The Psychology of Money Review: A Mindset Shift, Not a Roadmap
Our honest review of Morgan Housel's The Psychology of Money: the best lessons, the real weaknesses, and what it means for an Australian investor.
By Timothy Hirou GaschereauPublished 11 min read
The Psychology of Money has sold millions of copies and gets recommended in almost every "where do I start" money thread. But it's not the step-by-step investing guide a lot of people expect, and it was written for an American audience. Here's an honest look at what Morgan Housel gets right, where it falls short, and what it actually means for an Australian reader. It's part of our personal finance book reviews on Snowball Invest.
Quick answer
One of the best books ever written about how people think about money. It's not a step-by-step investing guide and it leans heavily on American examples, so for seasoned investors it will feel thin. But for anyone in their 20s to 40s who wants to understand why they make the financial decisions they do, it's absolutely worth the four-hour read. Our rating: 4 out of 5.
Want to read The Psychology of Money?
A short, memorable read that reshapes how you think about money. One of the best value books on this list.
In this guide
- →What the book is actually about, and the stories that anchor it
- →Genuine strengths and the real criticisms, side by side
- →Who it's for, and who should skip it
- →What critics say, and what readers say on Goodreads and Reddit
- →The Australian angle: which lessons translate, and which don't
📖 What is The Psychology of Money actually about?
Published in 2020, the book runs 242 pages across 20 short, essay-style chapters you can read in any order. There's no single argument built across chapters. Instead, Housel assembles a collection of ideas that together make one case: your behaviour with money matters far more than your knowledge of finance. A few stories anchor the whole thing.
| Story | The lesson |
|---|---|
| Ronald Read, the millionaire janitor | He left an 8 million dollar estate on a modest salary by buying good companies and holding for decades. Compounding beats income. |
| Rajat Gupta, the McKinsey CEO | Made around 100 million, then went to prison for insider trading. The hardest skill is getting the goalpost to stop moving. |
| Bill Gates and Kent Evans | Same talent, wildly different outcomes. Luck and risk are two sides of the same coin, and we underweight both. |
| The Man in the Car Paradox | Nobody admires the driver, they picture themselves in the car. Wealth is what you don't see. |
The chapter on freedom makes the case that the highest dividend money pays is control over your time. These are the lessons that stay with you. They're not complicated, they're just rarely said this clearly.
⚖️ Strengths and weaknesses
A fair review holds both sides up at once. Here's what Housel nails, and where the book falls short.
What it gets right
- ✓Genuinely readable: short sentences, concrete ideas, no textbook slog.
- ✓The anecdote-driven approach makes the lessons stick far better than formulas.
- ✓The behavioural angle explains why you won't do the right thing, not just what to do.
- ✓The compounding chapter on Buffett is one of the clearest arguments for starting early.
- ✓'Reasonable not rational' is a great reframe: a plan you follow beats a perfect one you abandon.
- ✓The 'enough' concept is the moral core, and it's treated with real seriousness.
Where it falls short
- ✕No actionable steps: it won't tell you how to build a portfolio or handle your super.
- ✕The 20-essay format gets repetitive, the same themes cycle back by the later chapters.
- ✕The examples are almost entirely American, so Aussie readers do their own translating.
- ✕The case studies lack diversity, mostly wealthy American men.
- ✕Experienced readers of behavioural economics will find much of it familiar.
- ✕The title slightly overpromises: it's popular non-fiction, not rigorous psychology.
👤 Who is it for, and who should skip it?
Read it if you
- ✓Are in your 20s or 30s and keep making the same financial mistakes.
- ✓Have money anxiety and want a calmer, longer-term perspective on wealth.
- ✓Read The Barefoot Investor and want something deeper on the mindset side.
- ✓Are a parent thinking about how to talk to your kids about money.
- ✓Find traditional finance books dry and want something you'll actually finish.
Skip it if you
- ✕Want specific investment strategies, portfolio construction or tax guidance.
- ✕Have already read several behavioural economics books.
- ✕Want Australian-specific content on super, franking credits or property.
- ✕Are an experienced investor looking for new technical insight.
🔍 What do critics say about The Psychology of Money?
Professional reception has been broadly positive, with sharp caveats. The praise centres on how accessible Housel makes behavioural finance, and the short-chapter format that keeps complex ideas digestible. The criticism is consistent: the book lacks a theoretical framework, the anecdotes are memorable but the mechanisms behind them aren't explained, and the advice is too general to be actionable. Some reviewers also note the examples are filtered through a very particular demographic lens, mostly wealthy American men. The consensus: an excellent introduction with limited depth, best for beginners or as a mindset reset.
💬 What do readers say? Goodreads and Reddit
On Goodreads the book holds a 4.27 out of 5 from more than 358,000 ratings, with roughly 82% giving it 4 or 5 stars and only 3% giving it one or two. The most common praise: "changed how I think about money" and "wish I'd read this at 22." The most common criticism: "nothing new if you've read behavioural economics" and "wanted more actionable advice."
On r/AusFinance it's recommended constantly alongside The Barefoot Investor, with a neat division of labour a top comment sums up: "Barefoot tells you what to do. Housel tells you why you won't do it."
🇦🇺 The Australian angle: does it apply here?
The behavioural lessons translate perfectly. The psychology of money isn't about the S&P 500 or American tax brackets, it's about how humans think, feel and behave around money, and Australians are humans. We panic-sell, we lifestyle-inflate, we compare ourselves to the neighbours and we struggle to define "enough." Every lesson applies here.
The mechanics do not translate. Housel never mentions superannuation, franking credits (the dividend imputation system unique to Australia that genuinely changes the maths on dividends), the concentration of the ASX in financials and materials, or Australia's particular obsession with residential property. The compounding lesson maps directly onto super: contributions made in your 20s and 30s compound in a low-tax environment for decades. For the actual mechanics of tax and super, you need ASIC's Moneysmart or a licensed adviser. As a framework for thinking about why you make the decisions you do, it's as relevant in Melbourne as in Manhattan.
💰 The Psychology of Money: the verdict
A genuinely good book. It's not the best ever written on behavioural finance (that's probably Kahneman's Thinking, Fast and Slow), and it won't tell you what to invest in. But it will change how you think about money, and that's worth more than most people realise. For Australians building their financial life, it belongs on the shelf: read it once for the mindset shift, then find Australian-specific resources to put that mindset into practice.
When you're ready for the practical side, our guide to passive investing in Australia is a good next step.
Want to read The Psychology of Money?
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❓ Frequently asked questions
Is The Psychology of Money worth reading?
+
Yes, for most people. It's one of the most readable and genuinely useful books on money mindset available. It won't give you a portfolio or a tax strategy, but it will help you understand why you behave the way you do with money, which is often the more important problem to solve. At 242 pages, the time investment is low and the return is high.
What are the main lessons of The Psychology of Money?
+
The key lessons: your financial behaviour matters more than your financial knowledge; compounding rewards patience above all else; wealth is what you don't spend, not what you display; luck and risk play a bigger role than most people admit; and defining 'enough' is one of the most important financial decisions you can make. It also argues that a reasonable plan you stick to beats a perfect one you abandon.
How long does it take to read The Psychology of Money?
+
Most readers finish it in three to five hours. The 20 short chapters average around 10 to 12 pages each, and the writing is fast-moving and accessible. It's a realistic weekend read or a two-week commute book.
Is The Psychology of Money good for beginners?
+
Yes. It's best suited to readers who are new to thinking seriously about money, or who understand the basics but struggle to follow through. Experienced investors who have already read behavioural economics texts may find it familiar ground, but for beginners it's close to essential.
Is The Psychology of Money relevant for Australian investors?
+
The behavioural lessons are fully relevant. The mechanics are not. Housel writes from an American perspective and doesn't cover superannuation, franking credits, the ASX or Australian tax. Apply the mindset lessons to your own context and use Australian resources for the practical steps. Think of it as the why book, not the how book.
What is the Morgan Housel book actually about?
+
The Psychology of Money is a collection of 20 essays about how people think and behave around money. It argues that financial success is less about intelligence or knowledge and more about behaviour, patience and temperament, illustrated with real stories including a janitor who died with 8 million dollars and a McKinsey CEO who went to prison for insider trading.
📚 Get the book (and two worthy next reads)
The Psychology of Money
Morgan Housel
19 short stories on how people actually think and feel about money, not just the maths of it.
The Behavior Gap
Carl Richards
Carl Richards uses simple napkin sketches to explain why we buy high, sell low, and generally get in our own way. Closing the gap between smart plans and messy human behaviour is worth more than any hot stock tip.
Thinking, Fast and Slow
Daniel Kahneman
The Nobel laureate's classic on the two systems driving how we think, and why our fast, intuitive brain makes such expensive money mistakes. It explains the behavioural traps behind nearly every bad investing decision.
Some links above are affiliate links. If you buy through them, Snowball Invest may earn a small commission at no extra cost to you. We only recommend books we'd suggest anyway.
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Timothy Hirou Gaschereau
Founder of Snowball Invest, not a financial adviser.
I write about what I'm learning myself, because nobody ever taught us how to take control of our own money. It's a skill, not a mystery, and it's never too late to learn it. The best day to start was yesterday, the second best is today.
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