The Essential Personal Finance Books

by Ouida on August 2, 2009

The idea for this post came from a conversation that I had with my friend, George. I had just finished the Resource Page for one of my blogs. Over the past decade or so, I have read over 100 financial books and decided to list the most influential ones, the ones making the greatest contribution to my financial philosophy and the success strategies I have used over the years. I was shocked to have a list that was ten books long considering all the books I had read. I told George, lamenting the fact that I had “wasted” well over a $1000 dollars on financial books only to have 10 make a difference. George said that he would like to know what about those were and why they made the list. I thought “hey, what a great idea for a blog post”.

The books that made a difference for me all changed the way that I think about money. Interestingly famous books like The Wealthy Barber, The 9 Steps to Financial Freedom or the Automatic Millionaire will never make my list because they will never help the average person gain wealth. The advice in each of these books only works if certain asset classes always appreciate in value. We’ve been through enough bubbles and recessions since March 2000 to know that assets do not always increase in value. It is a nice idea that you can save your money, invest in mutual funds for 30 years and retire comfortably at age 65. Far too many retirees have learned that this just isn’t the case. The problem is that they learn the truth at age 65 when a do-over is impossible. There are too many books that go over the basics of frugal living, debt reduction, budgeting and automating savings to pick one book over the other. To be fair those books will give a very basic financial foundation, but after you follow the specific “how to” strategies, you will face the inevitable question. “What next?” These books will never help you answer that question. The thing is, the answer to “what’s next?” is where wealth is created. The books that made my list made it, because they teach not only the basics of personal finance, but they provide ideas that help answer the question, “what’s next?”

Bling, Basics and Being a Millionaire

If you follow popular culture being a millionaire is all about Bling. The fancy car(s), the rolex watches, the 12,000 square foot home with the 4000 square foot bungalow. Having wealth is all about flash and show rather than cashflow and assets. I believed that until I read two books: Rich Dad, Poor Dad and The Millionaire Next Door. Rich Dad, Poor Dad taught me four important concepts:
1) that my house is not an asset
2) what a cashflow statement and balance sheet are
3) that income does not equal wealth (or that one can be poor at any income)
4) anything that is not an asset is a doodad therefore acquire assets before doodads. Most do the opposite

The Millionaire Next Door taught me that
1) The average millionaire owns their own business
2) Does not provide EOC (economic outpatient care to family members and friends)
3) The average millionaire does not automate his wealth but is an avid accumulator of assets
4) The average millionaire is frugal
5) Millionaires come in teams, if a husband is a millionaire it is because he and his wife are on the same page and vise versa.

Retire Rich, Retire Young helped me think about exit strategies. Robert Kiyosaki and his wife used a business to help them create sufficient income so that they could live on half and use the other half to acquire assets.

Who Moved My Cheese is a wonderful reminder that the only constant is change and that if I am to move forward in life I must be able to adapt and have a healthy response to change.

Your Money or Your Life is an incredible book. This book connects the dots between your work effort, the money your earn and the things that you buy. The concepts in this book allow me to live in full awareness of what things cost, not in terms of money, but in terms of my work product. A vacuum cleaner, for instance, isn’t a vacuum cleaner but four hours of work so the choice for me is to buy a quality vacuum cleaner and take care of it or work for a vacuum cleaner every year. I certainly have better ways to spend my time. The other key concept is that because the things I buy and the vacations I take ultimately cost work product, it is key that I perform work that I am passionate about.

How to Get What You Want with the Money You Already Have was a book I bought on impulse while building my personal finance library. This book taught me to value small sums of money instead of waiting for the big score before I could make major financial change.

Automatic Wealth: Six Steps to Financial Independence actually puts in writing what other financial authors are afraid to say: learning a new skill, one that will allow you to make more money, takes time, about 1000 hours. If you are already working 40 hours a week and can only spare 4 hours a week toward your new skill, you will spend 250 weeks, almost 5 years learning a new skill to increase your income. No wonder most real estate investors don’t make money in real estate. No wonder most Network Marketers never make a dime.

Multiple Streams of Income introduced me to the cold hard reality of the marketing funnel. It explains the seminar junkie phenomenon and makes no apology for it. I can use this knowledge to steer clear of someone else’s funnel or decide to create my own.

Debt is Slavery was a wonderful surprise of a book. It is more than a “debt is bad” book. It is a discourse in financial philosophy about assets versus liabilities, yet it is a very short read only about 120 pages or so.

The Richest Man in Babylon was first published in 1926. I still say “a part of all I earn is mine to keep” to myself at least twice a month. Financial instruments and technology may change but there are no new basic financial concepts. It is all here.

What’s Next?
Once you master the basics of personal finance, you have two choices: 1) you can do the minimum which is live frugally, pay off your home, invest in mutual funds for “the long haul” and hope that is enough or 2) you can become an active steward of your capital for further investment. Each of these books points you in the direction of number two and go into differing levels of detail about how to become an active steward. Maybe you become a writer, maybe you become a cashflow investor in real estate, maybe you become a blogger, maybe you open a brick and mortar business. Maybe you create a web page and sell through affiliate programs, maybe you write a book, maybe you learn about private placements, life settlements and invest in those, maybe you become a network marketer. Each of these strategies will take at least 1000 hours to learn but aren’t you glad that at least one business author had the courage to put that in print to save you some frustration?

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{ 2 comments… read them below or add one }

Old enough to know better August 5, 2009 at 4:31 pm

What a great overview for someone who has winged it most of my working life. You saved me some time and money; but it may be too late as I am already retired and find myself trying to figure out how to stretch every dollar! Actually, I’m not doing too bad, generally good health, a healthy outlook and disposition just not able to freely afford to do some of the things I though I would be like to do!


Ouida March 1, 2010 at 8:08 pm

Hi Mom! Thanks for your support and your comments on the new blog.


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