On this episode of How To Money, Matt and Joel talk with venture capitalist and finance author Morgan Housel, who has written articles for the Wall Street Journal, Business Insider, USA Today and many others, as well as a book called The Psychology of Money. He discusses the importance of knowing and embracing our finance flaws – especially our "relationship to greed and fear" – knowing and being true to what our money goals are, and having durability as the cornerstone of our investment strategy, instead of quick profits. “Finance is emotional,” he says. “There’s no one right answer for most financial topics….it really comes down to your financial goals, which are very different for each person.”
When it comes to the stock market, Morgan stresses that we should never try to predict or forecast what it will do; instead, we should look into the past and see what it has done, in order to prepare. He compares it to living in California and expecting earthquakes: You don’t bother trying to predict the day or time; you just make sure your house and your family is ready for one at any time. Our personal finance decisions should be approached in a similar way. Instead of trying to imagine how we’ll feel or react when an economic crisis occurs, we should look at how we have reacted in the past. If we panicked when the stock market crashed in 2008 and in 2020, it’s safe to say that a less risky long-term financial strategy is a better decision for us, instead of hoping that we won’t react the same way next time. Knowing and embracing our financial flaws can help us make better, more realistic decisions.
Morgan also stresses that “personal finance is much more personal than finance.” It requires serious introspection about your relationship to money, what you want money to be able to do for you, what your family’s and your financial goals really are, and how you respond to financial ups and downs. Without that introspection, you can make a lot of missteps trying to follow the advice of people who may have different goals than you do. Don’t just trust financial experts or books that tell you to buy this stock or that stock – they may be “playing a different game” than you are. Knowing the personal part of personal finance enables you to make the best money decisions for you. They also talk about what Morgan invests in, what he thinks the economy will do after the pandemic, and much more; get all this great information on this episode of How To Money.
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