I read a lot of personal finance books, and I often find myself giving tailored recommendations for personal finance books based on the needs and personality of the person asking. Some of these are books that helped me a great deal in understanding certain concepts or clarifying my personal priorities. Others may not have clicked with me personally, but I still recognize that they'd be great for a certain type of person or situation. Here are seven questions and the book recommendations I'd give for each one. See if you spot yourself in any of these questions.
Q: I want a good all-round introduction to personal finance concepts, including budgeting, investing, insurance, debt management, and retirement planning.
A: Personal Finance for Dummies by Eric Tyson. Most of the Dummies books I've read have had a pretty startlingly high level of quality in terms of laying out the need-to-know basic concepts of their subject in an understandable way, and this one is no exception. Tyson's explanations are clear, concise, and unbiased. He emphasizes a laid-back, whole-life approach to personal finance; he eschews time-consuming practices like stock trading and expense tracking to the penny, and he's confident that you can get a handle on this stuff without the help of a professional. If you do everything recommended in this book, you will be off to a fantastic start.
Q: I want help budgeting! Specifically figuring out how much I should be spending on various categories. I want to know if my spending plan is sane and sustainable for my income. I want to understand where I'm going wrong and why I never have enough money left over to save.
A: All Your Worth by Elizabeth Warren and Amelia Warren Tiyagi. This is handsdown my favorite personal finance book of all time. Warren (then a law professor studying bankruptcy, now a U.S. Senator) and Tiyagi (her daughter, a business analyst) lay out a simple overall budget formula you can use your whole life:
- 50% to "must haves" like housing, transportation, basic food and clothes, utilities, and debt minimums
- 30% to "wants" like entertainment, hobbies, special/fancy/fun food and clothes, charity donations, whatever it is that you enjoy spending money on
- 20% to "saving for tomorrow", including retirement contributions and debt overpayment
The rule is simple and easy to remember, and the book goes into depth about how to apply it, answering questions like: what expenditures fall under each category? How do I figure out of I'm "in balance"? And crucially, what do I do if I'm "out of balance?" The solutions are different depending on whether you are out of balance in "needs" or "wants." Unlike most PF books, it's not necessarily all about just tightening your belt and foregoing fun; in fact, if overspending on fun isn't the problem, that's a counterproductive solution. (BTW, saving too much is not a problem - the 50 and 30 are upper limits, and 20 is a lower limit - so if you're scoffing at "only" saving 20%, don't worry, you still count as "in balance.")
The book has that magic and rare combination of being at once specific and flexible: specific enough that it's actionable, and flexible enough that you can tailor the formula to YOUR personal needs, wants, and priorities. I constantly recommend it to everyone.
Q: I'm a young person in my 20s or early 30s, and I want to quickly learn the personal finance steps I need to take, now. I also want a book that lights a fire under my butt, specifically about budgeting. I spend too much on random crap, and I need someone to slap my face and tell me to snap out of it!
A: I Will Teach You To Be Rich by Ramit Sethi. The author has a snarky, take-no-guff approach to personal finance that is really effective if your main problem is discipline, self-control, and taking the time to actually figure out what you need to be doing to get your finances in order. Sethi explains the major areas of personal finance informally but clearly, with a focus on the needs of young professionals in their 20s and 30s. He tells you just what to do, and strikes one as the type of teacher who does not let you get away with anything. This book is the closest you can get to having a guy stand over you and tell you "Now call your cable provider and ask them for a lower rate. Class will not end until you get a lower rate." For some readers, that's going to be exactly what you need, especially when you're just getting started.
Q: Investing confuses me the most. I'm lost and I need someone to show me step-by-step what to invest in, where to invest it, and how to even begin.
A: The Bogleheads Guide to Investing by Taylor Larimore et al. This book explains what passive index fund investing is all about and how to do it, step by step, no muss, no fuss. It explains everything you need to know to build a portfolio on your own, without help from an advisor or any other professional, no matter how much or how little money you have to invest.
This book is written by fans of Jack C. Bogle, founder of the Vanguard Group, so it naturally is going to tell you to invest with Vanguard. I agree with them. Although they were of course paid for the book (royalties etc), these are not people who are paid by Vanguard; nobody is paid to shill Vanguard, we just do it because we love it. It's the only investment house that is focused on helping individual, normal investors, not bankers, line their pockets. That's why the expense ratios are so much cheaper than anywhere else, and why it's so easy to use the website without any help from a professional. I'm all about transparency and DIY.
Q: I'm not convinced about passive index fund investing. I want someone to show me the HARD MATH.
A: A Random Walk Down Wall Street by Burton Malkiel. I don't recommend this book to most people because, for a book aimed at a general lay audience, it's very dense and academic, almost like a textbook. But if you're suspicious of any book that handwaves over explanations or avoids getting into the nitty gritty detail due to space constraints -- this book has no space constraints, and here is the nitty gritty detail for you. Malkiel shows the inherent randomness of the stock market with plenty of mathematical, logical, and historical evidence, and demonstrates clearly the futility of picking stocks. If total-market index funds don't seem like the only logical investment choice after reading this, read it again.
Q: I get that I should be saving, but WHY? What am I saving for? What's the point of any of this? Life feels empty. I think I'm trapped in a rat race.
A: Your Money or Your Life by Vicki Robin and Joe Dominguez. This book spends a ton of time getting you to reflect on the value of time and money, the ways the two can and can't be translated into each other, and what it is you really want to do with your time on this Earth (and therefore with your money). This is the kind of book that changes people's lives. If you've never thought deeply about these things--and our society kind of trains most people to accept a lot of givens about time and money and work without questioning them--then this book is going to blow your mind right out of your face!
Full disclosure: I found it hard to get into this book because of the writing style. It's kind of overly persuasive and "guru"-ish (though I think the content is stronger than most "guru" books, and certainly it is genuinely interested and confident in its message, and not in selling you something else, like with most gurus). If you find this book annoying and just want a quick on-ramp to thinking about early retirement, the Mr. Money Mustache blog might be the ticket.
Q: I'm a highly detail-oriented, mathematical, systematic person and I want to know just how little I can get away with spending.
A: Early Retirement Extreme by Jacob Lund Fisker. Fisker is laser-focused on spending a little money as possible to escape our capitalist society's work-spend-work treadmill. "Extreme" is apt. Fisker has no use for you if you are not willing to live on lentils and wash your clothes in a bucket. He's obsessed with the idea of becoming a modern-day "Renaissance man" and learning to do everything yourself. This is another book that's going to blow your mind if you have not thought about this stuff before, and has the potential to completely change your life.
If, on the other hand, you think he sounds like a miserable arrogant tightwad with no capacity for love or joy, then you still may be able to get some value from some of his ideas and frugal tips, but you may end up throwing the book across the room in frustration.
Leave a comment if you want a specialized recommendation, and I might have already read just the book for you. If not, I almost certain will soon!