The Psychology of Money - be reasonable, not rational

A friend recommended this one, so I thought I’d give it a try. It turned out to be a quick read with some great insight into a sensible way to manage your finances, and a 5/5 from me.

It was engaging. I managed to get through it in 2 or 3 sittings during an international flight without getting bored by it.

The best message I heard was “aim to be reasonable, not rational with your finances”. The reality is we are not rational beings, but we can at least aim to be reasonable. Therefore it is better to use a strategy of investing that will let you sleep at night. That idea actually changed how I invest. Now I think about how I will feel about an industry, and whether it will go up and down, not just the actual likelihood of it doing well.

I also found the description of rich vs wealthy very accurate. “When most people say they would like to be a Millionare, most people mean that they would like to spend a million dollars, which is exactly the opposite of being a millionaire”. It didn’t change my own spending, but I thought it was a great quote.

There wasn’t anything I disagreed with, and I’d hand it to either kind of reader. Someone just starting out with money will get as much from it as someone who already invests.