The Psychology of Money by Morgan Housel – A Visual Summary

In his book The Psychology of Money, Morgan Housel shares timeless lessons on wealth, greed, and happiness.

In the video above and blog post below I’d like to share with you some of my favorite ideas from the book, sketched out because that’s what we do here!

Quick note before we get too far in: next month I’m hosting a sketchnote book club in which we’ll be reading, sketchnoting, and discussing the The Creative Act by Rick Rubin. Come join us!

Back to The Psychology of Money. Here’s a run-down of my favorite ideas.

What helps you sleep at night?

Housel encourages us to shoot for reasonable actions and decisions rather than going for 100% rational. It’s okay to make financial decisions based in part on how you want to feel.

If a certain decision (like paying off your mortgage early rather than investing that money, or having a larger portion of your savings in cash rather than invested) helps you sleep at night, then do it!

Get the goalpost to stop moving.

As you progress in your career and start to make more money, it’s easy to let lifestyle creep increase your regular expenses by the same amount. Don’t let that goalpost keep moving.

The earlier you’re able to establish and maintain a reasonable lifestyle that makes you happen and doesn’t break the bank, the easier it will be to save money for retirement, for emergencies, or simply for peace of mind.

Shut up and wait.

Here’s Housel’s general approach to investing in the stock market: go with low-cost index funds (which represent a large swath of the market rather than individual companies), and then just shut up and wait.

The market’s going to move up and down over short and medium time scales (like days and weeks and maybe even years), but over its history it has consistently gone up over the long run. So don’t agonize over what the market is doing in this exact moment.

Have a barbelled personality.

Even though the market has a long history of generally going up, there’s nothing to say it won’t crash and burn at some point in the future. So it would be a mistake to put all of your money there. That’s where a barbelled personality comes in.

Housel’s suggestion is to be both optimistic about the future (take risks that might not work out) but also be paranoid about potential failure (play conservative so that no single event or downturn will ruin you financially). One way that plays out in Housel’s life is how much of his savings he keeps in cash: 20%, which is much larger than usual. That’s the paranoid play that ensures that he’ll still be okay even if the market tumbles.

Avoid the extremes.

The concept of balance shows up in this next piece of advice too: avoid extreme decisions around your lifestyle and your finances. Going too fast or too slow simply won’t be sustainable.

So shoot instead for a life that allows for a moderate amount of savings, a reasonable amount of free time, and at least a moderate amount of time with your family and friends.

Control your time.

Here’s the best thing that money can buy you: time. As our most important non-renewable resource, our time often doesn’t get enough attention and credit.

As Housel puts it, controlling your time is the highest dividend that money pays. Financial security means that you can take time off of work when you need to, that you don’t have to rush to the first job available but can instead wait for a good fit, that you can even bump down from full time to 3/4- or 1/2-time so that you can spend more of your life doing things you care about outside of work.

If you enjoyed these ideas, I imagine you’ll like the rest of the book too.


If you like the style of visual notes that I shared and want to develop that skill yourself, check out our library of online courses as well as our upcoming sketchnote book club!