Top 5 Best Personal Finance Books
If it’s time to start a budget, update your portfolio or even get yourself out of a mountain of debt, which are the best personal finance books to get there?
This list contains a selection of classics, interspersed with some more modern titles to help you get your financial life in order. They aren’t in any specific order- different books will be better suited to different life stages. The most important thing, of course, when it comes to personal finance, is to get started.
I Will Teach You To Be Rich – Ramit Sethi
If you want to be rich, or at least wealthier than you are now, but don’t want to give up the little things that make life more liveable, this is the book for you. The blurb offers up the quote “Buy as many lattes as you want” and whilst the program won’t strictly work if you adopt this as your complete philosophy, Ramit Sethi does show you how to save in the right places and splurge in others.
The basic premise of the book is that you set up a system that is automated and therefore allows you to become richer almost without you having to think about it. There’s obviously a lot more to it than just that, but that’s the underlying principle – and there’s no doubt it works.
As a slightly older reviewer, the one thing I would say is that this is a book that I felt was probably aimed more at those in their twenties and thirties than those who are older and playing catch-up. In fact, as an older reader there’s definitely an emphasis on how much harder it is to start when you’re older, which some older readers might find off-putting and not particularly helpful.
Overall, I think it’s a great financial read for those in their twenties and thirties who want a set-it-and-forget-it type strategy. For those willing to go harder on the frugality and spend more time to really accelerate their path to wealth it’s still a good and worthwhile read, but probably isn’t a one stop shop as it might be for someone who wants to do the right thing but not have to commit enormous amounts of time to it.
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The Richest Man In Babylon – George S Clason
This book is a personal finance classic and is a great first read for those interested in managing their money and accumulating wealth. Having said that, if you plan to buy it, be aware that it is essentially a book of stories- parables- about basic underlying financial principles, rather than a step by step guide to how to get wealthy by investing in x or y stock or optimising your portfolio.
Although the language is deliberately written in an older style it is nonetheless perfectly engaging and accessible to a modern audience and the style of utilising parables gives it an edge that makes it more entertaining than a standard personal finance guide. Through these parables the seven basic fundamental principles of accumulating wealth are brought to life, in a way that makes them seem understandable and almost obvious – even though most people don’t follow them.
This book would make a perfect gift for someone just reaching the age of financial independence or starting their first job – the younger you read this the better, although it’s never too late to benefit from the kind of advice it offers. Ideal as a first introduction to money principles.
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The Millionaire Next Door
The Millionaire Next Door is one of the most celebrated personal finance books in the world. However, whilst it’s an interesting read, in my opinion there’s a lot of padding. The basic premise of the book is that the people that you think are millionaires probably aren’t really the people with the money. People that display their money, whether in the form of cars, clothes or other ostentatious purchases rarely accumulate real wealth. It also disavows the reader of the idea that most millionaires come from wealthy families- the data shows that in fact, most are self made.
The book works from this premise and does a very good job of backing it up with real world data. However, there is a lot of repetition, and in some respects I found it a little preachy. Rarely does it discuss whether the frugality required to become a millionaire is worth it, or how to live a decent life while building wealth. Instead it mainly focuses on the characteristics of those who have been at sucessful at accumulating $1,000,000, what they do to achieve this and, more importantly, what they don’t.
It’s a worthwhile read at the start of your financial education. However, it doesn’t – like many personal finance books- guide you on how to invest. Instead, it focuses on frugality, which is all well and good- it just takes an awfully large amount of words to make its point.
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The Simple Path To Wealth – JL Collins
If I could buy only one personal finance book to keep in my home, I think this would be it. It’s suitable for all ages, straightforward, and works on the premise that there is likely no such thing as the kind of financial wizardry that can outperform the market by a large percentage long term.
Instead, JL Collins offers a simple, cost effective strategy to slowly but surely build wealth without spending a fortune on financial advisors or lawyers. It’s not the most exciting, get-rich-quick strategy – if that’s what you’re looking for this book will not doubt disappoint. Instead, it’s a slow but steady path to building a solid financial future that uses compounding and basic investment strategies. It doesn’t shy away from the pitfalls of investing in the stock market – he is quite clear that in bad times you will lose money. However, he is equally clear that as long as your investment is long term ultimately the chances are very good that by using his methods you will become wealthy.
A couple of caveats – Firstly, Collins suggests saving 50% of your wealth. This is a tenable idea if you are in your twenties with no dependents or financial commitments – less so for older readers trying to get their financial lives in order. Secondly, this book is written for the US reader. If you are in the UK, Australia or elsewhere in the world, you’ll need to adapt the advice for your local laws and circumstances.
That being said, this is still a book I would buy as a wedding or graduation gift for every young person I know. I only wish I’d read it when I was in high school.
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The Total Money Makeover – Dave Ramsey
If you’re in serious debt, or even just debt, this is probably the book you need to help you get out of it. Dave Ramsey pulls absolutely no punches and works on the premise that all debt is pretty much bad debt. Instead he offers a strategy to get you and your family out of debt and on the way to building a secure financial future. Starting with building a $1000 emergency fund and then paying off debt using his Snowball Effect method.
One thing to note about this book – most of it can be found elsewhere. Dave Ramsey has a highly successful podcast series that contains just about everything in this book and there is a huge amount of information about his various methods online. Also, unlike some of the other books on this list there are secondhand copies to be found on ebay and amazon – so no need to pay full price if you are already in debt. However, if you can afford it and would like all the info in one place, it’s well worth the cover price.
A couple of minor poing, I’ve personally employed many of his methods simply by using YNAB* a budgeting software that is transformative to family finances based on the envelop method. Secondly, please be warned that at times his delivery method can be a little preachy – something that started to irritate me part way through.
Those caveats aside, it’s a proven strategy that can make a significant difference to your financial life and is still among my top 5 personal finance books.
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