Sumirti Singaravelu's Reviews > The Psychology of Money

2020 is one of those years where I took my personal finance management seriously not only because I turned 30 but I also became very aware of all the financial options available for investment and the great necessity for a woman, especially a married one, to be financially literate and independent.

The Psychology of Money is one of the those books that lays the fundamentals required for investment and saving your money without pushing and punishing with a lot of jargons, technical terms, and read-the-offer-documents-carefully-before-investing kind of mundane warnings (mind you, I am academically qualified and work in Finance and a Legal field). The book speaks in a very clear manner, chapters being crisp and brief, in a language which is assertive with a lot of understanding of the psychology of an individual average investor/human who wants to secure the future.

This book helped me to understand, something I never really did till now, that saving/investing money is a habit which is greatly guided by the relationship which one establishes with money itself. Do you see money as a tool/ enabler to pursue goals which brings you happiness or do you see money itself as happiness? Do you want to earn money because you want to buy 'things' (tangible, and as a show) or do you want to earn money because you want to secure a future that is stable, well-grounded, good-enough to weather through all the rough corners of life? Do you want to be rich or wealthy?. It's these fundamental questions which will guide in forming solid habits towards savings and investments.

The chapter explaining why money should be saved although there's no visible goal gave me words for thoughts I never could articulate otherwise. Money has to be saved not because one aims to buy a house or achieve a dream but rather it helps to buy one of the most valuable of all things - TIME. Also, the chapter on how debt erodes wealth gives a clear picture on the actual (opportunity) cost of debt, which for an individual investor, is too huge and substantially toxic in the long term (NOTE: This book does not talk about the educational debt and has not much to offer on the same. All the debts mentioned are those incurred for purchasing an asset/developing an asset/maintaining a lifestyle).

Although the chapters on compounding are too known to me, as someone from Finance field, to read the same in a clear language is such a pleasure in itself. I loved the insistence on being 'reasonable' in one's investments and expectations of returns rather than being completely 'rational'. Nothing helps to act as a motivation to save ourselves from the spiral of consumerism than the simple sentence, "If you buy too many things from your money, all you have is too many things and no money."

Although almost all the examples in this book is about a guy, and it really made me feel bad that there isn't a name of a woman in the list of best investors around the world, it did help me to understand that the true value of money is not in its value of amassing assets but rather in its purchasing power to leverage oneself in life - in terms of freedom, independence, security, and ability to achieve dream, which one doesn't have to let go.

Definitely a book I will get back to read every year - again and again!