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!


 Personal Finance 
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Playing Good Financial Offense

Ryan is a guest author from Millionaire Money Habits, a personal finance site that discusses how to build wealth by developing the habits of self-made millionaires. Subscribe to his RSS feed.

In the Millionaire Next Door, author Thomas Stanley talks about the importance of playing good financial defense in order to build wealth. In other words, controlling your spending and expenses in order to keep more of your money.

Financial defense is one way to increase your net worth, but many people either focus on or want to achieve the flip side of that concept. That would be to play good financial offense by increasing your income in order to produce and build wealth.

What is the Best Way to Increase Income?

Playing financial offense is a proactive, thoughtful approach to increasing income. It’s about planning and executing, as opposed to reacting to a situation. Too often people hope to increase their income by getting a promotion or a raise by working hard. That’s great, but you can take more control and create an offensive strategy to achieve your income goals rather than hope for them.

By taking initiative and having a clear plan on how to bring in more money, it would be virtually impossible not to achieve some level of success. Here is how I would recommend going about this:

Identify Your Goals

Take 15 minutes and give yourself some quiet time with no TV, no kids and no email. Shut it all down. Grab a sheet of paper and a pen and draw a line down the middle. Label the columns “short-term” and “long-term.” Now write down how much money you want to increase your income within the next 6 – 12 months and in the next 5 years. Winning the lotto does not count.

Create a Plan

Now, think about how you are going to reach these goals. Under the dollar amount you just listed, write 3-5 ways to reach these goals. Let me give you an example:

short-term goal = $5,000/year increase in income

  • Negotiate a raise
  • Interview for a higher paying position
  • Start a part-time handyman business
  • Get a weekend job
  • Find valuable things at auctions to sell on eBay

long-term goal = Make $100,000/year

  • Become director of x at my company
  • Obtain 25 cash-flowing rental properties over the next 5 years
  • Grow my part-time business to bring $X revenue

The examples above are to get you started. For each item, take each point a step further and have an action plan on how you could feasibly make them a reality. To negotiate a raise, for example, do some research on how to negotiate a raise and prepare a case to present to your boss.

Execute

Now that you have identified your goals and drawn out a plan, take action and execute your plan. You may fail at one or two of these, but that is why you should have a number of paths to achieve your goal. You will learn from your mistakes, and will be better prepared to brush yourself off and try again.

While Thomas Stanley stresses the importance of playing good financial defense in order to accumulate wealth, you can accelerate your goals by being offensively alert as well. Set some goals that you will hold yourself accountable to, take a proactive approach to increasing your cash flow, and start making more money for yourself.

(FYI, the Carnival of Personal Finance was posted this week at Four Pillars, go check it out!)


 Personal Finance 
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PFBlogger Spotlight: Mighty Bargain Hunter

Welcome to another edition of PFBlogger Spotlight, a series in which I interview some personal finance bloggers so that we all get to learn a little more about them. This week, we have John from Mighty Bargain Hunter, a blog that is a member of the Money Blog Network and someone I had a chance to know better when I was a member. MBH and I have privately discussed everything from the government screwing us by re-taxing the Roth IRA to hoarding gold, but after today even you will have a greater insight into the mind behind the Mighty Mighty Bargain Hunter! :)

jim: Hi MBH, could you tell us a little about yourself?
MBH: I grew up and went to college in upstate New York and came to Virginia in 2000 to thaw. I’m in my mid 30s and have a wonderful wife of almost six years and an adorable three-year-old daughter.
jim: What’s something no one else in the blogging world knows about you?
MBH: If I told you, then it wouldn’t be known by no one anymore! ;) I’ve put enough out there in “tell us five things about yourself” memes that I have to think hard — or make something up. OK, here’s one: I love shopping for shoes. Just kidding. Really, here it is: I love to play Monopoly and I shoot to kill. (Figuratively. While playing Monopoly, that is. Not killing people in real life. That would be bad to say in a widely-read public forum such as Blueprint For Financial Prosperity.)
jim: What motivated you to begin blogging and how long have you been doing it?
MBH: A friend from work got me onto online rewards programs and estate auctions, and I really liked them. I started the website in 2004 as a smart-shopping, bargain-hunting, frugal-living newsletter. I sent out the newsletters and posted them to the website. The original articles are here. Basically, I saw what SavingAdvice.com and TheFrugalShopper.com were doing, and it looked like I had something to say and could contribute to the discussion.

Since I’m an introvert, this also seemed like a good way to start up a side income. In the site’s first incarnation, I spent about 25% of my time writing the articles and 75% of the time formatting the web pages — they were all hand-coded. This got tedious, and my posting slowed to a crawl for a while. After squeaking out one article per month or so for a while, I stumbled on blogs like pfblog.com, and commented on Free Money Finance’s posts and (probably) Five Cent Nickel’s posts there until they informed me that they had their own blogs.

In the spring of 2005 I started blogging because I could spend 95% of my time on the website writing content and about 5% formatting it. MUCH better. And a couple thousand people think I still have something worthwhile to say. Which is why I keep doing it. ;)
jim: What do you think makes your perspective unique?
MBH: I love getting good deals and deep discounts. I have an entrepreneurial streak. I’ve learned conventional wisdom regarding career, money management, and investing, and have had enough of it thrown into question that I’m a little contrarian in my thinking.
jim: What are your favorite personal finance books?
MBH: The Millionaire Next Door (Stanley and Danko) and Automatic Wealth by Michael Masterson.
jim: Which of your posts do you think all your readers should read?
MBH: Judging by comments, hands-down it’s “Missed Fortune 101: Horrible Advice!” with more than 200 comments. One that still makes the rounds on StumbleUpon is “Twenty-five ways I save money.” Another one I like is “Sixteen ways being disorganized costs you money.”
jim: What financial “mistake” that you’ve done has bothered you the most?
MBH: I had a tech stock that lost 99% of its value post-bubble. I got frightened listening to a colleague that it might go completely worthless, and sold it near its low. It went up 25-30 times its price in the following years, and had I listened to the actions of every single board member in the company (they were buying the company stock like there was no tomorrow) rather than my friend, I’d own my house free and clear now. Lesson: Don’t let someone scare you into selling at a loss, especially if they don’t have a stake in it and if you know they like stirring the pot. Think for yourself.
jim: How about your best decision?
MBH: Getting married to a Christian woman and having a daughter. Aside from a joy that you can’t put a price on, I see money much more as a tool than as an end in itself. I was socking away a lot more before I got married, but it has turned out to be much more rewarding to provide for a family and return part of what I earn to God’s Kingdom than to just protect myself, by myself.
jim: What is your favorite personal finance blog and why?
MBH: I don’t have a favorite. I like dozens of blogs for very different reasons.
jim: What do you hope to accomplish this year?
MBH: I have a post that outlines my goals for the year. The financial goals are to track my finances regularly and to get my online income to cover my mortgage payment again (I wasn’t wise enough to have diversified my online income when Google moved the text-link cheese).
jim: And, lastly, if your blog ended today, how would you like people to remember it?
MBH: I’d like it to be remembered as a blog that had something useful to say to someone, and as a blog that didn’t take itself too terribly seriously. Heck, how serious can the blog be if it has posts written in the style of Dr. Seuss?

Go check out Mighty Bargain Hunter and tell him I sent you (then duck!). :)


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