Over the past year (starting in November 2006), I read a personal finance book each week and wrote a lengthy review of each one, a series which I completed just a few days ago. Now comes the fun part – comparing them, ranking them, and figuring out what I learned from them as a whole. My first task? Trying to rank all of the books that I read.
How do you rank them when they’re so diverse? Basically, I reflect on the book and ask myself a number of fundamental questions:
Did the book make me think while reading it?
Did the book stay on my mind after reading it?
Did the book bring about any changes in my behavior?
Did I actually believe what the book was saying?
Was the book merely a rehash of another book I’d read?
Do I have any interest in reading the book again?
As I went through the books and thought about these questions, a rough ranking of the books became pretty clear. This article focuses on the top ten from this finalized list – although I provide a list of entries eleven through fifty-three at the end of the article (and a link to find out more about them, both individually and as a whole).
What sets the top ten apart? Basically, if you read the top ten personal finance books (and perhaps a few more ranked immediately below the top ten), you’ll have absorbed basically all the useful material in every book on the list. Most of the others are repetitive, derivative, or have very, very specific target audiences. The top ten offer stellar advice, are well written and interesting, and really are the ones I’ve read that provide coherent, thought-provoking, and useful information without being boring.
So, without further ado, here are the top ten out of that mountain of books.
1. Your Money or Your Life
Joe Dominguez and Vicki Robin
This shouldn’t surprise my regular readers at all, as not only have I reviewed the book, I’ve also talked about how it changed my life and discussed it in incredible detail in the inaugural version of The Simple Dollar Book Club.
I’ve read a small mountain of personal finance books over the last year and a half and simply none of them compare to this one in terms of really making you reconsider the role that money has in your life and how to manage it better. Unlike other personal finance books, it really doesn’t focus much at all on the mechanics of how to save money or how to invest. Instead, it steps back and looks at the broader picture of how and why you’re spending money.
This material could easily become nebulous and, well, boring in the hands of lesser authors, but the late Joe Dominguez is just amazing here, transforming some very broad ideas into very, very specific things you can do to evaluate your own financial situation and how you’re choosing to spend your money and your time. It goes beyond money management into an examination of how we spend money in the modern world and whether it’s in line with our values or not. This book is incredibly heady stuff and will leave you questioning a lot about your life if you follow along and take the whole thing seriously. Read my complete review of Your Money or Your Life, and if that’s not enough detail, read through the very detailed book club entries.
2. What Color Is Your Parachute?
Richard Nelson Bolles
This is the book to read if you’re trying to choose a career or find a job, or are finding yourself rather dissatisfied with your current career and job choices. Everything else on the topic pales in comparison – this book hits that topic so well that the Library of Congress has named it one of the 25 Books That Have Shaped People’s Lives. And for good reason.
What sets this book apart from the pack isn’t the ordinary “here’s how to make a resume, here’s how to interview” stuff, but instead the material that focuses on teasing out exactly what you want out of your life and out of your career, and how to mold that into a potential career path for you to follow. This sounds complex, but Bolles transforms that complexity into a series of very worthwhile thought exercises that really digs through what you enjoy doing and what you value in life.
The end result of all of this is a clear picture of what you should be doing with your life in order to achieve the greatest level of fulfillment, and it’s packaged along with a lot of basic career advice that can take that picture and help you turn it into reality. Reading this book and actually trying the exercises can be truly life-transforming, and it’s largely led me to strongly consider a radical career switch. Read my complete review of What Color is Your Parachute?.
3. The Bogleheads’ Guide to Investing
Taylor Larimore, Mel Lindauer, Michael LeBoeuf, and John C. Bogle
This is the single strongest investment book I’ve ever read for the individual do-it-yourself investor. It presents a complete approach to investing, from the philosophy behind it to exactly how to execute that philosophy, and it’s all done in a completely readable and enjoyable way. This means the book not only tells you explicitly how to invest, but it tells you why you’re doing that for reasons that are completely consistent throughout the book.
Larimore, Lindauer, and LeBoeuf are nuanced advocates of the investing philosophy of John Bogle, the founder of the Vanguard Group, which is the second largest holder of mutual funds in the United States. Bogle’s philosophy is that you should invest as broadly as possible so that you’re not hitched to weakness in individual companies. By using that philosophy, you don’t have to actually do much research nor pay much in fees, because broad-based low cost index funds are very easily available to individual investors – they do all the work for you.
For determining exactly how I’m going to invest, this is always the first book I turn to for advice. How do I invest for the short term? What do I do for the long term? Should I be putting more into my 401(k) or Roth IRA, and how should I allocate that money? This book answers all of it in a logical fashion that makes sense and is readable by everyone from the complete beginner to the advanced investor. Read my complete review of The Bogleheads’ Guide to Investing.
4. The Complete Tightwad Gazette
This is, hands down, the most impressive collection of tips on how to save money that I’ve ever seen. Weighing in at just shy of 1,000 pages, this tome is composed of several hundred short articles on very specific topics on saving money, from clothing to food to entertainment spending.
What makes this book stand out even more is the entertainment factor. There’s a lot of humor mixed in with the tips, along with a few articles on some extreme frugality that goes beyond what you would even consider doing. It can be extremely entertaining reading, even aside from the fact that you can learn a ton about shaving money from your spending habits while reading it.
If you’re committed to reducing your spending and want a gigantic collection of interesting ideas written in bite-size chunks and a very readable, funny, and breezy tone, this book is the greatest thing to ever come along. In fact, if you’re interested in frugality at all, this is the book to get – the sheer number of useful and interesting ideas make this one an essential addition to your bookshelf. Read my complete review of The Complete Tightwad Gazette.
5. The Total Money Makeover
In this book, Dave Ramsey presents the most clear, direct, and specific plan you’ll find anywhere for getting yourself out of debt and on the right path. Ramsey writes with the fire of a preacher on a crusade, practically demanding you to get out of your chair and get your money in order, and his fire is really effective at pushing you to get serious about your debt.
Ramsey’s advice works both financially (it presents a reasonable plan for getting out of debt) and psychologically – the whole thing is designed from beginning to end to provide psychological cues to keep you going as you save. For example, the “snowball” concept is designed such that you’ll feel the success of paying off a debt quickly and then regularly thereafter.
While there are plans that are slightly more mathematically efficient at eliminating your debt, Ramsey’s plan presented here is by far the strongest in terms of execution and motivation that’s out there. If you feel lost in debt and don’t know where to turn, this one’s the best place to start. Read my complete review of The Total Money Makeover.
6. Born to Buy
If you are the parent of a young child, involved in the guardianship of a child, or are even considering having a child, you have to read this book. It really demonstrates the power that effective marketing has over young minds, causing children to make pretty poor decisions and adopt a brand-filled consumer lifestyle at a shockingly young age.
The book doesn’t just list opinions, but it turns to established scientific literature on almost every single page to back up the statements and conclusions. This is an incredibly well-researched book – Schor isn’t messing around here with just throwing out her opinions for all to read. The extensive bibliography at the end provides a ton of additional reading material.
Schor doesn’t just decry consumerism – that’s not realistic – but she provides a ton of reasonable ideas and suggestions about how to raise your child to be an intelligent consumer through minimizing the number of ads that they see and also reducing the impact of those ads through parental and guardian behavior. More than almost any book on finances and consumerism that I’ve ever read (excepting perhaps Your Money or Your Life), this book shook me to my core. I spent a lot of time in serious thought about how I’m raising my children to deal with consumerist society and I wound up making a lot of serious decisions along these lines, including basically eliminating television from my children’s life. It really opened my eyes. Read my complete review of Born to Buy.
7. It Pays to Talk
Carrie Schwab-Pomerantz and Charles Schwab
This is the one book in the top ten that I’m worried about overrating because of my own personal experiences, but this book was largely responsible for opening the floodgates for talking about finances between me and my wife and, later, me and my parents. This was my guidebook along the way in both cases, and it enabled all of us (me, my wife, and my parents) to really open up, help each other, and come up with some long-term financial plans together based on what we all wanted.
This book isn’t about money, for the most part – instead, it focuses on the challenge that people have in talking to their loved ones about money. If you’ve ever had difficulty telling the people closest to you about your debts or asking for help, or knowing how to open the door to talking to your parents about their retirement planning, you know what that’s all about. I know it was very difficult for me, and this book provided enough tips and suggestions and ideas that I was finally able to break down some barriers and talk about it.
If you’re in a situation where you, your spouse, your parents, or other loved ones are not communicating very well about their financial situation – and that communication really needs to happen so that everyone can have a secure future, this is a vital book. It goes beyond the simple paradigms of most personal finance books and really hits the challenges of opening up right on the head. Read my complete review of It Pays To Talk.
8. Smart and Simple Financial Strategies for Busy People
Jane Bryant Quinn
Many of the people who most desperately need basic personal finance advice are those who are incredibly busy with furthering their careers and ferrying their children to soccer practice. This book directly targets them, offering very specific solutions for time-crunched people who really need help with their financial state.
This easily could have become an extremely narrow book, but Bryant’s strategies turn out to be quite useful for everyone. Most of the concepts are very simple and can easily be adopted into anyone’s financial plan – in fact, I found myself using many of the tactics to great success.
While many of the ideas can be found elsewhere, nowhere else can you find such a set of time-saving financial strategies bundled together into one place, and thus for many readers, this is the book to pick up for basic personal finance help (provided they’re not buried too far into debt). Read my complete review of Smart and Simple Financial Strategies for Busy People.
9. The Millionaire Next Door
Thomas Stanley and William Danko
Stanley and Danko’s book takes an interesting perspective on the idea of a millionaire being someone sipping Dom Perignon and wearing a monocle. In fact, this book concludes that quite often, millionaire status is born from a lifetime of solid financial living, especially from people who do not earn exorbitant salaries.
This profile reveals a ton of interesting facts. A good work ethic trumps a good education (but an education is still worthwhile). Frugality trumps “keeping up with the Joneses.” Personal relationships are extremely valuable, in that stepping on people’s feet is often a poor way to go. These ideas come straight from the lives of people who have actually become millionaires in their lives.
The one flaw in this book that keeps me from ranking it higher than it is (perhaps as high as the top three) is the sweet smell of an age bias. Stanley and Danko are very heavy-handed in assuming their reader is at least forty years of age. While this wasn’t an issue most of the time, it did skew some of their advice a bit. Putting that aside, however, this book is an essential one for reading if you want to get a good grasp on what financial success without an exorbitant income looks like. Read my complete review of The Millionaire Next Door.
10. America’s Cheapest Family
Steve and Annette Economides
Few personal finance books focus so diligently and strictly on frugal living, and this is the only one that paints a clear and concise picture of how a real family does it, stretching an annual income of $35,000 to easily accomodate a family of four in a suburban neighborhood. This is a strong all around portrait of how this family accomplishes it.
This is the definitive “starter’s guide to frugality” out there. It provides realistic and yet specific advice using the real examples of a family that doesn’t seek to be the “cheap family on the block” but has a need to really squeeze every dollar that comes through their hand. Thus, the book walks through many avenues of family life – food, clothing, housing, transportation, vacations, and so on – and shows how to execute these things in a far less expensive way without sacrificing much quality at all.
At first glance, this book seemed a bit fluffy, but when you start applying these ideas in your own life, it’s almost as if a switch flips in your head and you somehow “get it” – frugal living isn’t some sort of secret and quite often it’s the most effective way to make your family’s finances work. This is a brilliant “getting started” guide for doing just that. Read my complete review of America’s Cheapest Family.
The Rest of the List
Here are books 11 through 53 in the rankings. If you’d like to know more about these books, including some nutshell explanations of why they’re ranked there and why there are actually 53 books in the rankings, read yesterday’s article outlining these lesser books. The links below go directly to detailed reviews of the books on The Simple Dollar.
11. The Overspent American
12. A Random Walk Down Wall Street
13. The Soul of Money
14. The First National Bank of Dad
15. The Automatic Millionaire
16. The Four Pillars of Investing
17. Real Money
18. The Lazy Person’s Guide to Investing
19. Smart Couples Finish Rich
20. Why Smart People Make Big Money Mistakes
21. Rule #1
22. The Little Book of Value Investing
23. The Money Book For The Young, Fabulous, and Broke
25. The Number
26. Smart Women Finish Rich
27. The 9 Steps to Financial Freedom
28. The Little Book That Makes You Rich
29. The Courage to Be Rich
30. The Random Walk Guide to Investing
31. The Millionaire Mind
32. All Your Worth
33. Automatic Wealth for Grads
34. Generation Debt
35. Mind Over Money
36. The Little Book of Common Sense Investing
37. How to Invest $50-$5,000
38. The Wealthy Barber
39. Pay It Down
40. The Richest Man in Babylon
41. The Only Investment Guide You’ll Ever Need
42. Mad Money
43. Yes, You Can Get A Financial Life!
44. The Little Book That Beats the Market
45. More Than Enough
46. Die Broke
47. Two For The Money
48. Make Your Kid A Millionare
49. Financial Peace Revisited
50. The Wall Street Journal Complete Personal Finance Guidebook
51. Making the Most of Your Money
52. Nickel and Dimed
53. Rich Dad, Poor Dad