid).”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness

“Worship room for error. A gap between what could happen in the future and what you need to happen in the future in order to do well is what gives you endurance, and endurance is what makes compounding magic over time. Room for error often looks like a conservative hedge, but if it keeps you in the game it can pay for itself many times over.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness

“Avoid the extreme ends of financial decisions. Everyone’s goals and desires will change over time, and the more extreme your past decisions were the more you may regret them as you evolve.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness

“You should like risk because it pays off over time. But you should be paranoid of ruinous risk because it prevents you from taking future risks that will pay off over time.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness

“Define the game you’re playing, and make sure your actions are not being influenced by people playing a different game.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness

“Charlie Munger once said “I did not intend to get rich. I just wanted to get independent.” We can leave aside rich, but independence has always been my personal financial goal.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness

“If there’s a part of our household financial plan I’m proud of it’s that we got the goalpost of lifestyle desires to stop moving at a young age. Our savings rate is fairly high, but we rarely feel like we’re repressively frugal because our aspirations for more stuff haven’t moved much. It’s not that our aspirations are nonexistent—we like nice stuff and live comfortably. We just got the goalpost to stop moving.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness

“It is impossible to think of a story about Ronald Read performing a heart transplant better than a Harvard-trained surgeon. Or designing a skyscraper superior to the best-trained architects. There will never be a story of a janitor outperforming the world’s top nuclear engineers. But these stories do happen in investing.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness

“There is never a moment when you’re so right that you can bet every chip in front of you. The world isn’t that kind to anyone— not consistently, anyways. You have to give yourself room for error. You have to plan on your plan not going according to plan.”
― Morgan Housel, The Psychology of Money

“The man who can do the average thing when all those around him are going crazy.”
― Morgan Housel, The Psychology of Money

“Michael Batnick says, “some lessons have to be experienced before they can be understood.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness

“The Battle of Stalingrad during World War II was the largest battle in history. With it came equally staggering stories of how people dealt with risk. One came in late 1942, when a German tank unit sat in reserve on grasslands outside the city. When tanks were desperately needed on the front lines, something happened that surprised everyone: Almost none of them worked. Out of 104 tanks in the unit, fewer than 20 were operable. Engineers quickly found the issue. Historian William Craig writes: “During the weeks of inactivity behind the front lines, field mice had nested inside the vehicles and eaten away insulation covering the electrical systems.” The Germans had the most sophisticated equipment in the world. Yet there they were, defeated by mice. You can imagine their disbelief. This almost certainly never crossed their minds. What kind of tank designer thinks about mouse protection? Not a reasonable one. And not one who studied tank history.”
― Morgan Housel, The Psychology of Money

“Few investors have the disposition to say, “I’m actually fine if I lose 20% of my money.” This is doubly true for new investors who have never experienced a 20% decline. But if you view volatility as a fee, things look different. Disneyland tickets cost $100. But you get an awesome day with your kids you’ll never forget. Last year more than 18 million people thought that fee was worth paying. Few felt the $100 was a punishment or a fine. The worthwhile tradeoff of fees is obvious when it’s clear you’re paying one. Same with investing, where volatility is almost always a fee, not a fine. Market returns are never free and never will be. They demand you pay a price, like any other product. You’re not forced to pay this fee, just like you’re not forced to go to Disneyland. You can go to the local county fair where tickets might be $10, or stay home for free. You might still have a good time. But you’ll usually get what you pay for. Same with markets. The volatility/uncertainty fee—the price of returns—is the cost of admission to get returns greater than low-fee parks like cash and bonds. The trick is convincing yourself that the market’s fee is worth it. That’s the only way to properly deal with volatility and uncertainty—not just putting up with it, but realizing that it’s an admission fee worth paying. There’s no guarantee that it will be. Sometimes it rains at Disneyland. But if you view the admission fee as a fine, you’ll never enjoy the magic. Find the price, then pay it.”
― Morgan Housel, The Psychology of Money

“We’re so far committed to the independence camp that we’ve done things that make little sense on paper. We own our house without a mortgage, which is the worst financial decision we’ve ever made but the best money decision we’ve ever made. Mortgage interest rates were absurdly low when we bought our house. Any rational advisor would recommend taking advantage of cheap money and investing extra savings in higher-return assets, like stocks. But our goal isn’t to be coldly rational; just psychologically reasonable.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness

“there are many things never worth risking, no matter the potential gain.”
― Morgan Housel, The Psychology of Money

“not all success is due to hard work, and not all poverty is due to laziness. keep this in mind when judging people, including yourself.”
― Morgan Housel, The Psychology of Money

“They are driven by the same thing: You are one person in a game with seven billion other people and infinite moving parts. The accidental impact of actions outside of your control can be more consequential than the ones you consciously take.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness

“Growth is driven by compounding, which always takes time. Destruction is driven by single points of failure, which can happen in seconds, and loss of confidence, which can happen in an instant. It’s easier to create a narrative around pessimism because the story pieces tend to be fresher and more recent. Optimistic narratives require looking at a long stretch of history and developments, which people tend to forget and take more effort to piece together.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness

“Good decisions aren’t always rational. At some point you have to choose between being happy or being “right.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness

“Modern capitalism makes helping people fake it until they make it a cherished industry.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness

“There’s a lot of truth to that … We assume that tomorrow won’t be like yesterday. We can’t afford to rest on our laurels. We can’t be complacent. We can’t assume that yesterday’s success translates into tomorrow’s good fortune. Here again, survival. Not “growth” or “brains” or “insight.” The ability to stick around for a long time, without wiping out or being forced to give up, is what makes the biggest difference. This should be the cornerstone of your strategy, whether it’s in investing or your career or a business you own.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness

“Many bets fail not because they were wrong, but because they were mostly right in a situation that required things to be exactly right.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness

“It’s different from being conservative. Conservative is avoiding a certain level of risk. Margin of safety is raising the odds of success at a given level of risk by increasing your chances of survival.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness

“barbelled personality—optimistic about the future, but paranoid about what will prevent you from getting to the future—is vital.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness

“Optimism is usually defined as a belief that things will go well. But that’s incomplete. Sensible optimism is a belief that the odds are in your favor, and over time things will balance out to a good outcome even if what happens in between is filled with misery.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness

“It is not intuitive that an investor can be wrong half the time and still make a fortune. It means we underestimate how normal it is for a lot of things to fail. Which causes us to overreact when they do.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness

“Thinking, Fast and Slow.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness

“Wealth is just the accumulated leftovers after you spend what you take in. And since you can build wealth without a high income, but have no chance of building wealth without a high savings rate, it’s clear which one matters more.”
― Morgan Housel, The Psychology of Money: Timeless lessons on wealth, greed, and happiness