As a reader, I dedicated my 2021 to financial education. I selected over 50 books and I read about half of them (among other things). If you have been following my articles, you have noticed that this is my approach to everything. If I want to improve my tennis game, I would read a bunch of books and I will go out and play tennis. Or, if I want to improve my running, I would read some books and I will go out running (in the rain, in the ice, and sometimes when it is sunny).
Ever since I read “Rich Dad, Poor Dad” in my twenties, I have been fascinated how people do not understand money, finances, and the simple (but not easy) steps to become rich (or to be more precise wealthy). This article is a collection of the best books about money, budgeting, saving, investing, which I have uncovered so far in my quest to attain financial education. I was tempted to post affiliate links to the books that I will quote, but then I remembered that I am determined to keep my blog free and ad free. So, if you feel the urge to support me – go and buy my book in the Books section above.
Financial Education: The Categories
I would like to separate my book recommendations in the following categories:
- Foundational – these are great books to start with. They can give you the motivation to keep reading.
- Personal finance – the books that will help you get your financial s**t together: get out of debt, start saving.
- Psychology of money – now this is an interesting category. Most people have a negative opinion about money, wealth etc. If you are one of them, none of this will work. You need to learn and define for yourself the meaning of money.
- Investing – this is the ultimate destination. The books in this section will show you how to invest (not how to day trade, how to speculate, or how to gamble). Investing is a slow, tedious, and not a very sexy thing to do. But it is still the only way to produce predictable, positive results.
Just to get this out of the way, yes, most of these books belong to more than one category. Feel free to comment below if you have any feedback.
Foundational
As I already said, I would recommend that you start your financial education journey with a few of these books. Even though I read Rich Dad, Poor Dan when I was in my twenties, I did not get fully sold on the ideas until much later in my life (when I also had the means to start following the next steps). The book that really resonated with me was The Richest Man in Babylon. More information – below.
Rich Dad, Poor Dad
Robert Kiyosaki describes a fictional reality where he grew up with two dads. His own poor dad who was very intelligent, worked in academia, but never achieved financial success. And his best friend’s rich dad, who was equally intelligent, but worked as an entrepreneur and was an investor. With a series of parables, Kiyosaki shares how his rich dad’s relationship with money and wealth is healthy and it results in obtaining both (as opposed to his poor dad’s feelings about that).
The most useful concept in this book is thinking in terms of assets and liabilities (not in terms of value). For example, your car is a liability (because you have to pay a lot of money for it). Your house is only an asset if you rent it out and you generate positive cash flow. This book will be especially helpful for young adults as long as they keep their interest in the topic and continue exploring other books.
The Richest Man in Babylon
The story of this great book is set in ancient Babylon where, again in a series of parables, the author outlines a simple approach to financial independence. The book is hilariously using outdated language (e.g., using purse as a synonym of wealth) but strikes the point of provided the basic pillars of financial education. This is an easy and a very entertaining read. I found the concept of “pay yourself first” (i.e., deduct some portion of your income to savings as soon as it appears as opposed to waiting until the end, or paying everybody else, and only set the leftovers as savings) very eye-opening.
I Will Teach You to Be Rich
Another amazing book to start with and a lot more contemporary (published in 2009). Ramit Sethi gives you an easy to follow but very efficient approach that even the laziest and busiest of people can follow. It shares a lot of the wisdom of the previous two books and adds new dimensions like how to get out of debt, how to save for a big purchase (e.g., wedding, home, etc.) ahead of time.
The Total Money Makeover
Very similar to the one above, The Total Money Makeover by Dave Ramsey gives you a seven-step plan to get out of debt, build up an emergency fund or a college fund, pay up your mortgage, start investing, and enjoy the process. Dave Ramsey also shares a lot of examples from real people who used his approach and went through the process.
The Almanack of Naval Ravikant
Even though this book is officially in the Philosophy or Business genre, I found this book really inspiring and very relevant to the topic of financial education. Eric Jorgenson shares the wisdom of Naval Ravikant – an entrepreneur, philosopher, and angel investor. The book is structured in two major sections – wealth and happiness and (spoiler alert) the fact that they are interconnected. I would recommend getting the Almanack a little later in your financial education journey.
Personal finance
After graduating the foundational course, you will get to the next step of getting your personal finances in order. As those books will teach you, there is a different attitude between being rich, looking like a rich (but being a month away from bankruptcy, and being (and looking poor).
You Need a Budget
The first step is to have a budget. Jesse Mecham’s book covers any possible life situation – if you are single, part of a couple, or part of a family. I believe that everybody needs a budget and this book is a great way to start. Mecham introduces the concept of “aging your money”, which means using your salary from previous months to pay future liabilities as opposed to getting in debt first and they using your income to pay the debt and the interest.
The Millionaire Next Door / The Millionaire Mind
This is a series of two books where Thomas Stanley explores the life of the affluent in North America, who live normal lives despite the fact that their net worth is tens of millions of dollars. These people usually live next door and have a very rigid philosophy about money, budgeting. A lot of modern-day millionaires fall into this category – e.g., Warren Buffet who still lives in his home which he bought decades ago. What you can learn from this book is how to generate and preserve wealth.
Secrets of the Millionaire Mind
This is another book that teaches you how to think like a rich person. Harv Eker summarizes seventeen rules for the rich mindset. Yes, the book is full of promotional content but there is enough content to make it worth reading.
Rich Dad’s Cashflow Quadrant
And finally, another one of Kiyosaki’s masterpieces. In the Cashflow Quadrant, he describes the four ways for making money – employee (where you earn a salary), self-employment (where you are a one-man business), business owner (where you own a business), and investor (your money works for you). Needless to say, you can become rich in any of the quadrants, though some are easier than others. And also, switching from one quadrant to the other is very difficult, because your success in one can blind you to the challenges of the other.
Psychology of Money
This category is very related to the previous one, but the topics of these books go more into the physiology part.
Fooled by Randomness
In Fooled by Randomness Nassim Taleb shows how many of the events are purely random and how in spite of that we try to give them meaning. This is not a financial book and is not a philosophical book and yet it is both. For example, “the market” has usually been going up ever since (something like 11% without accounting for inflation on average). To some people this means that it does not matter in which company they will invest, the price is going to raise. This is an example of the survivorship bias, because these averages are true, but only for the surviving companies. The failed ones are not part of the market any more. I would recommend this book fairly late in your financial education cycle. This book is very easy to read and very hard to describe.
Die with Zero
Another excellent psychological book where Bill Perkins argues that we over-save in our active years and under-spend in our retirement years. He does not actually argue that we should indeed die with zero, but argues for a more pragmatic and realistic approach to saving money. It might feel like the complete antithesis to the Millionaire Next Door and you might find yourself aligned with one approach or the other, but it is still worth reading.
Passive Income, Aggressive Retirement
In this book, Rachel Richards shares the three main paths of generating passive income (and escaping what Kiyosaki calls “the rate race”) – royalties, investing, real estate. She shares a lot of information and strategies which worked for her and for other people she writes about.
Investing
And finally, this is where things get really interesting. The books in this section will teach out how to invest. There are two high-level options: you can be a passive investor (i.e., investing in funds and diversifies portfolios) or an active investor (picking stocks, but still diversifying). Being a passive investor is easier, more reliable, but generates returns lower than the market. Being an active investor is hard, very follicle and usually generates returns substantially lower than the market. And still there are some people who were able to consistently beat the market.
The Intelligent Investor
Benjamin Graham is the “greatest investment advisor of the twentieth century” and the mentor of Warren Buffet. This book is very old (published in 1949) and most of the examples in it are rather outdated. But still, this is like being an economist and reading “The Wealth of Nations” – you need to start with the foundation.
Mastering the Market Cycle
Howard Marks shows how market rise and fall (everybody knows that), but also when to pull out and when to stay in. What contributes to cycles more than anything else is human emotion. This book goes hand in hand with “Fooled by Randomness”. You cannot control cycles, you cannot predict them, but you can prepare for them and try to profit from them.
The Essays of Warren Buffet
This is probably the best book about stock picking out there and about how to valuate a company. Many people have read it, and very few have ever followed in the footsteps of Warren Buffet. The book can feel intimidating, because it is packaged with knowledge. I would recommend re-reading it every now and then.
One Up on Wall Street
Peter Lynch is another successful “stock picker”, who build the Magellan fund. It is absolutely worth reading this book cover to cover and to reflect on the different aspect of his strategy. Most of the examples are, of course, outdated, but the principles are still the same.
The Motley Fool Million Dollar Portfolio
This is a great end-to-end book about investing and stock picking. It taps into the wisdom of Warren Buffet, Peter Lynch, and the rest, but it provides a unique twist to creating your million-dollar, diversified portfolio. The Motley Fool is a community where investors connect and share advice.
The Bogleheads’ Guide to Investing
Another end-to-end book about personal financing, which covers all the important aspects without diving into too many details. Again, I would recommend this to everybody and you need to know this as early in your life as possible.
Specific to Canada
And last but not least, because investing and financial education does not only happen in the US, I would like to present 2 Canada-specific books.
Wealthing like Rabbits
Wealthing like Rabbits is a starter book for investors in Canada. You will gain a lot of priceless knowledge about RRSPs, TFSAs and their different purpose and usage.
The Value of Simple
Another starter book concentrated in Canadians. The part that stood out for me were the ways to convert your savings/investments into income when you retire. There are some subtle differences between RRSP and TFSA in that aspect.
Summary
I believe that books contain the answers of most of our problems. Every year I set myself on a conquest of a specific topic which is relevant to my life, success, and happiness. The topic in 2021 was financial education and this article is the result of my year-long strides in that aspect.