Understanding personal finance and figuring out what to do with your money can be a challenge. Unfortunately, as a society, we don’t seem to place much regard or emphasis on passing down useful skills and knowledge in this arena. As a result many of us reach adulthood and even gain employment, taking our first job all while lacking the requisite skills needed to live within our means.
That’s the bad news.
The good news is that if you look for it, help is all around you. Walk into any bookstore (or get on Amazon) and you’ll find numerous titles offering advice on money: how to make it, how to spend it and how to save it.
But which books should you actually read?
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All that choice can be overwhelming…too many choices can paralyze us into inaction. No worries, though. We’ve compiled a short list of the best books to read on the topic of personal finance!
1. I Will Teach You To Be Rich
Yeah, we know what you’re thinking. This book is a scam, right? The author himself, Ramit Sethi, recognizes that the title of his book sounds like it was written by a “Nigerian prince” but the content provided is undoubtedly first-rate.
At its core, this book has many great lessons that revolve around the three central themes of getting out of debt, automating your finances and going after big wins.
It’s the triple-threat of personal finance. It’s hard to grow your wealth if you’re mired in debt. The best thing to do is dig yourself out as soon as possible. Next, try to have your bill payments and savings automated so that you don’t have to think about it. Monthly savings accrue on autopilot and before you know you’ll have a substantial nest-egg. Finally, Sethi points out that while most people focus on where they can scrimp and save, fewer people think about how they can make MORE money. That’s what he means when he says “go after big wins”.
For example: learning to negotiate your salary could increase your earnings substantially (maybe as much as 20%). That increase is one that stays with you throughout – leading to huge gains over a lifetime.
It’s pretty simple stuff. As the author points out, do these three things well and you’ll be further ahead than 90% of the rest of the pack. This book is full of actionable advice and well worth a read.
2. The Millionaire Next Door
This book is the product of research by Thomas Stanley and William Danko on the habits of millionaires. By examining the behaviors of people who have managed to accumulate considerable amounts of wealth, you might then be able to emulate and recreate their success.
The authors break people down into groups by their level of net worth. They classify people as under, average or prodigious accumulators of wealth based on a simple formula. Not surprisingly, the prodigious accumulators of wealth were the people profiled in the book but what the authors found about their lifestyles was surprising.
Many of them didn’t have the extravagant tastes that you might assume goes hand in hand with being a millionaire. In fact…the authors found that many people don’t become millionaires because of how much money they spend on objects – but because they didn’t spend money on those very things. Put another way, millionaires became millionaires by living beneath their means. Hmmmm.
Other notable behaviors of the wealthy included not spending tomorrow’s cash: they didn’t take on a lot of debt. They also tended to spend more time thinking about and setting up their investments, spending on average almost twice as much time figuring out what to do with their investment funds. By contrast, under-accumulators of wealth (not millionaires) were more interested in spending time and money on buying new cars (definitely not an investment. Actually kind of the opposite of an investment).
When you get a chance, pick up a copy of the Millionaire Next Door to sponge up more lessons in wealth building.
3. Get A Financial Life
This book targets twenty and thirty year-olds and provides a bunch of great information – with no overreaching conclusions. Rather, the book presents its facts and allows you, the reader, to draw your own conclusions. If that sounds appealing then you should probably get your hands on this book.
Get A Financial Life by Beth Kobliner deals with all the big areas of personal finance: paying off debt, basic banking and investing but where it really shines is in its tackling of 401(k)s. Kobliner encourages people to get started sooner rather than later and offers tips on how to manage a 401(k) even during a rough market.
It’s an extremely practical book that seeks to offer insights on the nuts and bolts of running your financial life. You can learn about whether it’s better to rent or buy a house, what kind of insurance you need and even how to minimize your tax burden. This book is perfect for those who have an analytical bent and want the facts, not long platitudes and motivational speeches.
4. Berkshire Hathaway Letters to Shareholders: 1964-2014
Ok so this is less a book than it is just a compilation of all the letters written by Warren Buffett to his shareholders at Berkshire Hathaway, but we had to include it in this list.
Warren Buffett of course, is one of the greatest investors of all time. He’s guided Berkshire Hathaway from a small textile company into a behemoth conglomerate whose shares trade at around $200,000 a pop. In the 50 years he’s been at the helm, he’s accumulated incredible wealth and is the foremost authority on investing.
These 50 years’ worth of letters will give you an insight into the man and his methods and this alone should provide enough wisdom to last a lifetime. These aren’t just lessons for investing, these are lessons for life itself.