The Psychology of Money

“A genius who loses control over their emotions can be a financial disaster. The opposite is also true. Ordinary folks with no financial education can be wealthy if they have a handful of behavioral skills that have nothing to do with formal intelligence.”

Housel claims that people’s behavior and emotional control are more important to their financial health than a formal education in finance. This supports his theme that building wealth is possible for everyone as long as we learn the soft skill, “the psychology of money.” This quotation underscores Housel’s real-life example in which an educated financier became bankrupt while a janitor became a millionaire.

“You know stuff about money that I don’t, and vice versa. You go through life with different beliefs, goals, and forecasts, than I do. That’s not because one of us is smarter than the other, or has better information. It’s because we’ve had different lives shaped by different and equally persuasive experiences.”

Housel aims to broaden the reader’s notion of financial smarts by arguing that people learn equally important and valid lessons that differ based on their experiences. In making this argument, Housel presents financial management as a somewhat relative skill, rather than a matter of concrete right or wrong. He also encourages the reader to consider others’ experiences and perspectives with humility and an open mind—an unusual recommendation from a financial self-help book.

“Studying a specific person can be dangerous because we tend to study extreme examples—the billionaires, the CEOs, or the massive failures that dominate the news—and extreme examples are often the least applicable to other situations, given their complexity.”

Housel urges the reader to consider broad statistics and average results more reliable than the more sensational stories about outliers, whether successful or unsuccessful. This quotation persuades the reader that American culture’s obsession with dissecting specific events and personalities does not help disseminate sound financial wisdom, while also underestimating the role of chance in famous success stories.