Trent Hamm* says there are a handful of books that stand out among the masses as being “head and shoulders” above the rest when it comes to advice on personal finance.
There are a lot of books out there on personal finance topics, with more getting published each year.
Many of them are quite good — for the most part, you won’t go wrong picking up a personal finance book from the bookstore or the library or Amazon (provided you avoid ones with outlandish claims, like quadrupling your wealth in a year or becoming a millionaire very quickly).
Over the years, though, a handful of personal finance books have really stood head and shoulders above the rest.
These books do a spectacular job of addressing specific personal finance topics.
These books remain in print and many often see regular revisions to keep some specifics updated, but the core information in each of these books is rock solid and timeless.
Ten personal finance books you should read to jumpstart your financial education:
- Best overall for personal finance: Your Money or Your Lifeby Joe Dominguez and Vicki Robin
An early edition of this book was the book that turned my financial life around.
It happened to be one of a handful that I grabbed at the library when I was completely lost in terms of my financial life and it was heavily responsible for turning my financial situation around.
Your Money or Your Life‘s premise is that when you work, you are effectively exchanging some portion of your life for every dollar that you make.
Then, when you spend that dollar on something that doesn’t provide deep or lasting meaning, you’re essentially wasting your life.
You’ve traded your time and energy for something that didn’t provide equal or greater value in return.
That core idea has a lot of implications, and Your Money or Your Life walks through them carefully through concepts like the fulfillment curve and the crossover point.
For me, perhaps the most effective point was the discussion of the idea of your true hourly wage.
Your true hourly wage refers to the amount of money you actually earn per hour of time invested in your work.
You add in all of the extra hours you give to work doing things like commuting, doing work outside of your work hours, communicating, travel and unwinding, then you also subtract out all of the money that your work bleeds from you for things like work clothes, work lunches and commuting expenses.
When you use those “true” amounts — the actual portion of your salary that you keep after work expenses are taken out divided by the total number of hours you actually devote to tasks due to work — to calculate your true hourly wage, it can be shocking, and it really recasts how much of your life you’re trading for the things you buy.
The book’s core advice is to become much more careful and thoughtful about how you spend money, recasting it in terms of the lasting value you get out of each dollar you spend, and it not only makes a powerful case for that perspective, it gives you a ton of tools for rebuilding your financial life with that idea at the center of it.
- Best for budgeting: You Need a Budgetby Jesse Mecham
My preferred piece of personal finance software is You Need a Budget.
It does a really nice job of helping you make a clear financial picture of your life, categorizing your expenses and creating a spending plan that really makes sense.
Part of why the software works so well is that it’s designed around a clear budgeting philosophy, perhaps best summarized as “give every dollar a job.”
The book You Need a Budget, written by YNAB’s founder Jesse Mecham, spells out that philosophy in detail and explains how to apply it to your own life without requiring the software in any way.
In my eyes, it’s the best basic book on budgeting out there.
So, what is that “give every dollar a job” idea all about?
The idea is really simple: whenever your paycheck arrives, you assign every dollar added to your bank account some kind of job.
In other words, you decide upfront how every dollar in your paycheck is going to be spent.
For example, $500 of it might go to the rent, $200 might go to the car payment and $100 of it might go toward eating out.
You get the idea.
Then, you just go ahead and take action on a lot of those.
Make that car payment. Make that rent payment. Get them out of the way.
The rest of the money goes to the things you’ve designated for them.
Mecham’s book expands on this core idea, which is the foundation of a real living budget that actually works for you.
- Best for people with debt: The Total Money Makeoverby Dave Ramsey
If there is a single book that you need to read if you’re struggling with overwhelming debt, it’s The Total Money Makeover by Dave Ramsey.
It addresses the issue of personal debt better than any other book on the market.
The core idea behind The Total Money Makeover is that you should assemble a “debt snowball” — Ramsey’s term for a debt repayment plan — and pay it off as rapidly as possible, progressing rapidly toward debt freedom as an ultimate goal.
The plan that Ramsey offers is very simple to follow; Ramsey definitely follows a “keep it simple, stupid” attitude throughout the book.
Ramsey takes the perspective of a “tough coach” in this book, which may or may not be to everyone’s liking.
There is a lot of strong encouragement and inspirational stories for making positive steps toward repaying debt, but there is also a lot of strong “get to work” talk to motivate as well.
If you value motivation and are struggling with debt, this book is basically perfect for you.
- Best for personal financial success: The Millionaire Next Doorby Thomas Stanley and William Danko
The Millionaire Next Door is a discussion of a detailed survey of actual millionaires conducted by the two authors over a number of years.
The survey draws a number of very interesting conclusions about people who manage to accumulate wealth in their lifetimes, and it’s not what people typically expect when they think “millionaire.”
The book concludes that people who are effective at building personal wealth don’t live flashy lifestyles; they accumulate wealth by being careful with their spending.
The consistent theme of this book is that the most effective route to building financial stability is by, yes, having a job that pays well or a business of your own, but coupling that with being quite frugal.
In fact, the book goes so far as to argue that abundant spending and a flashy lifestyle are often indicators of little actual wealth outside of the exorbitantly rich.
The authors walk through all kinds of conclusions from their survey, studying how people who build solid personal wealth parent their children, conduct their marriages and buy homes.
The survey data is surprisingly consistent in terms of some key traits in each of those areas.
If you want a window into the traits and commonalities amongst people who are actually successful at building lasting personal wealth so that they can become financially independent, this book is a very valuable read.
- Best for changing spending habits: Atomic Habitsby James Clear.
For most of us, one of the biggest challenges to turning our financial picture around is changing our spending habits and routines.
As humans, we’re creatures of habit — we have certain ways of doing things, we stick with them and we change them less often than we think.
Two books really changed my thinking about habits.
The one I want to focus on here is Atomic Habits by James Clear, which focuses on the singular principle that if you want to change your habits, you focus by changing the smallest possible habit, making that change permanent and building from there.
In other words, if you want to start changing your spending habits, focus on changing one very discrete habit that you do.
For example, if you stop for a coffee at the coffee shop every morning, just change that one habit to making coffee at home each morning and focus on making that your new habit.
Atomic Habits is full of strategies for making that singular shift happen, and then that singular shift gives you a blueprint and a foundation to make other changes happen.
Just start with and focus on one singular small habit and let the rest follow from there.
Remember I mentioned two books? The one that’s not listed here — Triggers by Marshall Goldsmith — is a wonderful book, but is a bit less straightforward for getting started. It’s more of an “advanced take” on how to handle changing your behaviors, not the individual actions that you take.
I strongly recommend it as a follow-up to Atomic Habits.
- Best for savings and retiring investments: The Automatic Millionaireby David Bach.
One principle I’ve come to really believe in, particularly in the last few years, is that lasting financial success is largely automated.
If you’re relying on yourself to constantly make the right financial decision over and over, it’ll probably fall apart because, even with the best of intentions, you’ll make a lot of wrong choices that undermine your progress.
Success is found when the right financial decision is essentially locked in place for you or made so easy that it’s the obvious choice.
That’s the core concept behind The Automatic Millionaire.
The idea that the book offers is that you should automate as many of your financial choices as possible so that you’re much less likely to make major financial mistakes in the heat of the moment.
For example, let’s say you get paid on the first day of each month and the money always shows up in your checking account by the fifth day.
You might then set up a bunch of financial moves to automatically happen on the seventh or eighth — a contribution to your emergency fund, your mortgage payment, your bills automatically paid, a contribution to your Roth IRA, money transferred into an account for groceries and household supplies and money transferred somewhere for “fun money” use.
The goal is to take those decisions out of your hands and make them happen without further thought or having to take action.
They just occur.
That way, you never second guess your decision to make smart financial moves.
You just need to make that decision once and carry it through by setting everything up.
- Best for investment beginners: The Bogleheads’ Guide to Investingby Taylor Larimore, Mel Lindauer, and Michael LeBoeuf
If there is a single volume on investing that I would recommend everyone to read, particularly when they’re starting out, it’s this one.
What sets The Bogleheads’ Guide to Investing apart is that it not only explains the basics of investing, it also spells out in very clear terms a sensible and easy to follow investing philosophy.
The core idea behind the book is that you’re not a seasoned investor and you’re not going to devote large sums of time to studying investing; you want to understand what’s going on, but you don’t aim to be a professional investor.
Rather, you just want to get good returns without having to pay a money manager and run minimal risk of losing your shirt.
The investing philosophy that this book describes is indexing.
It’s the idea that the best way for most people who aren’t professional investors to invest is to buy tiny slivers of everything and ride the market average.
The book identifies many ways to do that easily through buying low-cost index funds, which exist to do that very thing — buying little bits of everything at once.
- Best for learning more about stocks: A Random Walk Down Wall Streetby Burton J. Malkiel.
This is the single most worthwhile book for a person to read if they want to gain a basic understanding of how the stock market works.
While it’s not a particularly strong guide on how to invest, it is very good at making the fundamentals of the stock market clear to everyone.
The core idea of the book is that for the average person, the stock market is effectively unpredictable.
The prices of stocks go up and down based on reactions to new information, which are somewhat predictable, but the release of that information isn’t predictable at all for most people.
You can’t guess what the stock market will do tomorrow any more than you can guess what the headlines tomorrow will be, and any reasonable knowledge about those headlines has already been incorporated into the current value of stocks.
So, what can an average person do?
Malkiel’s suggestions are pretty strongly in line with the suggestions from the previous book: buy index funds.
The difference here is that, while a detailed review of The Bogleheads’ Guide to Investing gets deep into the how, A Random Walk Down Wall Street gets deep into the why.
- Best for teaching finance to kids: Raising Financially Fit Kidsby Joline Godfrey.
As a father of three, I know as well as anyone the sheer number of challenges that raising children to be self-sufficient independent adults puts on the shoulders of parents.
Raising your child to have the skills necessary to succeed in the modern world is tricky, and finances are a particularly tricky area.
Hands down, Raising Financially Fit Kids by Joline Godfrey is the best book on teaching your kids about money.
What really makes this book click is that it focuses on the developmental needs of children at each age in their growth and offers strategies for teaching personal finance ideas that are in line with that developmental level.
It leans really heavily into the practical, offering specific things to do with your kids at each level so that they understand the value of money, the value of saving and how to be ready to manage their own financial life.
I’ve been using the ideas in this book for years in raising my own children and the biggest thing I’ve noticed is that all of my kids are prodigious savers.
They all see the big picture and are constantly willing to delay gratification when they have a big goal in mind.
That’s a skill I really wish I had at their age because it would have helped my own financial journey so much.
I attribute much of that to the ideas I’ve used from Raising Financially Fit Kids.
10: Best for retiring early: Early Retirement Extreme by Jacob Lund Fisker.
What if you have a laser focus on retiring as early as possible, escaping the rat race of constant work and spending the rest of your life devoted to other goals with the money you earned during your years of work?
Early Retirement Extreme is a powerful philosophical and practical guide to that approach.
Early Retirement Extreme ‘s main idea is that almost every decision you make in life can be filtered through the lens of how many years you want to spend working for someone else at tasks you don’t choose.
Every lifestyle upgrade you choose adds to the time spent working for others and takes away from the time you spend on your own.
In the author’s hands, this becomes an overarching life philosophy.
He offers a lot of encouragement for readers to adopt a jack-of-all-trades approach to life, where they develop a wide array of skills such that they’re prepared to handle whatever life might throw at them should they retire.
Having a wide variety of skills also means that you’re less likely to have to pay others for services now (as you’re saving for early retirement) and later (when you’re actually in early retirement), enabling you to save more now and also be able to retire faster.
Fisker applies that mindset to all kinds of things in the later chapters, like choosing a place to live, how to exercise, entertainment choices and career decisions.
It’s a powerful, thought-provoking book.
You can find all of these books for free at a library near you
Most (if not all) of these books can easily be found for free at your local library or requested by them via interlibrary loan.
I strongly encourage you to get these books for the first time via the library, read through them, and purchase them only if they strike a chord with you and you would like to have them around for future reference.
*Trent Hamm is the founder of The Simple Dollar
This article first appeared at thesimpledollar.com
