The Psychology of Money Chapter 19: All Together Now

Eat healthy. Exercise. Manage stress. Don’t smoke. These are common health recommendations that are broad and can be given to a large audience. It’s also understood that there are exceptions: for those about to go into heart surgery, don’t run a marathon. Kids can have some candy on Halloween. Recovering alcoholics are often encouraged to continue smoking while in rehab. Beyond exceptions, there also is nuance for individuals based on their specific circumstances. Allergies or other dietary restrictions need to be considered. Rehabilitation of an injury excludes many otherwise useful exercises. Alcohol is poisonous to the human body, but having a couple drinks with friends is often a net benefit.

It’s the same with your money. Broad recommendations and good practices don’t replace the times when you are an exception or otherwise need more nuanced advice. Throughout this book, we’ve seen that success in our personal finances comes down to how we behave. In his second to last chapter, Housel provides “a summary; a few short actionable lessons that can help you make better financial decisions.” But before that list, he gives an important caveat. He cautions that as an author trying to help millions of people, he does and can not know all of his readers. In his words, “I can’t tell you what to do with your money, because I don’t know you. I don’t know what you want. I don’t know when you want it. I don’t know why you want it.” This specific level of advice is what we offer in our planning services, what we’re in the process of moving all clients to. People seeking advice simply want to know, “What should I do?” Answering that question is our mission.

But there are still financial equivalents to the generic medical advice above that are broad but nevertheless helpful. Here is Morgan Housel’s list.

• Go out of your way to find humility when things are going right and forgiveness/compassion when they go wrong.

• Less ego, more wealth: Saving money is the gap between your ego and your income, and wealth is what you don’t see.

• Manage your money in a way that helps you sleep at night.

• If you want to do better as an investor, the single most powerful thing you can do is increase your time horizon.

• Become OK with a lot of things going wrong. You can be wrong half the time and still make a fortune.

• Use money to gain control over your time.

• Be nicer and less flashy.

• Save. Just save. You don't need a specific reason to save.

• Define the cost of success and be ready to pay it.

• Worship room for error.

• Avoid the extreme ends of financial decisions.

• You should like risk because it pays off overtime.

• Define the game you're playing.

• Respect the mess: There is no single right answer; just the answer that works for you.

We have two more weeks with Housel’s book: next week his final chapter on how he handles his own money, and a postscript titled “A Brief History of Why the U.S. Consumer Thinks the Way They Do”. After that I’ll announce the next book for this series, and offer an invitation to read it along with me.

Let us know

• Which of Housel’s points above feels most natural for you? Which feels most unnatural?

Until next time, happy reading!