Originally published March 23, 2016
Understanding personal finance and knowing what to do with your money can be a challenge. Unfortunately, as a society, we don’t seem to place much importance on imparting useful skills and knowledge in this area. As a result, many of us reach adulthood and even get jobs, taking our first job while lacking the skills required to live within our means.
That’s the bad news.
The good news is that if you seek it, help is all around you. Walk into any bookstore (or go to Amazon.com) and you’ll find plenty of titles offering advice on money: how to earn it, how to spend it, and how to save it.
But what books should you actually read?
All this choice can be overwhelming…too many choices can paralyze us into inaction. No worries, though. We’ve compiled a short list of the best personal finance-themed books to read!
1. I will teach you to be rich
Yes, we know what you’re thinking. This book is a scam, right? The author himself, Ramit Sethi, acknowledges that the title of his book sounds like it was written by a “Nigerian prince”, but the content provided is undoubtedly top notch.
At its core, this book contains many valuable lessons that revolve around the three central themes of getting out of debt, automating your finances, and chasing big wins.
This is the triple threat of personal finance. It is difficult to grow your wealth if you are in debt. The best thing to do is to get on your own as soon as possible. Then try to automate your bill payments and savings so you don’t have to think about it. Monthly savings accumulate on autopilot and before you know it, you’ll have a substantial nest egg. Finally, Sethi points out that while most people focus on where they can save and save money, fewer people think about how they can earn MORE money. That’s what he means when he says “aim for the big wins”.
For example: learning to negotiate your salary could significantly increase your income (perhaps up to 20%). This increase is one that stays with you throughout life, leading to huge gains throughout your life.
It’s quite simple. As the author points out, do these three things right and you’ll be ahead of 90% of the rest of the pack. This book is full of practical advice and is definitely worth reading.
2. The Millionaire Next Door
This book is the product of Thomas Stanley and William Danko’s research into the habits of millionaires. By examining the behaviors of people who have succeeded in accumulating considerable wealth, you can then imitate and recreate their success.
The authors divide people into groups based on their level of net worth. They classify people as sub, average or prodigious accumulators of wealth according to a simple formula. Unsurprisingly, the prodigious wealth accumulators were the people profiled in the book, but what the authors discovered about their way of life was surprising.
Many of them didn’t have the extravagant tastes one would assume to go with being a millionaire. In fact, the authors found that many people don’t become millionaires because of the money they spend on things, but because they didn’t spend money on those things. In other words, millionaires became millionaires by living below their means. Hmmm.
Other notable behaviors of the wealthy include not spending tomorrow’s money: they haven’t taken on a lot of debt. They also tend to spend more time thinking about and setting up their investments, on average spending almost twice as much time figuring out what to do with their investment funds. In contrast, sub-wealth accumulators (not millionaires) were more interested in spending time and money on buying new cars (definitely not an investment. In fact, it’s quite the opposite of an investment).
When you get the chance, pick up a copy of The Millionaire Next Door to soak up more lessons on building wealth.
3. Get a financial life
This book is aimed at twenties and thirties and provides lots of interesting information – without overstated conclusions. Rather, the book presents its facts and allows you, as the reader, to draw your own conclusions. If that sounds appealing, you should probably get your hands on this book.
Get A Financial Life by Beth Kobliner covers all the major areas of personal finance: debt repayment, basic banking, and investing, but where it really shines is in its fight against 401(k). Kobliner encourages people to get started as early as possible and offers advice on how to manage a 401(k) even during a tough market.
This is an extremely practical book that seeks to offer insight into the inner workings of managing your financial life. You can find out whether it’s better to rent or buy a house, what type of insurance you need, and even how to reduce your tax burden. This book is perfect for those with an analytical bent who 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 just a compilation of all the letters written by Warren Buffett to his Berkshire Hathaway shareholders, but we had to include it in this list.
Warren Buffett, of course, is one of the greatest investors of all time. He guided Berkshire Hathaway from a small textile company to a giant conglomerate whose shares trade at around $200,000 a pop. In his 50 years at the helm, he has accumulated incredible wealth and is the foremost authority on investing.
These 50 years of letters will give you insight into the man and his methods and that alone should provide enough wisdom to last a lifetime. These are not just lessons for investing, they are lessons for life itself.