While short blog posts are a great learning tool, nothing beats cozying up with the best-written books on personal finance.
Reading ‘The Millionaire Next Door’, ‘The Little Book of Common Sense Investing’, and ‘A Random Walk Down Wall Street’ will build a strong foundation of personal finance knowledge that can be built upon for years. These three books teach how anyone, regardless of profession, can build up wealth by investing monthly into low-cost index funds.
Top 3 Finance Books You Should Read
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Before jumping into these book recommendations, I want to make it clear that the links to the books below are ‘Amazon Affiliate Links’. This means that if you click on the link, and then purchase the book in the same web session, I will receive a small kickback in commission (at no extra cost to you). If you are uncomfortable with this blog post being monetized, feel free to instead support your local library, bookstore, or simply navigate to Amazon on your own.
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1.) The Millionaire Next Door
The Millionaire Next Door holds a special place in my heart as the first personal finance book I ever read.
This book is responsible for sending me down the personal finance rabbit hole.
It explains how the majority of people have a vast misunderstanding of wealth. While many of us associate wealth with high income, the majority of millionaires work normal jobs, in normal neighborhoods. The book demonstrates that anyone can build millions if they emulate the practices of the wealthy; investing early and often. The compilation of research shows that millionaires are commonly blue-collar individuals who quietly focus on investments, rather than the white-collar individuals who are often plagued with a need to buy luxury goods, status symbols, and nice houses that drive them to live beyond their means.
This is the book that taught me it’s not about how much you make, but how much you save that matters.
If you have a surgeon who makes $250,000/year, but saves only 5% of their ($12,500), compared to a teacher who makes $80,000/year, but socks away 25% ($20,000), the teacher is exponentially wealthier. Not only will the teacher have more money invested overall, but their retirement goals are more attainable since they can comfortably live off $60,000 opposed to $237,500. One of these people can retire easily, while the other will likely work for the rest of their life, can you take a guess which one is which?
This book is perfect for someone who needs an incentive to begin/increase investments, especially for those who feel discourage since they “don’t make enough”.
2.) The Little Book of Common Sense Investing
Saying that learning how to invest is intimidating is an understatement.
Right away you are thrown into a world that speaks a seemingly different language. From stocks, ETFs, Mutual funds, expense ratios, PE ratios, and the sea of stock tickers (SWTSX, VSTAX, AAPL, etc.), can make understanding even basic finance principles feel impossible to understand.
“The Little Book of Common Sense Investing” demonstrates an easy-to-understand alternative (index fund investing) strategy that can ensure the highest returns possible for the average investor. The author, John C. Bogle, is the man responsible for founding the company that pioneered the index fund (Vanguard). He was able to revolutionize the way modern-day portfolios are run by creating an investment tool that allows someone with no financal education to take advantage of market growth.
This book is perfect for someone new to investing as it’s written with very little ‘financial jargon’, making its’ message understandable to the masses.
3.) A Random Walk Down Wall Street
If “The Little Book of Common Sense Investing” is a surface-level analysis of why index funds are the best investment strategy for most, this book goes on a deep dive. While some people can easily accept statements like, “time in the market beats timing the market”, for others, they want to see proof.
This book will help the analytical investor stay the course with a simple (but powerful) index fund strategy by demonstrating how passive strategies are better than active strategy based on speculation, money managers, or getting caught up in a market bubble.
Many investors try to beat the market deals more for their own our pride rather than their financial goals. Once someone hears that beating the market is an impossible task, the ambitious among us assume that their intelligence will allow their portfolio to beat others as long as they are willing to put in plenty of time and effort.
The nice thing about this book is that rather than dismiss the idea of active investment strategies all together, it engages in an open discussion about fundamental analysis, technical analysis, and many others in order to point out common flaws so you can understand why passively investing in index funds is proven to be the best option, rather than blindly following the advice of others.