Personal Finance 
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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.

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!


 Reviews 
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Review: The Little Book That Makes You Rich

The Little Book That Makes You Rich by Louis NavellierI’m a huge fan of these colored “Little Books” published by Wiley (some other ones that I think are good are The Little Book That Beats The Market and The Little Book of Common Sense Investing, which arguably has the biggest name author in Vanguard’s John Bogle) and this one probably looks the coolest because it’s black and gold. The Little Book That Makes You Rich is penned by Louis Navellier, spans 185 pages, and focuses on growth investing. Now, what’s the difference between this book and the others? Each of them focuses on a different aspect of income generation with respect to the stock market and each one has an expert writing it. The ones I’m aware of are:

Who is Louis Navellier? According to the inside flap of the dust jacket, he “has one of the most exceptional long-term track records of any financial newsletter editor in America.” Check out the first paragraph of a MarketWatch article that asks some questions about a new newsletter – “Witness Louis Navellier’s Emerging Growth. It’s the number one performer among 32 surviving letters followed continuously by the Hulbert Financial Digest over the last 20 years. Its portfolios have achieved an average annualized return of 19.8% vs. a dividend-reinvested return of 12.5% for the Dow Jones Wilshire 5000.” I’d say that gives Navellier enough credibility to write this book.

So what’s in this little guy? First, I like Navellier’s writing style and his general approach in this book. The preface begins by addressing (but not answering, that will come later) the one skeptical question I had: “how the heck is this book, little or not, going to make me rich!? It’s not that easy!” He will applaud you, tell you that you shouldn’t believe everything you hear, and that the next 185 pages will enlighten you to his approach that has given excellent returns over a spectacular time period (in fact, the eight factors he looks for are on page 3 – not buried on page 216, not that there are even that many pages, after reading a lot of charts and being built up, his eight factors are on page three).

What are these eight factors? Ha – get the book, it’s only $14 from Amazon and before I go any further I already recommend the book if you’re looking to get into growth investing. The balance of the book goes into each of the eight factors and points out one derailer that I will share with you. Navellier’s derailer is human emotion. He doesn’t believe in the story, he doesn’t believe in falling into or out of love with stocks, he says that all that will cloud the reality that lives in the numbers. Believing the latest buzz on the street, hearing some “tip” at a cocktail party, or believing any number of questionable information sources, only hurts your ability to make a good decision. Steve Forbes, in the Foreword, did say that Navellier has picked a few “clunkers,” but the overall performance of Navellier’s picks and his returns have been “enviable.”

Sneak a peek at your local book store to see if it’s for you.


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