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Personal finance is an incredibly important topic and one that very few people have a good understanding of.
Unfortunately, it's also not a topic that is covered in high school or post secondary, leaving many people struggling with only the most basic knowledge or worse, basing their important financial decisions off of misconceptions.
It doesn't have to be this way, we live in a time where almost all of human knowledge is just a search away, but even with access to this information it can be hard to separate good information from bad.
Thankfully, some of the world's leading financial experts have distilled their knowledge into books that are concise, accessible, and easy to read, and we've sorted through them to provide you with a list of the 8 must-read personal finance books of 2020:
Rich Dad Poor Dad
Even if you are just getting started with personal finance, chances are you’ve already heard of this book. Rich Dad Poor Dad spent more than six years on the New York Times bestseller list and was featured on the Oprah Winfrey show, helping the book to gain international attention, and there are plenty of good reasons that this book was so wildly successful.
Even now more than 20 years after it was originally published the book remains one of the must-reads in the personal finance category.
Author Robert Kiyosaki educates readers on personal finance using stories from his own childhood to illustrate the different mentalities of the rich versus the poor and explains the lessons he learned about finances from both perspectives, using his father in the example of “poor dad”, while a friends father fills the role of “rich dad”.
The book is largely based around his personal experiences growing up, making it very palatable to readers. Through simple and engaging stories you will learn more than the basics of personal finance, but how to change the way you think about money, and how to put your money to work for you at any income level.
Love the book? Check out more from Kiyosaki on his blog.
I Will Teach You to Be Rich
I Will Teach You To Be Rich spawned from a blog that author Ramit Sethi begin while going to Stanford to study Psychology and Technology. Coming from a middle-class family, Sethi had to work hard to be able to afford his tuition which resulted in the creation of a system to help him apply to more than 60 scholarships.
His ingenuity paid off, but his celebrations were short lived, upon receiving his first scholarship payout, he decided to try and grow his money by investing in the stock market, and almost instantly took a loss of nearly half of the scholarship money he’d earned. This blunder turned out to be a major blessing in disguise, as it set him on the path to gain a better understanding of money and finances.
Sethi takes a refreshing approach to personal finance, turning away from the idea that getting more always means having less, cutting out the indulgences that bring joy into our lives. Whether you love to have the latest tech, are always looking forward to your next vacation, or just can’t live without your morning coffee, he wants you to have your cake and eat it too while still bettering your financial situation through his simple six-week program.
Sethi’s philosophy is straightforward and avoids the preachy, better-than-you mentality found in the advice of so many financial advisors, instead of chastising you for what you don’t know and aren’t doing, he educates readers on the four main principles of personal finance; banking, budgeting, investing, and saving, while showing you how to make them work for you, step-by-step.
The Total Money Makeover
Personal finance can be an intimidating topic to begin with, but what if you aren’t just living paycheck to paycheck, but actively struggling under debt? Lots of personal finance experts will feed you the same cliche and outdated information, beating you over the head with just how much money you could save if you stopped shopping and gave up your morning latte, but what if you can’t afford a morning latte?
These well-meaning platitudes do nothing to help your financial situation and only leave you feeling hopeless. The Total Money Makeover is a book for the rest of us and will teach you how to better manage your income and get out of debt with just seven simple steps.
Author Dave Ramsey takes a no nonsense approach to helping you prioritize your finances, starting with demolishing your debt, and following up by teaching you how to build and make the most of your savings to keep you from ending up back where you started, even in the event of a financial emergency.
Ramsey developed his methods through his own personal experience after he went from having a real estate portfolio worth more than $4 million to filing for bankruptcy in just two years due to circumstances beyond his control. He has also incorporated lessons from prominent financial counsellors and business people to round out his teachings which have since helped countless people around the world to take control of their personal finances and change their lives for the better.
Why Didn't They Teach Me This in School?
Why Didn’t They Teach Me This In School is a relatively new book released in 2017, but in the short time since it was published, it’s become an Amazon Bestseller, topped personal finance reading lists from eBay and Lifehacker, and has been recommended by Forbes as one of the best personal finance books for people of any age.
Author Cary Siegel initially began writing the book as a way to pass on financial advice to his children as they grew up, but quickly realized that the money management lessons he was teaching could help a lot of people who were undereducated in financial matters that were not discussed in high schools, colleges, or universities.
Siegel decided to take his work in progress and turn it into something that could be read and easily understood by anyone, breaking down 99 money management principles across eight simple lessons that could quickly take anyone from the absolute basics to financially savvy and secure. You won’t find these lessons in the pages of a finance textbook, they are the kind you only learn from a lifetime of experience.
Following the success of his first book, Siegel released a workbook companion the same year, and a follow up book, Why Didn’t They Teach Me This In School, Too? in 2018.
The 4-Hour Workweek
The 4-Hour Workweek is a guide to personal finance and self help book all rolled into one that spent more than four years on the New York Times Bestsellers list, as well as taking the top spot on both BusinessWeek and the Wall Street Journal’s bestseller lists. The concept was developed by author Timothy Ferriss as he faced burnout from working 14-hour days for his nutritional supplement company BrainQUICKEN.
Ferriss opted to take a three week break and traveled through Asia, Europe, and South America, during which he was forced to step away from the grind and learn how to get the most value out of the least amount of effort, changing his perspective and forming the concept of what he calls “lifestyle design”. The book began to take form as Ferriss went on to give a series of lectures on tech entrepreneurship at his alma mater, Princeton University.
In the book, Ferris teaches readers how to maximize their income while minimizing their workload, and how to start enjoying the ‘retirement’ lifestyle today. Ferriss uses his own real world examples and provides carefully crafted samples of conversations, e-mails, and business deals, along with wisdom gathered from CEOs, economists, and stock brokers around the world to show you how to make the changes that will allow you to achieve your financial goals and live your dreams, today.
The Millionaire Next Door
The Millionaire Next Door is a book compiling the research on American households with net-worths above $1 million done by co-authors Thomas J. Stanley and William D. Danko. Similarly to Rich Dad Poor Dad, the authors use their research to compare the behavior and thought processes of what they call PAW’s (Prodigious Accumulators of Wealth), with UAWs (Under Accumulators of Wealth).
The authors discovered that contrary to the beliefs of many, Millionaires are more likely to lead simpler lives, living in working class and blue collar areas and saving much of their income, rather than spending their wealth on luxuries and leading flashy lifestyles in high end gated communities.
It is important to note that their term UAW, does not refer to the poor or lower class, rather those who have a low net worth for their income bracket. The authors found that many who report a high annual income save less than 10% of their money and live the most lavish lifestyles that they can afford, resulting in overall poor financial health.
By contrast, those defined as PAW’s tend to save more than 10% of their pretax income, spending very little on luxury items such as clothing, cars, jewellery, and other products or services and living comfortable lifestyles well below their means.
The book distills this research into a number of helpful personal finance lessons and principles, covering everything from careers and education, to spending habits, investments, and explanations of the traps and pitfalls many stumble into, leading them to go down the path of the UAW, as well as how to avoid them.
The Automatic Millionaire
The Automatic Millionaire has a lot more to offer than an eye-catching title, author David Bach has crafted an enjoyable read with a ton of simple advice that anyone can put into practice, without even having a budget. First published in 2004, the book was initially launched on the Oprah Winfrey Show, quickly moving on to become a classic in the world of personal finance.
Unlike many books in the personal finance category, The Automatic Millionaire isn’t boring and hard to understand, it’s easy to read and deeply enjoyable. It will leave you wondering how you could have been missing what Bach makes so simple and obvious.
The majority of the book is focused on two main concepts, paying yourself first and what Bach calls The Latte Factor. Paying yourself first means setting up an automatic contribution to your savings, investments, and retirement accounts before you take your living expenses out of your pay.
Bach follows up this first principle with examples of how compound interest can take even the smallest contributions and turn them into substantial amounts, even millions of dollars over the years.
Of course, the concept of paying yourself first is something that is out of reach for many who may be struggling to even cover their cost of living in the first place, which is where the Latte Factor comes into play. The Latte Factor, as Bach explains it, is the small but regular expenses that add up to significant expenditures over time. Before you write off the advice because you’ve heard it before, or you don’t partake in a fancy drink each morning, examine your finances.
Chances are you’ve got more than a few small expenses eating away at your income, maybe it’s the interest on your credit card, the extra gas you use, the snacks you pick up at the grocery store, or the netflix account you don’t really use anymore. Whatever your expenses may be, that money would be better used in investments, even at 10% a few dollars each day can add up to a million dollars or more by the time your retire.
Using Bach’s principles, becoming a Millionaire doesn’t have to be some out of reach goal, you can get there with just a few small changes to your lifestyle and your understanding of money.
If you enjoy Bach’s easy digestible style of writing and want to learn more about personal finance, he has written nine other best selling books and regularly adds new content to his blog.
The Little Book of Common Sense Investing
The Little Book Of Common Sense Investing is the sixth book by John C. Bogle, founder and former CEO of the Vanguard Group, and the third in the John Wiley series “Little Book. Big Profits. ” It was written to be an accessible guide for the average investor to help them take advantage of efficient investments, focusing exclusively on index funds, which Bogle believes is the only investment type which basically guarantees investors a fair return from the stock market.
The book is a must-read for anyone who is looking to make the most of their money by building a portfolio of investments and outlines how to keep the cost of investing low in order to maximize your return and come out ahead of other investors. Bogle applies common sense to the principles of investing, advising against attempting to beat the market, to create the most effective and efficient investment strategy.
If you are still not convinced, billionaire business magnate and seasoned investor Warren Buffett gave his endorsement to the book stating, “If a statue is ever erected to honor the person who has done the most for American investors, the hands-down choice should be Jack Bogle.”
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