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Best Personal Finance Books for Your Library

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None of these books are new, they’ve been around for years and they’ve been considered by many to be the best personal finance books out there. The topics they cover will vary and their approaches will be sometimes very different, but each has value and as a student of personal finance they all have something to offer to a reader. Many of these books will sound familiar and I challenge you to make an argument that one of these books shouldn’t be on a list like this.

General Personal Finance

The Wealthy Barber by David ChiltonThe Richest Man in Babylon by George ClasonYou can’t describe this category without listing the book I consider to be the defining book in this cateogry – The Richest Man in Babylon by George Clason. This book was written in the 1920′s and is a fiction story that teaches simple personal finance lessons. It’s a tiny little book that you could probably read in less than two hours and the lessons it teaches are simple. There are several other books that are like this, teaching basic personal finance concepts, such as The Wealthy Barber by David Chilton, but this one was the first and most celebrated.

The Millionaire Next Door by Thomas Stanley and William DankoAnother ground-breaking book that deals with general personal finance was The Millionaire Next Door by Thomas Stanley and William Danko, first published in the 90′s. The reason it was ground-breaking was because they showed how many millionaires actually lived. So many of us see the flashy lifestyles of celebrities and sports figures, thinking that’s how millionaires live. Stanley and Danko interviewed millionaires and discovered that most do it by spending less than they earn and by being smart with their money. When this book was released, it really surprised some people and I think it was exactly the type of wake-up call people needed (and still need today!).

Your Money or Your Life by Joe Dominguez and Vicki RobinFinally, the last cornerstone book in general personal finance has to be Your Money or Your Life by Joe Dominguez and Vicki Robin. This book is lauded by many a personal finance blogger and it’s very popular because it helps you re-examine your priorities. Instead of living to work, they help you re-prioritize so that you’re working to live. If you do feel like you’re trapped in the constant struggle between working, bills, and expenses, this book can certainly help you sort everything out.

Bonus book: A book that I haven’t read yet but is also well recommended is Napolean Hill’s Think and Grow Rich, which also happens to be free and in the public domain. I haven’t read it yet, doing so now, but it was written during the Great Depression so it might be helpful during our economic malaise.

Managing Debt

Dave Ramsey The Total Money MakeoverI haven’t read it but so many people have told me about Dave Ramsey’s The Total Money Makeover. I’ve been very fortunate never to have fallen into the credit card debt hole but after I wrote my post about how Dave Ramsey’s Snowball Debt payoff method was brilliant, I’ve gotten several emails from readers telling me it has worked for them when other methods failed. If you are in debt, check out Dave’s book (at the library!) because it goes into much more than debt repayment, it’s an entire overhaul of your financial life.

You’re Broke Because You Want to Be: How to Stop Getting By and Start Getting AheadIf Dave Ramsey hugs you, then Larry Winget slaps you in the face. Depending on which type of motivation you respond you, Larry Winget’s You’re Broke Because You Want to Be: How to Stop Getting By and Start Getting Ahead is either perfect or will make you feel depressed. While I haven’t read Ramsey’s book, I have reviewed You’re Broke Because You Want to Be and I thought that it was a good book but might be a little too tough. It has a lot of very useful information and it has an answer for any excuse you could possible have about debt.

Investing

A Random Walk Down Wall StreetBenjamin Graham The Intelligent InvestorNo list of investing books would have any credibility if it didn’t include these two most important texts: Burton Malkiel’s A Random Walk Down Wall Street and Benjamin Graham’s The Intelligent Investor. The basic gist of A Random Walk is that a blindfolded monkey can select stocks as well as a professional. The random walk refers to the actions individual stocks prices can take in the short term and Malkiel recommends index funds the entire way. Benjamin Graham’s The Intelligent Investor, on the other hand, is the seminal text of value investing, where you buy stocks in down and out companies with a long view in mind. If it’s any comfort, Warren Buffett was Benjamin Graham’s protégé at Columbia University.

The Little Book of Common Sense Investing<I also have to recommend The Little Book series which include several books on investing. They each cover a different part of investing and different scenarios, but they’re all written by very accomplished authors and written very well. My favorites are The Little Book of Common Sense Investing by Vanguard’s John Bogle, The Little Book That Makes You Rich by quantitative investment expert Louis Navellier, and The Little Book of Bull Moves in Bear Markets by Peter Schiff (in part because we are in a roaring bear market).

Finally, I have to give a nod to David Bach’s The Automatic Millionaire because it teaches one very important lesson – set it and forget it is one of the most powerful lessons in retirement investment planning. Save in your 401(k) and IRAs by making automatic regular deposits and you’ll be happy in retirement.

Frugality

The Complete Tightwad Gazette by Amy DacyczynThe Complete Tightwad Gazette by Amy Dacyczyn is the book on frugality. If you were to ask any frugal blogger for their list of the top three books on saving money and frugality, this book would be in that list with no exceptions. This is also one of the most actionable books on this entire life. When you read a book like the Wealthiest Man in Babylon or the Automatic Millionaire, you come away with solid personal finance information but nothing you can actually do. The Tightwad Gazette is the polar opposite, you can make it through a handful of pages without getting an idea of what you can do to trim. Want a hint of what’s inside? Money Saving Mom listed ten painless ways to save $100, pulled from the book.

The Complete Tightwad Gazette by Amy DacyczynOne of the easiest ways to be more frugal is to simplify your life. One of the easiest ways to simplify your life is to get a book that has over a thousand ways to simplify all aspects of your life – The Joy of Simple Living by Jeff Davidson. This is another one of those extremely actionable books where he goes through room by room by room, giving suggestions on how things could be simpler.

Behavioral Economics

Freakonomics by Steven D. Levitt and Stephen J. DubnerThis category isn’t one that is often discussed when looking at personal finance books but I think behavioral economics is something we should all be familiar with. Behavioral economics refers to “research on human and social, cognitive and emotional factors to better understand economic decisions by, say, consumers, borrowers, investors, and how they affect market prices, returns and the allocation of resources.” The book that introduced me to this type of economics was Freakonomics by Steven D. Levitt and Stephen J. Dubner. I don’t really know how to describe Freakonomics other than to say that the authors took a bunch of interesting economics stories that applied to everyday life and tied it together into a book. You’ll read about cheating teachers and cheating Sumo wrestlers, you’ll read about impact abortion has had on crime, and a dozen other interesting stories that will do nothing but pique your interest for more.

Predictably Irrational by Dan ArielyFrom there, you can’t miss two other books that I’ve read and enjoyed – Predictably Irrational by Dan Ariely and The Undercover Economist by Tim Harford.

Predictable Irrational seeks to explain why we, as supposedly rational people, make such irrational decisions. The best example is how customers often behave economically irrationally whenever free is introduced to an equation, people often go after the “freebie” or “add-on” when it doesn’t make rational sense to do so.

The Undercover Economist by Tim HarfordThe Undercover Economist is slightly different, it explains, among other things, how you can glean information from situations where you don’t think information can be gleaned. The best example I can remember is one where Starbucks began offering fair trade coffee at a higher price. Starbucks charged a higher premium for that coffee than what it agreed to pay for fair trade coffee. In other words, Starbucks was profiting from fair trade (it wasn’t simply higher by the net increase in fair trade versus non-fair trade coffee). The information it provided was invaluable in that it identified how likely Starbucks customers were willing to pay more for their coffee – it showed how elastic the price truly was.

Those are the books that I think would make a fantastic library for the personal finance enthusiast. I’m absolutely certain I missed some great books out there, so if you have a favorite that I didn’t list, please leave a comment so I can be sure to check it out!

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17 Responses to “Best Personal Finance Books for Your Library”

  1. Thanks for the books.

    I was just checking Get Rich Slowly’s list of 25 best books.

    Some of these books overlap his but there’s certainly some new additions i’m looking to read. Thanks!

  2. Mike P says:

    Excellent list (though there are a few I haven’t read).

    I’d also highly recommend The Four Pillars of Investing by William Bernstein

  3. While I haven’t read anything by Dave Ramsey, I have heard plenty of negatives about his book as well as his methods. Personally, I have a very strong belief against any type of book life this where all people are treated as an aggregate and everything is a blanket statement. Each person’s situation is different, as is their psychological issue with money, and therefore how can book and generic, broad-based planning take all of the different profiles of debtors into consideration. I am a huge proponent of specialized advising, where each person get a tailored action-plan after finding out all the little details about their habits and financial health. That said, books like this just do not provide that kind of direction, but it’s your list, Jim so I won’t tell you what to include or take off.

    I will recommend another book for you to check out, though. I read “The Middle-Class Millionaire” by Russ Alan Prince and Lewis Schiff a few months ago, and it was a quite interesting read. The premise is similar to that of “The Millionaire Mind” (which by the way I have about 30 copies of and give at each initial consultation I do regardless of whether or not the person becomes a client) in that it focuses on those who built their wealth as opposed to inheriting it. It doesn’t come off as an instructional guide promising to teach anyone how to get rich, but does offer some insight into the mindset and habits of those who are. And it hits on the failures as well as the successes, so in a way it humanizes the people it describes.

    • jim says:

      I think Dave speaks to a certain mindset, one that is greatly affected by the psychological aspects of finances more so than the numbers. For some, it’s a godsend, to others it’s just a gimmick. Either way, I know it has worked for people so I wanted to put it out there. I agree that financials are very specific but there are enough generalities that can affect a large enough group for it to be worth writing about.

      I’ll check out Middle Class Millionaire next time I get the chance.

  4. Lord says:

    The Richest Man in Babylon is available here.

  5. Carla says:

    The only book I have in that list is Freakonomics but have been resistant to reading it since I got it a few years ago.

    I would like a personal finance book that is more about facts and information and less about shouting and humiliation. Any recs out of that list?

  6. Rob Lewis says:

    I’ve only read one of these (Tim Harford’s The Undercover Economist, which is a good read – he also has quite a good blog – http://timharford.com/), so I’ve obviously got a lot of reading to do!

  7. Simon Prince says:

    Excellent choices, I read most of these.. and now will problem complete the ones I have neglected (starting with Your Money or Your Life when it becomes available on the Kindle)

    Under Behavioral Economics, I would add: NAKED ECONOMICS by Wheelan. I enjoyed this book more than Undercover Economics.

  8. Nick says:

    I’ve read the Millionaire Next Door and the Wealthy Barber. I highly recommend the Millionaire Next Door as it has changed my life more than any other finance book to date.

    Thanks for the other recommendations!

  9. Spend ’til the End by Scott Burns and Larry Kotlikoff.

  10. Chiko says:

    With a goal to be financially independent by 25, I will surely be adding these books to my library.

  11. Some of these I have but I’m making a list and will keep my eyes open at the used bookstore for some of the others. Thanks for pulling them together!

  12. Start-Up says:

    A critical section of personal finance is missing. A section for books about making more money would be great. Increasing your net worth is done by both saving more and making more. For those of you looking to do so via the internet I would recommend Darren Rowse’s problogger, Timothy Ferriss’ four hour work week, and yanik silver’s moonlighting on the internet.

  13. John Hunter says:

    The Intelligent Investor by Benjamin Graham is excellent. The updated editions provide sensible commentary by Jason Zweig. Very highly recommended.

  14. George says:

    Although it’s from waaaay back in 1978, I recommend “Everyone’s Money Book” By Jane Bryant Quinn. It has a full range of financial advice including all the peripherals of that era. Kinda like Bargaineering.com for the 70′s! Even though some of the monetary devices have changed, she discusses the logic and needs of the underlying instruments, so the book still holds up. Whenever I find a copy in a used book store or yard sale, I buy it and give it to friends.

    I also recommend Intelligent Investor which has already been cited.

  15. Bret says:

    Jim,

    This is a great list of books. I have read and recommend most of these, especially the first three books in the list.

  16. James says:

    Hi Jim,
    I found your post whilst searching for finance related information which goes to show that quality content will hold its own in the search engines.

    Some of the titles you have on your list are a great read (not so sure about Think and Grow Rich but, hey, it’s your call :) ). Would it be worth bringing this post up to date? There are even better titles out there now (inlcuding The Millionaire Fastlane, The 10X Rule, etc) which would sit nicely with some of the books you’ve already hightlighted.

    Just a thought…

    James


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