victoriayhul: personal finance books

Well, Book Week has come to a close at Get Rich Slowly, and while it was an interesting experiment, it’s not likely to happen again any time soon.

For one thing, I learned that doing book reviews takes more work than doing regular posts. To do a review, you have to read the book (sometimes twice), decide how it’s relevant to readers, and then write a normal article. And while an occasional book review is a nice change of pace, a week filled with them is boring, both for me and for the readers. So, no more Book Weeks at GRS.

Before we ease back into normal personal-finance topics, though, I thought it would be fun to discuss our favorite personal-finance books and magazines. As a starting point, here’s a recent comment from Deb:

I’d love a running list of your top 10 fave finance books. You could keep it fluid; there’s no reason it can’t change. I’m always on the hunt for helpful financial books! I’m most confused about self-directed investing vs. having a financial advisor. I tried to wrap my mind around Bernstein’s books and just couldn’t do it, which makes me concerned about trying to do investing on my own!

Deb’s comment is interesting for a couple of reasons.

First, I like the idea of a “running list” of favorite finance books. Because she’s right: The list changes with time. As I read more, and as my own finance skills develop, different books will appeal to me.

Second, she points out that what might be a good book for one person may not be good for another. I find William Bernstein’s books perfect for my personal knowledge and philosophy. I’m sure my wife would find them tedious. We each have different tastes and needs.

So, to end Book Week, I’ve drafted a list of my current top-ten finance books. These are the books I would want in a personal finance library if I started one today. Your list would be different (and I invite you to share it in the comments).

Here’s the list (in alphabetical order by title):

All Your Worth. You know, I hated this book at first. And I’m still not a fan of how Elizabeth Warren allows personal responsibility off the hook. But I can’t deny that this book had a huge impact on helping me find a balanced financial life. The Balanced Money Formula has been a Big Deal for me, and that’s an idea that originated here. [My review.]

The Complete Tightwad Gazette. This book is a monster — almost 1000 pages of ideas on how to live well for less. Amy Dacyczyn was the Queen of Cheap twenty years ago, and her legacy remains strong. If you want to know how to get the best deal on groceries, how to shop for clothes, and how to reuse anything, then pick up this book. It’s a treasure trove of ideas. [I have never reviewed this book, though I've mentioned it many times.]

Debt is Slavery. Not many people have heard of this slim self-published book. That’s too bad. Michael Mihalik does a fantastic job of explaining a handful of basic financial concepts, and his advice is sound. This is the perfect book for a young adult who doesn’t know where to start. I wish I’d had access to this book when I was 20. [My review.]

The Four Pillars of Investing. If I ever finish Jeremy Siegel’s Stocks for the Long Run, it may replace this book on my list. For now, though, The Four Pillars of Investing is my go-to book for reminding myself why I’ve adopted index funds as my main investment strategy. This book covers investment theory, history, and psychology, as well as the business of investing. [My review.]

The Incredible Secret Money Machine. I know, I know: You’ve never heard of it. It may be long out of print, but The Incredible Secret Money Machine is a terrific book about building “money machines”, businesses or products that keep producing nickels year after year. I wish the author had the gumption to update this (it’s over 30 years old!) and reprint it for a new generation. [My review.]

Work Less, Live More. Bob Clyatt’s book on early- and semi-retirement is one of my favorites. It’s sensible, comprehensive, and inspirational. He includes a big section on smart investing, and offers ideas for how to pursue your passions once you’ve stopped working full-time. [I've never reviewed this book, though I should.]

You Can Negotiate Anything. It was a toss-up whether to include this or Negotiating Your Salary [my review]. The latter is outstanding, and I recommend it highly to anyone who is applying for a job or asking for a raise. In the end, though, I chose Herb Cohen’s book because it covers a wider range of topics. And it’s entertaining! [My review.]

Your Money and Your Brain. I haven’t reviewed this at Get Rich Slowly yet, but it’s a great book. Jason Zweig covers the latest research into how money affects our behavior. There are a lot of interesting books out there about the psychology of personal finance, but this is the most comprehensive.

Your Money or Your Life. Of course this is on my list. Your Money or Your Life has influenced thousands of people — including me. The book includes advice about getting out of debt, living frugally, and seeking financial independence. But what most of us remember is that it helped make money less abstract, helped us see how it was directly related to time. [A guest review from the first month of GRS back in 2006.]

Your Money: The Missing Manual. Wait — I put my own book on the list? You bet. I wrote Your Money: The Missing Manual precisely to be the sort of book I needed when I was struggling with money. I think it’s a great resource, getting to the heart of a broad range of topics. Plus, I’ve done my best to point to other books and websites readers can use to get more information. If I could only have ten books in my personal-finance library, I’d want this to be one of them. (In fact, I refer to my own book almost daily. No joke. I guess that’s one of the luxuries of writing a book — you can just write the book you want!)

Are there other great books about money out there? Of course. A list of ten books can’t begin to be comprehensive. Over the past five years, I’ve read nearly 200 money manuals, and many of them contained great information. But today — on 10 September 2010 — these are the ten essential books I’d want in my personal finance library — if I could have only ten.

What are your essential personal-finance books? Which have you read and loved? Which have you read and hated? Are there books you’d recommend to people in specific circumstances?

This post is from staff writer Sierra Black. Sierra writes about frugality, sustainable living, and getting her kids to eat kale at Childwild.com. This post is part of Book Week at Get Rich Slowly.

Since my twin victories of paying off our last credit card and funding a summer of travel, my husband has begun to show interest in personal finance.

It’s not that he wasn’t supportive of my efforts before — he just preferred to support them from a safe, ignorant distance. A distance from which I handed him an envelope of cash each week to do the grocery shopping, he didn’t ask too many questions, and somehow we were climbing out of debt. He was more than happy to adopt any frugal-living strategy I suggested, as long as he didn’t have to think about the Big Picture.

That system worked, but I longed for more active participation from him. Not only because I wanted us to share equally in the journey toward financial freedom — I do want that — but also for a selfish reason. I wanted him to participate because he’s better at this stuff than I am. He’s a whiz at spreadsheets. The man has a Ph.d in Physical Chemistry. You don’t get one of those without doing a few math problems.

Lately, I’ve been getting my wish. My husband has been talking with a financial advisor at the university he works for, and having clear, honest conversations with me about our money.

This seemed like the perfect time for me to read Mary Hunt’s How to Debt-Proof Your Marriage.

Relationship first

Hunt’s book covers the basics of personal finance and debt destruction, with a special focus on doing it as a couple. Before she even begins talking about financial management, Hunt talks about strengthening the foundations of your marriage. You can’t have financial harmony without emotional intimacy, she says.

I couldn’t agree more. It’s clear in my own marriage that spending time relaxing together on vacation helped my husband and me both chill out and have better conversations during our family finance meetings too.

Hunt and I part ways in the chapters about how to achieve that emotional intimacy, though. She bases her prescription for marital bliss on traditional gender roles. She includes chapters for each sex on how to make deposits in the other’s Love Bank — a metaphorical bank of goodwill made of small, loving gestures.

The Love Bank is an adorable idea, one I’m tempted to put into practice here in my own home. I’m pretty sure I won’t be making my deposits to my husband’s Love Bank by biting my tongue when I disagree with him, though. Likewise, I don’t expect him to express his love for me by bringing me flowers and handling all the tough decisions for me like the natural leader of our family should.

Hunt is a generation (or two) older than I am, and what works for her marriage is so foreign to my young, feminist mind that it was actually a little hard to read. But leaving aside the details of how you get to an intimate marriage, though, she and I agree wholeheartedly that it’s important to get your emotional needs met before you can effectively work together with your spouse to manage your finances.

Money second

The personal-finance half of the book will be familiar to most GRS readers. Hunt advocates an approach similar to Your Money or Your Life and Dave Ramsey’s Total Money Makeover, one that begins with calculating your net worth and tracking your expenses. From there, she covers the basics of setting up an emergency fund, creating a spending plan, and starting a debt snowball (though she uses different terms for these steps).

Like her ideal of a healthy relationship, Hunt’s financial advice seems a little dated in places. A lot of it has to do with how to organize your three-ring binders, or how to painstakingly accomplish by-hand calculations that Mint can do for you in a few minutes. If you’re a devotee of the pen-and-paper approach, though, her chapters on how to track and plan your spending are rock solid and detailed enough to easily follow.

The one thing in this book that made me want to put it down, run to my office, and implement it on the spot was, in fact, her filing system. Hunt takes a few pages to go over exactly what personal records you should be keeping, and outlines an elegant effective way to organize them. I spent an hour tearing apart my filing cabinet yesterday as soon as I read those pages. I may not want my marriage to look much like hers, but I’m delighted to have made over my filing cabinet in Mary Hunt’s image.

Different views

There are a few areas where Mary’s financial advice deviates from the usual Get Rich Slowly formula. One is the matter of the debt snowball. She encourages readers to start saving 10% of their income towards an emergency fund immediately, while still paying the minimums on their credit cards. Only after saving up a fully funded six-month emergency fund would Hunt advise you to roll those savings into your credit card payments.

Given the relative interest rates on credit cards and savings accounts, this approach will almost certainly cost you money. If it works for you psychologically, though, by all means pursue it. No matter what order you do them in, the key steps of tracking your spending, creating an emergency fund, and snowballing your debt payments will lead you to financial security.

Another place where she breaks with conventional wisdom is in her savings and spending ratios. GRS readers are familiar with the Balanced Money Formula that encourages us to use 50% of our money for living expenses, 30% for fun and 20% for savings. Hunt advises 10% for giving, 10% for saving and 80% for spending.

The order of those percentages is vital to her. A devout Christian, Hunt feels that all the money that comes into your life is a blessing from God, and promptly giving 10% of it back to God shows you can be trusted with this blessing, and more of it will come your way.

I’m not a Christian, but I admire Mary’s faith and devotion to charitable giving. It’s a goal of mine to give 10% of my income. I’ve written about that here before, and readers made a persuasive case for waiting until my debts were paid before giving so much away. For now, I give a modest amount and look forward to giving more in the future.

I think that for Hunt, the psychological benefits of giving 10% and saving 10% before you make any spending decisions at all outweigh the financial benefits of paying off your debts as fast as possible and then beginning to accumulate and donate wealth.

It’s an interesting approach, and one that might work for a lot of people. Particularly if you’re a devoted Christian and looking for a personal-finance book that reflects your values, you’ll find a lot of good in How to Debt-Proof Your Marriage. If you’re looking for a book that’s totally focused on financial savvy and relationship skills, though, this might not be your best bet.

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victoriayhul

Friday, September 24, 2010

personal finance books

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