I get asked all the time if I can recommend a good book on money management. I can actually name two, but more on that in a minute.
I have read hundreds of books on all sorts of financial topics — general money management, investing, retirement, and on and on. Unfortunately the vast majority of them aren’t worth the paper they are printed on. They are poorly written and contain little valuable information.
That said, there are many books that stand out for one reason or another — and I mean this in a positive way. They do have good information and are worth anyone’s time in reading.
However, there are only two books that I believe warrant a whole-hearted endorsement from me. They are both general money management books and both, if read and applied, will change a person’s financial life for the better (they have changed mine, that’s for sure). In fact, if applied over a lifetime, they will almost certainly make a person wealthy.
The Millionaire Next Door
I first read The Millionaire Next Door: The Surprising Secrets of America’s Wealthy
shortly after it was published in 1996. I was out of graduate school, married, and a few years into my career. I had been working on eliminating debt from my life (yes, including my mortgage), but this book pushed my financial vision into over-drive.
The book’s message is that most millionaires in America aren’t the ones living in huge homes, driving expensive cars, and taking extravagant vacations. In reality the average American millionaire is just your typical guy next door. He’s unassuming and someone most people would never pick as being wealthy. That’s what made this book such a phenomenon — its findings turned conventional thinking on its head.
The book highlights seven common denominators among those who successfully build wealth. They are:
1. They live well below their means.
2. They allocate their time, energy, and money efficiently, in ways conducive to building wealth.
3. They believe that financial independence is more important than displaying high social status.
4. Their parents did not provide economic outpatient care.
5. Their adult children are economically self-sufficient.
6. They are proficient in targeting market opportunities.
7. They chose the right occupation.
After reading the book, I applied every one of the learnings above except #5 (since I don’t have adult children). And my finances benefitted greatly from doing so.
The Richest Man in Babylon
Shortly after reading The Millionaire Next Door, I stumbled upon The Richest Man in Babylon: George S. Clason’s Bestselling Guide to Financial Success: Saving Money and Putting It to Work for You, an equally life-changing personal finance book.
The Richest Man in Babylon is a parable of a wealthy man in ancient Babylon who gives a friend “seven cures for a lean purse” as follows (along with a summary of each):
Cure #1: Start Thy Purse to Fattening – Save 10% of your income.
Cure #2: Control Thy Expenses – Keep spending low.
Cure #3: Make Thy Gold Multiply – Invest to grow your wealth.
Cure #4: Guard Thy Treasures from Loss – Don’t lose money when you invest – protect your principal.
Cure #5: Make of Thy Dwelling a Profitable Investment – Own your own home.
Cure #6: Insure a Future Income – Turn your wealth into a retirement income.
Cure #7: Increase Thy Ability to Earn – Study to become wiser so you can make more money and manage it better.
Just look at those tips! All of them are extremely solid! I think we’ve heard a lot of these from the millionaires we’ve talked to.
Applying the concepts in these two books did one thing for me: made me a much, much better money manager. But really, if a person just read and applied either one of them over a decent period of time, he would be wealthy.
That’s why I can wholeheartedly recommend these books to ANYONE looking for a good book on personal finances. If you haven’t read either of them, do so immediately. Then do your loved ones a favor and have them read these — especially your kids, relatives you have that are graduating college and high school, and so forth. Doing so will change their lives forever and the earlier someone begins applying these principles, the better!
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