Monday, 19 October 2009

Book Review: The Secret Language of Money by David Krueger with John David Mann

I like this book. Reading it made me reflect, it explained puzzling human behaviour about money and investing with a neat combination of physical and psychological science and good stories, it gave me practical, implementable advice to, as its subtitle says, "make smarter financial decisions and live a richer life".

The book provides a welcome new approach to improving our own investing and financial success. Unlike the general run of investing books written by economists, mathematicians, engineers, author Krueger formerly practised as a psychiatrist and is now an executive coach. Instead of the facile and useless "just say no" kind of thought that seems to follow from the huge catalogues of irrational investor behaviour (e.g. see Behavioural Finance), Krueger offers ingenious solutions to defeating to defeating our own bad tendencies. One I laughed at is his suggestion to counter impulse spending on a credit card by freezing it a block of ice.

Money is such an essential part of our lives (quoted in the book is the statement of Albert Camus: "It is a kind of spiritual snobbery that makes people think they can be happy without money.") that even one practical thought that a reader actually does something about will make its price more than worth it. And the book does cover a lot: basic attitudes, emotions about money and its alignment with life values and goals, aka our money story, debt, reckless spending, scams, bubbles. Find out why everyone, no matter what their income, thinks that about twice their current income is what it would take to make them happy (oops, caught me too!) and then what to do to make the numbers match up better so you can stop having money be a source of anxiety and become merely the means to an end that it should be.

  • re out of control spenders: "The spender's true goal, whether it is affection, intimacy, prestige, esteem, comfort, or connection, is something that money cannot buy."
  • "A balanced healthy approach to spending means using your money in those ways that best serve your values and your goals in life."
  • "Cons work because they tell us what we want to hear."
  • "... the graying of America has created a bull market on fraud" because the part of the brain that is most useful to detect the irrationality of scams, the pre-frontal cortex, tends to wane with advancing age
  • "Success has less to do with skills and intelligence than with a mindset." ... phew!, I was worried there! I'm not making fun of this statement. The story on page 55, which I presume is true, about the two anthropologists who have totally different outcomes in an experiment because of a difference in mindset struck me as powerful illustration of what I have observed so often - people who succeed but should not have based on "rational" factors and others who fail when by all rights they should have succeeded.
  • "Focus your energy on where you are headed rather than where you've been."
  • "Why do we keep walking the same path over and over, as if "trying harder" will make the critical difference - when we know very well where it is almost to lead?"
My main quibble is that some of the suggested cures to investing-related mistakes seem weak, too general or not very relevant.

Maybe another edition in future will beef up that part but in the meantime this is an excellent book in my opinion. 4.5 out of 5 stars.

Thanks to McGraw-Hill for providing me with a free copy to review. Check the book's own website to get a flavour of the book with some substantial content.

Other bloggers have reviewed this book too: Thicken My Wallet, Michael James on Money here and here and Million Dollar Journey


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CanadianInvestor said...

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