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October 6, 2020

5 personal finance books everyone should read

Here at DiversyFund,we’re big believers in books. Even the staunchest accountants aren’t born knowing about debits and credits, and any successful entrepreneur will readily name 15-20 books that were vital to their success. So why do we expect ourselves to just…be good at money? We don’t expect skills like cooking, skateboarding, or public speaking to be honed overnight, and learning how to manage money is no different. Fortunately, a lot of very smart people have been there, done that, before us and wrote some really great books about their experience.

Knowing about money or reading books about personal finance isn’t about math or tediously keeping track of every cent. Although that is important—the American Psychological Association’s most recent survey on the subject shows that a walloping 70 percent of us believe we’re on shaky financial ground. Even more —75 percent—are of the firm belief that we’d be a whole lot happier if we just had more money.

Instead, most of the well written books about finance are really more about life. Some books delve deeply into the behaviors and systems we can use to improve the state of our finances, whereas others are more about what it means to be rich in today’s world. Whatever your motivation for trying to improve your finances might be, these books should give you a great start.

The Millionaire Next Door by Thomas J. Stanley and William D. Danko

The OG personal finance book talks about what it actually means to be and feel rich. This book discusses the fundamentals of the personal finance world in simple, consistent terms. An unpretentious look at the ways average people can become millionaires, The Millionaire Next Door is like Chicken Soup for the Soul for personal finance fans. This book will help you in developing good practices from the very beginning.

A Random Walk Down Wall Street by Burton G. Malkiel

If you’ve recently become interested in the stock market, this is an excellent book to pick up. Malkiel challenges the conventional wisdom that is marketed to beginner investors that picking stocks and timing your purchases can result in big wins. If you aim to pick winning investments, he argued, you’d be just as well off throwing darts at a stock ticker. He advised average investors to buy index funds instead of paying high percentages to active fund managers—a piece of advice that is worth its weight in gold for young, beginner investors.

I Will Teach You To Be Rich by Ramit Sethi

Ramit Sethi is one of those personal finance experts who “walk the walk.” He’s not afraid to spend money as an investment in himself and his business, and candidly talks about how he chooses to spend money.

In this book, Sethi introduces a “money dial” concept that makes a lot of sense to people who are reluctant to cut out every single expense that makes them happy. So what is the money dial? Sethi asks readers to list out all the categories they spend their discretionary income on (travel, clothes, eating out, etc.) and then to choose just one or two of their favorites. That way, you have a plan for spending that actually aligns with your goals and interests. Once you have your category that you want to spend guilt free within, be ruthless about cutting expenses from other areas of your life now that you know these categories aren’t all that important to you. For example, say it’s really important to you to eat organic, home-cooked meals with the freshest ingredients on a daily basis. You decide this is the category you want to go all out on: you plan to invest in top-of-the-line kitchen appliances, upgrade your refrigerator and pantry, and schedule grocery delivery for every other day instead of once a week. You’re so excited about these plans that the once-a-day fancy latte doesn’t seem that necessary any more. Suddenly seems like an obvious choice, doesn’t it?

Broke Millennial: Stop Scraping By and Get Your Financial Life Together by Erin Lowry

As evidenced by the title, Erin Lowry understands exactly what 20- and 30-somethings are going through when it comes to finances. Young adults are understandably anxious and overwhelmed about issues like student debt, rising cost of living and stagnating wages. Along with those bigger issues, Broke Millennial also talks about tricky money topics like not being able to split the bill with friends on a night out. Lowry’s book is a smart, compassionate guide that promises to show you how to go from “flat-broke to financial badass.”

You need a Budget by Jesse Mecham

Probably the only true “budgeting” book in this whole list, You Need a Budget is beloved by beginners and personal finance experts alike. YNAB is a system based on the concept of “every dollar gets a job” and comes with a seamless software and app that makes tracking your money easy and fun.

Where this book and systems beats most others is in the idea of true expenses. Think about it: a lot of unplanned expenses and emergencies we get hit with financially aren’t really that unpredictable. If your laptop is struggling to do even the most basic tasks, you can probably guess that you’ll need to replace it within a year. Similarly, you can probably estimate how much you’ll be spending on Christmas gifts in July, so there’s no reason to put that expense on a credit card if you can save a small amount every month specifically for that expense. The software makes it easy to plan for your true expenses, and there’s even a subreddit with lots of great support for newbies.

Looking on the internet can often get overwhelming really fast and lead beginners down rabbit holes that can put them off entirely or give incorrect impressions (no, day trading cannot make you hundreds of thousands of dollars a year). If you’re looking for ways to get more familiar with the personal finance and investing world, there’s no better place to start than this list.

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