SubscribeFri 24 Aug 2007
I think many of us who blog about personal finances take it for granted that our readers may have read many of the same books that we’ve read. The question is what books have we all read? I think there are a few books that belong in everyone’s library. Many these books I imagine are also owned by other bloggers.
The Millionaire Next Door, Thomas J. Stanley and William D. Danko
I believe every single personal finance blogger has read the Millionaire Next Door. I would say most bloggers are disciples of this book. It’s a good book, and well worth reading, but probably could be summarized by two statements. “Spend less than you earn. Don’t compete with the Joneses.” Those are certainly two principles I agree with. Personally my biggest gripe about the book is that it’s both overly simplistic, and academically sloppy. The latter I wouldn’t have a problem with except the writers present as if it were an academic study. It’s not. The book is anecdotal rather than data driven despite citing plenty of simple statistics. The book is simplistic because it approaches the process of wealth creation from a one size fits all approach. While there’s no question in my mind the first step to sustained prosperity is spending less than you earn, that simple statement has two complicated parts, earning more and spending less. The Millionaire Next Door will not teach you how to earn more, and really the only lesson it gives on spending less is, buy a used car and a small house. Still this book is a must read. Read it and you’ll understand most personal finance bloggers, as we all like to fashion ourselves the would be “Millionaire Next Door.”
A Random Walk Down Wall Street, Burton Malkiel
This is probably most definitive book about the act of investing rather than how to invest. As the title suggests it tends to believe that equity performance cannot be predicted, hence the random walk. While the theme of the book is to basically invest in index books, there are few books that match it in explaing the general nature of stocks.
The Intelligent Investor, Benjamin Graham
Benjamin Graham was Warren Buffett’s mentor and this is his definitive book on value investing. It’s must read for any aspiring value investor. That said, it’s dated on many topics, and both a lengthy and muddled read. There are also many people who believe that Benjamin Graham to be far too conservative in his investment approach. Warren Buffett is widely accepted as having improved on Graham. However, you can’t talk about value investing without talking about Benjamin Graham and the Intelligent Investor.
Rich Dad, Poor Dad, Robert Kiyosaki
This last book I suggest not because I think it’s a particularly well written or informed book, and hesitate to even recommend it any fashion. However it’s an influential book, and one illustrates an alternative line of thinking. The book can be illuminating for individuals who have never really thought about money. I’m not sure who the best benefits by reading this book. Regardless, there’s no question the influence this book has had. For many people this book has changed how they think about money. Reading provides insight into how other people think even if ideally you take no hard money lessons from the book. The book given that it’s authored by an “expert” who is on the seminar circuit is all about pitching a path to riches rather than concrete steps to take.
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August 24th, 2007 at 5:16 pm
I’ve read The Millionaire Next Door and RDPD. If you want to read TMND, read the first half of the book, then stop. All of the interesting stats are there - after that you’re right, it’s just anecdotes. It is a fascinating book, though.
Rich Dad… what can you say. This was THE book for me, the one that got me thinking about financial freedom and rethinking assets vs. liabilities (de-educating myself from my MBA in accounting) and I think it should be required reading. If you use it for specific technical advice you are insane - Kiyosaki is full of himself and he doesn’t give good advice. But I love his way of thinking - the only goal should be getting out of the “rat race”.
I’d also throw in Your Money or Your Life. It’s excellent for refocusing on WHY money is important.
August 27th, 2007 at 7:32 am
I was about to comment that I couldn’t believe that you included Rich Dad, Poor Dad. However, I was stopped short after reading Brip Blap’s comments. I thought the book was extremely shallow and uninformative, but if it is able to inspire someone to think freely then I say add it!
August 27th, 2007 at 6:06 pm
I was afraid someone was going to make a comment like that, SD. I will defend Kiyosaki against all of the criticisms for this one reason: he made me think about what he wrote about. I would never pay for a down payment on a credit card like he did. I would never do bizarre creative financing like he did. But I did rethink the concept of home ownership (it’s a liability that makes you spend money, not an asset that earns money). Far and away the most important point was that financial freedom is the goal. Before I read RD,PD I thought the point was to make more money so you could spend more money. I have an MBA with accounting emphasis and I wasn’t uneducated about finance, but I never thought about the concept of ‘living below your means’. I thought managing money meant the ability to maximize your purchases. Terrible, I know, but that’s what Kiyosaki made me think about. He sent me on the way to better books and concepts and for that I think he wrote a great book (which puts me in a minority in the PF community, I think).
August 28th, 2007 at 10:51 pm
I like your list. My main problem with the millionaire next door was the overwhelming amount of statistics. I thought it went a little overboard explaining what kind of cars millionaires drove and what ethnicity they were and various other statistics that are, in my opinion, pretty useless in our quest to make ourselves more financially secure. I actually am also a fan of Kyosaki. I don’t believe his methods are for everyone and he definitely understates the whole real estate process but I believe he is very motivational. His book was the first book that I read that really got me thinking about personal finance and getting out of the “rat race”. I would recommend it to anyone and then let them form their own opinions.
August 29th, 2007 at 4:20 am
I’ve read TMND RD,PD, too and agree with all that’s been said. I found Kiyosaki’s book to be inspirational even though I wouldn’t recommend that anyone become a follower of his or invest in any of his other products. I would consider his book to be sort of a gateway drug for lots of people getting into the idea of financial freedom, though. For that, it’s worth reading.