In honor of Financial Literacy Month, we asked guest blogger Jesse Michelsen to share with us a few of his favorite personal finance books and what he’s learned from them. This is what he came up with:
I Will Teach You To Be Rich by Ramit Sethi – Tip: Fight for what you value
“
I Will Teach You To Be Rich” is a book all about values. The author says to ignore the “latte factor” or extreme frugality and prioritize what makes you happy and adds value to your life. Once you know what you want and don’t want, do everything you can to afford the things that make you happy – cut out the things that don’t.
For example, if you like driving expensive cars but don’t spend much time at home, rent a tiny studio apartment for a fraction of the kind of house you could afford and spend your hard earned cash on that one thing that makes you tick, 0 to 60 in 5 seconds.
If travel is what gets you going and nothing else matters, don’t spend money on things you can’t take in your backpack. Without big screen TVs or furniture the cost of getting away becomes much more affordable.
The key here is to discover what you love and understand that compromises are necessary. You can’t have it all, but who really wants it all?
Enjoy Your Money! How To Manage It, Invest It, Save It and Give It by J. Steve Miller – Tip: Find the lessons in every experience
“Enjoy Your Money” is an unconventional book on personal finance. The book is written like a movie script – a conversational story between friends. The story goes through the different characters lives one by one and from each mini story within the book comes a conventional tip about money such as find your passion and follow it or live within your means.
The biggest tip I got from this book was that we need to read between the lines. Our lives are a story, as well as the lives of everyone around us. When you see someone’s life you may form a first impression of them, but digging a little deeper can reap the biggest reward. Learning about their past, their story and learning from their experiences as well as taking those experiences and combining them with your own past can provide the best lessons you will ever know.
That Thing Rich People Do by Kaye A. Thomas – Tip: Trust The Unpredictable
“That Thing Rich People Do” is a book about investing. It’s a brief book and can literally be read in just a few hours, but the wisdom inside can help you get on track to a great retirement.
My favorite tip from the book was that when investing you need to trust that the market is volatile and always will be. If there were a way to predict the market, everyone would come to know it and then it wouldn’t work anymore. The market will remain unpredictable forever and you need to find a way to beat that average.
According to the author, that way is by Dollar Cost Averaging. If you try and time the market you will most likely find yourself selling low and buying high – riding the emotion of the rest of the crowd. By Dollar Cost Averaging, that is, deciding on a set amount of money you will put into the stock market, at a set and regular frequency, you will buy some shares at a higher price and some at a lower price as the market fluctuates. When the price is high, you will not be able to buy as many shares with your set amount of money as you will when the price is low and you will inevitably have a lower average price per share at the end of the day.
LendingTree guest blogger Jesse Michelsen, founder of the personal finance blog PFFirewall.com, works in the tech field when he isn’t blogging about budgeting and personal finance issues.
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Agree, or disagree? Share your own favorite personal finance books in the comments section below:
Anything from Ramit Sethi is well worth the read! I’ve long been suspicious of extreme frugality, and that’s a theme of his as well.
There’s something about frugality taken to the Nth degree that isn’t conducive to making more money, which is the other half of the money equation. We can only cut expenses so much, but income, at least in theory is limitless. Which should get our greatest effort?
@Kevin
I agree, he is so blunt but there is a reason for that. He knows what works, tests everything extensively and is great at getting his message heard.
I agree that frugality can only go so far, then you have to work on earning more if you want to rise above your current financial standings.
I read “Enjoy Your Money” and thought it was a good read.
@Jason it was very clever, I enjoyed it too regardless of how much I learned from it.
I loved Millionaire Next Store, but it is so dated now. I would love it if they updated the data and released a newer version.