Personal Finance 

Best Personal Finance Books for Your Library

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.


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.


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!

 Personal Finance 

The Smartest Financial Advice Ever asked forty famous people for their best piece of financial advice. You’ll hear answers from the likes of Bill Miller, Derek Jeter, Jon Barry, Steven Levitt, and even advice from Rodney Dangerfield. In the beginning of the slideshow, the photos are of the respondents but as you get closer to the end it’s photos of the origins of the advice; you’ll know what I mean when you get there.

Unfortunately, they didn’t ask me, otherwise this is what I’d say about the smartest financial advice I got:

The smartest advice I ever got from my parents was to always work hard. My dad once told me that I was one of those people who could complete a fifteen minute job in ten minutes. As I basked in the compliment, my dad told me that what would separate me from the other people who could do the same thing was what I did with the other five minutes. Everyone has talent in something, but not everyone has a work ethic. A strong worth ethic is what separates the great from the merely good. I can’t say I disagree.

Here are my favorites from the slideshow:

Elizabeth Gilbert: Swear off debt.

Elizabeth Gilbert is the author of Eat, Pray, Love, a book my wife has read and really enjoyed, and I thought this bit of advice from her parents was a gem. Her father passed along this message from her grandfather: “Borrowing money is like wetting your bed in the middle of the night. At first all you feel is warmth and release. But very, very quickly comes the awful, cold discomfort of reality.”

In Taiwan, and China, the concept of consumer debt is only a recent phenomenon. Until the last five or ten years, the idea of a credit card was foreign in Taiwan. My father told us a story about when my parents bought a home on Long Island that my grandfather wanted to give him the cost of the home (this was nearly thirty years ago). My dad explained to my grandfather that he could put 20% down and borrow the rest, a concept that made no sense to his grandfather. Why borrow money? Just keep saving and saving and saving until you can afford it. It’s amazing how pervasive consumer credit has become in such a short time.

Derek Jeter: Know where your money goes.

Derek Jeter is the shortstop for the New York Yankees and considering the size of his paycheck, it’s amazing this was the advice he thought of. I think it’s valuable because as we get older, the finances get more complex and you begin relying on more and more experts. We now have an accountant that handles our taxes, we leaned on a real estate agent when we bought our house, we’ll have to rely on the expertise of numerous subject matter experts as we grow older but it’s always important to be part of the process.

Chris Larsen: Take risks when you can.

Chris Larsen founded and, two hugely successful and innovative companies in the lending industry. This bit of advice came from Jim Collins, author of Built to Last, Larsen’s MBA professor at Stanford. “You’re young. You can fail two or three times, even lose all your money two or three times, and you’ll be just fine. Taking that risk puts you in the path of wealth.”

In my MBA, I received similar advice from my Entrepreneurship professor. He said that, especially if you’re young, you should be willing to take risks and try paving your own way. It’ll be hard, you might fail, but the worst thing that can happen is that you go back and get another job.

There are a lot of good gems in there including appearances by Freakonomics author Steven Levitt, Four Hour Work Week author Tim Ferriss, and many many others.

The smartest advice I ever got [CNN Money]


Debt Bloggers in Dan Ariely’s Predictably Irrational

Predictably Irrational by Dan ArielyIf you’re a fan of behavioral economics (think Freakonomics and Undercover Economist), you should pick up a copy of Predictably Irrational by Dan Ariely. I reserved both the print and audio book versions (I didn’t know which would be available first) and have been listening to the CDs in my car as I drive around.

I was delighted to hear, somewhere on the third CD, and then confirm in print, on page 122-123; Ariely mentioned a New York Times article written by John Leland that featured several debt bloggers I know: Tricia of, Stephanie of, Him and Her of, and a blog called We’re in Debt (I thought I recognized the URL but it resolved to a landing page – oops).

Here’s what the passage said, it was in reference to how you could force yourself to save and control destructive consumer spending behavior:

John Leland wrote a very interesting article in the New York Times in which he described a growing trend of self-shame: “When a woman who calls herself Tricia discovered last week that she owed $22,302 on her credit cards, she could not wait to spread the news. Tricia, 29, does not talk to her family or friends about her finances, and says she is ashamed of her personal debt. Yet from the laundry room of her hom in northern Michigan, Tricia does something that would have been unthinkable — and impossible — a generation ago: She goes online and posts intimate details of her financial life, including her net worth (now a negative $38,691), the balance and finance charges on her credit cards, and the amount of debt she has paid down ($15,312) since starting the blog about her debt last year.”

It is also clear that Tricia’s blog is part of a larger trend. Apparently there are dozens of Web sites (maybe there are thousands by now) devoted to the same kind of debt blogging (from “Poorer than You” and “We’re in Debt” to “Make Love Not Debt” and Tricial’s Web page: bloggingawaydebt). Leland noted, “Consumers are asking others to help themselves develop self-control because so many companies are not showing any restraint.”

BLogging about overspending is important and useful, but as we saw in the last chapter, on emotions, what we truly need is a method to curb our consumption at the moment of temptation, rather than a way to complain about it after the fact.

The book is very very good and provides great insight into how predictably irrational we are.

 The Home 

Is A Realtor Worth The Commission?

Home sellers in Madison, Wisconsin, in the period between 1998 and 2004, that sold their home using a real estate agent did not consistently get higher prices than those who didn’t. When you factor in the commission, for sale by owner sellers did better. How about them apples?

What stinks is that its likely not representative of the average because the Madison, Wisconsin for sale by owner websites are more popular than others in the nation, but it certainly points to a direction that the National Association of Realtors doesn’t want to go. The primary benefit that real estate agents offer is exposure – specifically a listing in the MLS database. As fewer prospective homebuyers rely on real estate agents and begin scouring for sale by owner, or other sources of homes for sale listing, the less value a realtor can provide.

What can a real estate agent do nowadays that will get you more for your home that you can’t do yourself? If you don’t know how to stage a home and need tips, watch some home flipping or home selling show on A&E. If you don’t know how to play people off each other and getting them to overpay, read a book by Machiavelli. Short of having the legal document templates handy, I honestly don’t think there’s much to offer outside of the exposure/MLS listing and this study backs that up.

What’s funny is that the National Association of Realtors claim that houses sold through MLS get a 16% premium over those not sold through MLS, which is really as fair a measure as the Madison, Wisconsin results when you think about it. Unless they sold identical homes at identical times, some with MLS and some without, there are so many disparate factors that the claim is meaningless. Plus, 16% is before the 6% commission, and 10% is probably getting close to how much error they had on that self-serving study.

If you want to read more, Freakonomics has a great writeup with additional reading material and the original article appeared on the New York Times.

Any real estate agents out there want to defend their commissions? 🙂

 Personal Finance 

Surprising Phishing Statistics

I was reading the Freakonomics blog (if you liked the book, you’ll love the blog, it has a lot of good stuff on it) when Stephen Dubner mentioned a report put out by CipherTrust, a security management firm. They studied the first two weeks of October and saw that all phishing attacks originated from less than five zombie networks (computers taken over by spyware/malware/backdoors/etc and send out these emails likely without the owner’s knowledge). Less than five!

Remember, if a bank or Paypal or financial institution ever unexpectedly contacts you via email, never click on a link in that email no matter how genuine it looks. If it were really urgent, they’d call you (they have your phone number) and if it’s not urgent, you can call them.

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