Recently, I read a Dayre post about a user’s personal finance and investing journey. It was pretty interesting and it made me think about my own personal finance journey and from there, about the books I’ve read. Somehow, everything in my life can be linked to a book I read.
While personal finance and investing is something that I learnt mostly outside of books (yay for corporate finance classes in uni and basic “INFLATION WILL EAT YOUR MONEY UP LEARN TO INVEST” math classes in secondary school), I do have three books that I’d recommend to people who want to take better care of their personal finances.
Note: These books focus on North America, which is not surprising because they are all by American authors. If you’re living outside the States, like me, bear in mind that not everything will be applicable (especially things related to 401ks and other financial products created for an American audience). Take the principles from these, but don’t feel like you have to follow every single specific piece of advice – this is all about what is useful to you.
1. Pound Foolish: Exposing the Dark Side of the Personal Finance Industry by Helaine Olen
I assume that for people who want to learn more about personal finance, books are going to be a major resource so I would recommend you read this first!
Pound Foolish is a critique of the American Personal Finance industry (which is where most of the books in Singapore come from anyway). It’s important to read because it critiques the personal finance industry (yes, it exists) and its gurus.
There’s A LOT of information out there and not all of it is good, so I think it’s wise for us to know what to look out for and what advice to avoid.
The book is not without its pitfalls (it swings too much to the pessimistic side for me at times), but I think it’s worth reading.
Full review (Link leads to Goodreads review)
2. Dollars and Sense: How We Misthink Money and How to Spend Smarter by Dan Ariely
This isn’t the typical personal finance book, in the sense that it doesn’t give specific tactics (how to save, how to invest, etc), but it is important because it talks about the ways we think about money, such as:
- Relative prices
- Mental accounting
- Anchoring (basing whether we think something is value for money based on a different, initial price shown)
- Ownership
And a lot more
To me, part of personal finance is to think of money in a healthy way and to recognise spending/saving pitfalls. This book will help you clear up the misconceptions we may have about money and spending.
You can read and learn lots of tactics and strategies on how to save and invest and cut costs, but recognising the patterns in the way you think about money is going to be invaluable in helping you identify and break bad money habits.
Full review (Link leads to Goodreads review)
3. The Dumb Things Smart People Do with Their Money: Thirteen Ways to Right Your Financial Wrongs by Jill Schlesinger
This one is perhaps the most traditional personal finance book. Again, it’s very America-centric (especially when they talk about retirement), but she does give useful principles and even good questions you can ask your financial advisor (or insurance agent, if they want to sell you an ILP or something) to see if they’re on your side. The book covers a baker’s dozen of personal finance topics, but the basics can be distilled to:
- Clearing consumer debt (credit card debt, student loans, auto loans)
- Max out your retirement contributions
- Have an emergency account with enough money to cover half a year to one year of expenses
I think this would be very useful to help kickstart your financial planning, especially if you haven’t started.
Full review
Coda: Stuff I’ve Learnt and Would Like You to Know
Like I mentioned at the start, most of what I’ve learnt about personal finance and investing took place outside of books. So even though this is a book recommendation post, I do want to share two lessons that I’ve learnt and personally found very helpful.
1. Before investing, figure out what type of investor you are first
Before you start buying shares or bonds, figure out what kind of investor (short term or long term, growth or dividend) you are and what is your tolerance for risk (high, low, medium). For example, I’ve always known that I’m a long term investor, so I don’t bother with technical analysis meant for the short term. That cuts down a lot of things that I otherwise would have to learn. Recently, I’ve decided to focus on dividends, so I’m slowly shifting my portfolio to a more dividend-based one – this is because I realised that my brain doesn’t have that much capacity to think of exit prices, so once I buy, I intend to just hold and collect. It’s a change but not a big one so I can still go slow.
This is important because you don’t want to buy the stocks/funds/bonds that are wrong for you and your goals – that’s only going to stress you out. And if you know what type of investments you want, you’ll also be able to focus on the things that you need to learn to evaluate a company instead of trying to learn every single ration and analysis there is.
2. Make sure you are happy in the present
There is no sense in scrimping for some luxurious future if you’re not happy in the now. I can tell this story now and laugh, but the first year I was in Japan, I was terrified of not having enough money (mostly because I had no idea what a good budget was). I ended up saving a lot, but I also gave myself gastric problems that still flare up now and then because I did things like skipping meals as a method of ‘saving money’.
I’ve also seen a lot of people make ‘saving money’ the primary goal in life, to the point where they second guess every purchase they make. I’m not going to lie, I was influenced by that and did that for a time, and then I realised that I was still unhappy because I was never going to be the most frugal person ever. I learnt that it’s okay to treat yourself; it’s just a matter of finding balance. If you find that your saving goals are making you miserable (or worse, physically ill) in the present, then re-evaluate and reset it so that you don’t punish yourself for future happiness.
