Back in 2020, at the height of the COVID pandemic, I remember starting a book that everyone seemed to be talking about, ‘The Psychology of Money’ by Morgan Housel. Quite frankly, it was one of the best books I’d ever read.
It started with a bang, talking about a tech executive who skipped $1000 gold coins like rocks into the ocean, and went on to tell about a rural janitor who died in 2014 at age 92. The tech executive ended up broke very quickly. The janitor left $6 million to his local hospital and library.
The rest of the book, very simply put, explains how those two things happened. Housel’s basic premise is that money itself is just a tool. Spending money is one thing, building wealth is another. His argument is building wealth is more about how you behave than having niche knowledge. He also is very clear that money is deeply personal – you’ve read that multiple times in this column.
Every single person in the world has had unique experiences, which shapes how they view money. If your first job was during the .com boom of the late 1990s, you probably think of money differently than if you graduated right at the global financial crisis of 2008. No one way is right, but Housel argues that there are reasons a tech millionaire goes bankrupt, and a janitor becomes a millionaire. Here are my four favourite takeaways from The Psychology of Money:
1. Getting Wealthy & Staying Wealthy Are Different Skills
Building wealth requires risk-taking and optimism, but keeping it requires humility, frugality, and paranoia. Many people who are great at making money are terrible at keeping it. Housel explains that what we consider wealth – Lamborghinis, branded clothes, McMansions – they are not signifiers of wealth as much as shows of spending. He argues that true wealth is what you saved, not spent.
2. Don’t Underestimate the Power of Compounding
A quote I see all the time is, “Compound interest is the 8th wonder of the world. He who understands it, earns it. He who doesn’t, pay it.” It is always misattributed to Albert Einstein, though there is no proof he actually said it at all. In any case, whoever said it was right, and Housel agrees. He points out that a vast majority of Warren Buffett’s billions came after he turned 60, because compounding had decades to work in his favour. So yes, stay invested for as long as possible.
3. Good Enough is Enough
The problem with a lot of financial advice is it shouts about the best case, and whispers about the best case. If, like me, you’re prone to catastrophizing, then you will probably spiral over the worst case, while ignoring the best. As with most things, the truth is somewhere in the middle, so settle for something you can live with. In short, good enough is enough. Housel puts it better – he says rational financial decisions are hard to stick to emotionally. A strategy you can actually maintain through fear, greed, and uncertainty is better than a theoretically optimal one you’ll abandon. Being reasonable beats being perfectly rational.
4. Money Should Buy Freedom
I spend a lot of time reading about the Financial Independence, Retire Early (F.I.R.E.) movement. Toronto Life recently did an entire issue on this subject, which I read cover to cover. But I was less interested in the R.E. part, and more in the F.I. part – because to me (and Housel) the real goal of money isn’t the retirement necessarily, nor is it a fancy car or a huge house. It’s autonomy and freedom, the ability to do what I want, when I want, with who I want.
The Art of Spending Money
As you can tell, I was very impressed by The Psychology of Money and so I was thrilled when I got my hands on a copy of Morgan Housel’s new book The Art of Spending Money, which came out in 2025. To Housel himself this was the natural follow up to his 2020 bestseller, one in which he focuses on how to spend.
His central claim is very similar to the one in the previous book. Money is personal, and spending is more art than science because it’s shaped by how the world views our spending. Here are my four favourite takeaways from The Art of Spending Money:
1. Spend to Impress You, Not Others
In the first chapter, Housel says that all behaviour makes sense with enough information. He quotes a newspaper headline from the roaring 20s that said, “The More You Were Snubbed When Poor, the More You Enjoy Displaying Your Wealth.” It’s seeking validation, in a way. Housel points out that visible spending is spending, wealth is invisible. Housel reminds us that visible spending tells you nothing about invisible well-being, the less tangible things matter more.
2. Know Yourself
Housel points out that if you’re already unhappy, more money won’t fix your problems. And when spending money does make you happier, it’s usually for indirect reasons – so buying a bigger house is great when you use it to entertain more family and friends, but if you don’t have friends and family to share it with, it could make you lonelier.
3. Don’t Underestimate the Power of Compounding
No I didn’t just copy this from previously in the article and paste it here. Compounding features in this book too – Housel notes that quiet compounding is underestimated. This means ignore the external noise, and focus on the inner truth. Like the Aesop fable, slow and steady.
4. Everyone’s Unique
Everyone has their own journey, and you have no idea what’s going on with them. If you live your life to impress others, you will end up poorer – both financially, and in other ways. At the same time, don’t judge others, they’re working off of their own life experiences, which you won’t ever know.
The Final Word
I liked both books, and they’re companions to each other. In the introduction of The Art of Spending Money, Housel writes that there are two ways to use money – one as a tool to live a better life, and the other as a yardstick to measure yourself against everyone else. If you live your life chasing the latter, you will never find the former.
Some Other Stuff I Tried Last Month:
- Bar Avelo in Toronto, ON. Avelo offers two plant-based dining experiences, both serving some of Toronto’s finest cuisine. The lower floor restaurant offers a 5 or 8 course Tasting Menu, while upstairs, Bar Avelo has an extensive hand-crafted cocktails list, and an a la carte food menu. I recommend it!
- Dvořák’s Cello Concerto, performed by Spanish cellist Pablo Ferrández. It was magical.
- Little Willy, a puppet show retelling of Romeo & Juliet by Order of Canada recipient Ronnie Burkett. It was unhinged and hysterically funny!
Disclaimer
The opinions and views expressed in each book are those of the authors and do not necessarily reflect the views of Harvest ETFs. Similarly, the opinions and views expressed in this review are solely those of the reviewer (the Author) and do not represent the views of Harvest ETFs. The Author and Harvest ETFs have no affiliation with the author of the book.
This communication should not be considered as advice and/or a recommendation to purchase or sell the mentioned securities or used to engage in personal investment strategies. Tax, investment and all other decisions should be made with guidance from a qualified professional.
