There is an avalanche of financial information out there. Websites like The Wall Street Journal provide How-To-Guides on personal finance with sound definitions. Kiplinger provides ongoing commentary as well. The issue with these and other personal sites is that for most people, there is too much detail. Most people are right. If one’s financial structure is sound, there is little need to spend significant amounts of time investigating and understanding finance barring life and world changing events.
Following are resources for personal and professional development in Finance. They are not consuming or difficult to read. If you only have time for one or two, that is fine. The essential themes in all these books are to get out of debt as quickly as possible, the power of compound interest and living well within your means.
The key to remember is not that families need to watch every penny. Being asset rich and cash poor leads to a mind set of worry, stress and guilt. Most misers are worried, and no fun. What kind of life is that? It is the big ticket items and fundamental decisions that forge futures. If you find you have made a mistake (and you will), fix it. Don’t allow the past to ruin the future.
Personal Finance
Keep it simple! This is a very important theme. Don’t turn off because of the avalanche of financial information out there. Make a plan and party towards it. Here are some basic tips:
- GET OUT OF DEBT. Never leave debt on your credit card. If you can’t do that, cut it up.
- Live well within your means. Your accommodations should not cost more than 20% of your income.
- Owning a house is a great way to build equity. But pay off the interest as quickly as possible. Using the prepayment option to make an extra payment once a year will save hundreds of thousands of dollars in payments over a 30 year mortgage.
- Make a plan and party towards it. If you need an advisor to do so, get one. Talk with your partner about it to remain focused but not obsessed.
- Putting 20-30% of your income aside is a good rule of thumb. No, I’m not kidding.
- Treat your car well. Change the oil every 3,000 miles and use the best oil you can find. Make sure the engine is large enough for the car. I still rely on V8’s, but there are some good V6’s out there. A well built car prudently maintained will last over 200,000 miles. Remember, your car is worth thousands of dollars more to you than anyone else, which is what you will lose when you trade it in.
- Knowingly diversify your savings portfolio. Index funds are best.
| The Wealthy Barber, Updated 3rd Edition: Everyone’s Commonsense Guide to Becoming Financially Independent My favorite starter book on personal finance. |
| I Will Teach You To Be Rich Start well. |
Investing
Personal investing is remarkably clear cut and simple. Stay in index funds, stay with what you know, and remain diversified.
For most people, their house will be their largest investment. Here is the one simple 20/20 rule of buying a house: If you can’t make a 20% down payment and a 15 year mortgage represents more than 20% of your income, then the house is too expensive for you.
It goes without saying that most people end up living at the very edge of their economic boundaries, and pay heavily for that if setbacks occur and when it comes time to retire. If your house is costing you more than 20% of your income, you must seriously consider that you are living too large. And I realize that 20% is lower than most advisors suggest. But remember that houses often consume 10% or more in maintenance costs.
Personal uncertainty in an uncertain world, and saving for the future demand extreme prudence in this large investment. Besides, house prices are unlikely to rise in the future as they have in the past.
 | The Intelligent Investor (4th Revised Edition) (Intelligent Investor) Warren Buffett calls it “the best book on investing ever written.” |
 | Unconventional Success: A Fundamental Approach to Personal Investment How to construct and manage an individual portfolio. |
Professional Finance
These books are useful for one’s personal development as well. They are the cream of the crop. Much of the secret of writing a good finance book is focusing on the appropriate depth and then writing clearly. Both of these books do that.
| Finance for Non-Financial Managers (Briefcase Books Series) The book translates the language of numbers into easy to understand English. Financial concepts are provided in a step-by-step method so that the reader develops skills that may be used immediately. |
| Principles of Finance with Excel: Includes CD Using excel is a no brainer. |
