Three Big Takeaways:​
 

1. It was not until the 1980s that the idea that everyone deserves a dignified retirement took hold. And a way to get that dignified retirement ever since has been an expectation that everyone will save and invest their own money. Let me reiterate how new this idea is: the 401K did not exist until 1978. The Roth IRA was not born until 1998. It should surprise no one that many of us are bad at saving and investing for retirement. We're not crazy, we're all just newbies. (pg. 21)
    

2. Modern capitalism is a pro at two things: generating wealth in generating envy. Perhaps they go hand-in-hand; wanting to surpass your peers can be the fuel of hard work. But life isn't any fun without a sense of enough. Happiness, as it’s said, is just results minus expectations. The ceiling of social comparison is so high that virtually no one will ever hit it. (pg. 41)
    

3. The highest form of wealth is the ability to wake up every morning and say, “I can do whatever I want today.” People want to become wealthier to make them happier. Happiness is a complicated subject because everyone's different. But there is a common denominator and happiness - it's that people want to control their lives. The ability to do what you want, when you want, with who you want, for as long as you want, is priceless. Having a strong sense of controlling one's life is a more dependable predictor of positive feelings than any of the objective conditions of life we have considered. (pg. 83)
   
    

Other Key Ideas:​
 

What you're holding is 20 chapters, each describing what I consider to be the most important and often counterintuitive features of the psychology of money. The chapters revolve around a common theme, but exist on their own and can be read independently. It's not a long book. You're welcome. Most readers don't finish the books they begin because most single topics don't require 300 pages of explanation. I'd rather make 20 short points you finish then one long one you give up on. On we go. (pg. 7)

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Americans spend more on lottery tickets than movies, video games, music, sporting events, and books combined. And who buys them? Mostly poor people. The lowest income households in the United States on average spend $412 a year on lotto tickets, four times the amount of those in the highest income groups. 40% of Americans cannot come up with $400 in an emergency. They are blowing their safety nets on something with a one-in-a millions chance of hitting it big. That seems crazy to me. It probably seems crazy to you, too. But I'm not in the lowest income group. Likely you're not, either. So it's hard for many of us to intuitively grasp the subconscious reasoning of low-income lottery ticket buyers. (pg. 18)

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Studying a specific person can be dangerous because we tend to study extreme examples – the Billionaire's, the CEOs, or the massive failures that dominate the news - and extreme examples are often the least applicable to other situations. The more extreme the outcome, the less likely you can apply its lessons to your own life. You'll get closer to actionable takeaways by looking for broad patterns of success and failure. The more common the pattern, the more applicable it might be to your life. Trying to emulate Warren Buffett’s investment success is hard. But realizing that people who have control over their time tend to be happier in life is a broad and common enough observation that you can do something with it. (pg. 33)

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Capitalism is hard. But part of the reason this happens is because getting money and keeping money are two different skills. Getting money requires taking risks, being optimistic, and putting yourself out there. But keeping money requires the opposite of taking risks. It requires humility, and fear that what you made can be taken away from you just as fast. It requires frugality and an acceptance that at least some of what you've made is attributable to luck, so past success can't be relied upon to repeat indefinitely. The ability to stick around for a long time, without being forced to give up, is what makes the biggest difference. (pg. 59)

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If you're projecting your income, savings rate, and market returns over the next 20 years, think about all the big stuff that's happened in the last 20 years that no one could have foreseen: September 11th, a housing boom and bust, a financial crisis, a record-breaking stock market rally, and a coronavirus that shook the world. Therefore, a barbelled personality - optimistic about the future, but paranoid about what will prevent you from getting to the future - is vital. optimism is usually defined as a belief that things will go well. But that's incomplete. Sensible optimism is a belief that the odds are in your favor, and over time things will balance out to a good outcome even if what happens in between is filled with misery. And in fact you know it will be filled with misery. You can be optimistic that the long-term growth trajectory is up and to the right, but equally sure that the road between now and then is filled with landmines, and always will be. (pg. 63)

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There are few financial variables more correlated to performance than commitment to a strategy during its lean years - both the amount of performance and the odds of capturing it over a given time. The historical odds of making money in US markets are 50/50 over one day periods, 68% in one year periods, 88% in 10 year periods, and 100% in 20 year periods. (pg. 118)

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When saving for retirement we can look at history and see that the US stock market has returned an annual average of 6.8% after inflation since the 1870s. It's reasonable to use that as an estimate of what to expect on your own diversified portfolio when saving for retirement. However you should use room for error when estimating your future returns. Assume the future returns that you earn in your lifetime will be 1/3 than the historic average. The one-third buffer is enough to allow you to sleep well at night. (pg. 141)

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The “End of History illusion” is what psychologists call the tendency for people to be keenly aware of how much they've changed in the past, but underestimate how much their personalities, desires, and goals are likely to change in the future. All of us think that we have just recently become the people that we were always meant to be and will be for the rest of our lives. We tend to never learn this lesson. We always underestimate how much we will change in the future. (pg. 151)

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Pessimism just sounds smarter and more plausible than optimism. Tell someone that everything will be great and they likely shrug you off or offer a skeptical eye. Tell someone they're in danger and you have their undivided attention. If a smart person tells me they have a stock pick that's going to rise tenfold in the next year, I will write them off as full of nonsense. If someone who's full of nonsense tells me that a stock I own is about to collapse, I will clear my calendar and listen to their every word. If you say the world is going to go on getting better, you are considered embarrassingly mad. If, on the other hand, you say catastrophe is imminent, you may expect an award or prize. (pg. 179)

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Saving money is the gap between your ego and your income, and wealth is what you don't see. Wealth is created by suppressing what you could buy today in order to have more stuff or more options in the future. No matter how much you earn, you will never build enough wealth unless you can put a lid on how much fun you can have with your money right now. (pg. 207)

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Achieving some level of independence does not rely on earning a doctor's income. It's mostly a matter of keeping your expectations in check and living below your means. Independence at any income level is driven by your savings rate. And past a certain level of income your savings rate is driven by your ability to keep your lifestyle expectations from running away. (pg. 215)

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Most of what we get pleasure from - going for walks, reading, podcasts - cost little, so we rarely feel like we're missing out. A benefit of maintaining a lifestyle below what you can afford is avoiding the psychological treadmill of keeping up with the Joneses. Comfortably living below what you can afford, without much desire for more, removes a tremendous amount of social pressure that many people in the modern world subject themselves to. (pg. 216)