Unless you took some business courses in college, you probably don’t have a deep understanding of financing. Public high schools for the most part do not cover personal finance, and if they do it is usually not in-depth or comprehensive. There are countless websites, articles, and podcasts that aim to guide people through the complicated world of personal finance, but sometimes it feels like there is too much advice.
It can be overwhelming to know where to start when there is so much content. That’s why we’ve gathered our top five books for personal finance and picked out some of our favorite bits of wisdom.
Here are our top five books for personal finance.
Financial Freedom: A Proven Path to All the Money You Will Ever Need by Grant Sabatier
Who’s it for: Millennials looking to get ahead.
Why we like it: It teaches you to think more deeply about your spending choices.
Grant Sabatier, the “Millennial Millionaire”, chronicles his five year journey from broke to millionaire. Here the author shares his strategies and advice for becoming financially independent. Sabatier stresses the importance of being thoughtful about your purchases and considering the long term costs of purchases. Being diligent with your budget and recordkeeping is of the utmost importance. Below are our top three takeaways from his book:
- Consider the total cost of a purchase. Your cost goes beyond the immediate ten dollars that you pay for an item on impulse. If you instead invested that ten dollars in a 401K or in the stock market, that money would be worth more than ten dollars in the long term. Sabatier is adamant that you must think about this cost, and think about the amount of time and work that goes into what you earn to pay for that.
- Check your finances daily. This will encourage you to stay on track and warn you if you are falling away from your financial goals. While many experts advise against checking your investments daily as it may cause you to be too anxious and make hasty decisions, Sabatier maintains that this is good practice to keep you focused.
- Get out there and side hustle. Sabatier worked a full time job while working up to forty hours outside of his job. He did projects that he liked, such as web design, to make extra money to invest. He stresses that when you work for someone else, your earning potential is limited, but when you work for yourself, your earning potential is endless.
The Total Money Makeover: A Proven Plan for Financial Fitness by Dave Ramsey
Who’s it for: People struggling with debt.
Why we like it: It is a practical approach to tackling debt and living within your means.
Ramsey’s book has been a staple of the personal finance genre for almost twenty years, and for good reason. This book has helped millions of people get out of debt and get into good budgeting habits. By starting slow with small changes here and there, Ramsey shows how you can slowly but drastically change your approach to money. This book is built around Ramsey’s “Seven Baby Steps” to financial freedom, outlined below.
- Save $1,000 for your starter emergency fund. Everyone should have a rainy day fund for emergencies and unexpected costs. Start small in the beginning and work to increase it.
- Pay off all debt (except the house) using the debt snowball. This snowball system involves listing all of your debts from largest to smallest, and paying the minimums on everything except the smallest debt. Working from smallest to largest, work on paying off all your debts.
- Save 3–6 months of expenses in a fully funded emergency fund. As time goes on, add to your starter emergency fund so that you are more capable of handling a catastrophic emergency.
- Invest 15% of your household income in retirement. Starting to save for retirement is a huge step in financial independence.
- Save for your children’s college fund. Set your kids up for success if you are able to do so. Unburdening them (or lessening the burden at least) of student debt will help them tremendously in the future.
- Pay off your home early. When other debts are paid off, paying off your mortgage is a huge step towards financial independence. Also, you can save a great deal of money in interest if you cut a few years off of your mortgage.
- Build wealth and give. When you are in a comfortable position, continue saving but be charitable and give back.
The Psychology of Money: Timeless lessons on wealth, greed, and happiness by Morgan Housel
Who’s it for: People who tend to overspend.
Why we like it: It forces you to examine the psychology of your money decisions and changes the way you think about finances.
The Psychology of Money takes a whole new approach to the subject of personal finance. While finance is typically thought of as a math and data driven field, Housel examines finances from a psychological point of view, examining why people make the money choices they do. By examining why people make financial choices, he gives tips on how to avoid common pitfalls of overspending. While there were many great takeaways from Housel’s book, here are our top three:
- Define when enough is enough. As humans, it is our nature to always want and strive for more, but it is important to decide what your actual goals are. At some point, we must stop comparing ourselves to others and stop moving our financial goalposts.
- Be reasonable with your finances, not rational. Again, we are human. We do not make decisions based on spreadsheets and flowcharts, we make decisions when we are out and about. You cannot realistically aim for perfection with your finances, so try to be as reasonable as you can in your circumstances.
- Always leave room for error or disaster. If things can go wrong, they probably will at some point. Always have an emergency fund and try to give yourself buffers in your budget.
Raising Financially Fit Kids by Joline Godfrey
Who’s it for: Parents with kids of all ages.
Why we like it: It discusses financial stability while also emphasizing the importance of family building, charitable deeds, and civic duty.
Teaching your kids to be fiscally responsible is a daunting but incredibly important part of parenting. No parent wants to see their child struggle with finances, so it is necessary to teach them good habits and tips early on. This book is strategically broken down by age groups, from young children up to 20-somethings, so that you can teach kids of any age how to be more financially responsible. Godfrey includes tons of age-specific activities for parents of all income levels. This book focuses primarily on three major themes:
- Financial education is about more than money. It is also about building stable, financially literate families who can go out and make their own dreams come true.
- Financial stability is about living within your means. It is not necessarily about amassing more and more wealth, but amassing skills and living comfortably while doing so.
- Giving wisely is a global citizen’s responsibility. Godfrey stresses the importance of charity when you are in a comfortable financial situation.
The Intelligent Investor by Benjamin Graham
Who it’s for: People looking to up their investment game.
Why we like it: It is a classic book with lots of timeless advice, but it has also been updated to stay relevant for today’s investor.
Graham’s book has been considered a financial bible since its initial publication in 1949. Since then, it has been updated to reflect today’s current economic conditions and markets. Graham’s top investing principles have guided businessmen such as Warren Buffet, who considers Graham to be his teacher in investing. Here we have summarized his top investing principles:
- Always invest with a margin of safety. The margin of safety refers to buying stocks at a significant discount to its intrinsic value, which provides the opportunity for high-returns as well as minimizing risk.
- Expect volatility and profit from it. Investing is inherently risky and volatile, but that shouldn’t scare you off. You should instead embrace this characteristic. Smart investors see market downturns as opportunities to find good investments. Graham stresses that you should not let market turns dictate the value of a company. You should instead form your own valuation of a company’s worth and let that guide you through your investment decisions.
- Know what kind of investor you are. Are you an active investor or a passive investor? You must decide if you want to be the type of investor who is very active in research and hands-on in day to day decisions, or if you want to be a passive investor who owns a wide portfolio as a way to minimize risk. You can make money in either capacity, but you need to know which one you are.
And those are our top five personal finance books.
We hope you find these tips for personal finance useful and encourage you to pick up these books if any piqued your interest. And when you are ready to make some smart financial moves of your own, consider refinancing your vehicle with Auto Approve. Refinancing can save you loads of money and couldn’t be easier with Auto Approve’s streamlined process. You can get started right now.