Eight Great Books for Understanding Finance
NEW YORK (MainStreet)--Folks come to MainStreet seeking perles de sagesse on personal finance but often want some time away from the computer to further their knowledge of money management and gain control of their financial lives. That's why we're bringing you our curated list of eight great books for understanding economics and financeas endorsed by some of our favorite outlets. This isn't a list of books about making money; in fact, I automatically dropped any titles that talk about how to "get rich quick." My experience is that books like that are at best obvious, at worst outright charlatanism. Instead this is a list for understanding how money works, where it works and what's happening behind the scenes. So, without further delay, here's what the Internet has to say on the matter.
From:NPR's Planet Money Understanding big-picture economics isn't easy, and recommending books on the subject is even harder. These days the field is so completely politicized that it's hard to find an economist to quote who won't make somebody angry. This is where Tim Harford's The Undercover Economist comes in. Written by a columnist for the Financial Times, this book takes apart the global economy to explore how all of the moving pieces fit together in our day to day lives. What does it take to get your daily cup of coffee, and who's really profiting from it? Who profits off of immigration? This book looks at the global economy and how it works on a very practical level, including even where it fails in a chapter dedicated to the 2008 financial crisis. Harford is a fun, engaging writer, and he brought that sense of style to his first book. For someone looking for a good primer on the big picture, this is a great place to start.
From:The Guardian Hand in hand with understanding modern economics is knowing where it can go wrong, and nowhere is that more obvious than in the great lies we tell with accurate statistics. To help right this wrong Huff wrote his engaging manual How to Lie With Statistics back in 1954, a book that exposes many of the common assumptions, errors and even dirty tricks behind misunderstood statistics. Clocking in at a slender 144 pages, this is an easy book to breeze through but one that's well worth the time. As Huff writes, there's a "secret language of statistics, so appealing in a fact-minded culture, [that 's] employed to sensationalize, inflate, confuse and oversimplify." This book is an attempt to guard against that, but does so in a way that's fun to read and easy to understand. Considering how often economists depend on statistics and models to make their arguments, getting a peak behind the curtain is essential for anyone who wants to make sense of the talking heads. For someone looking for a slightly more contemporary option, or one that gets into its subject in a little more depth, I also recommend Nate Silver's The Signal and the Noise, an excellent look at how statistics are used in politics, economics and our day-to-day lives.
From:Mint.com This one hits a little close to home. One of the trickiest aspects about being an independent worker is figuring out the mechanics of your own money. That might sound like a strange thing to say, but in fact it's not until you're working on your own that you start to realize everything that goes into cutting a bi-weekly paycheck. For someone with an employer, elements like retirement, health insurance and taxes get handled more or less automatically. For the self employed, there's no HR department. You're on your own. That's where this book comes in handy. The Money Book lays out many of the chores and hidden pitfalls that the self-employed need to watch out for, along with useful solutions along the way. Among the problems it discusses are how to handle fluctuating income, collecting when clients drag their feet and, of course, how to plan for and pay your own taxes. Too many freelancers end up having to pick back up jobs that they never wanted because of poor money management. If you're self employed, or even thinking about it someday, give this book a read. You can thank me later when you're the only person at the coffee shop not in an audit.
From:Inc.com As those who know me know well, media treatment of the "Millennials" is a particular sore spot for me. As a general rule it tends to be condescending, arrogant and dismissive, treating the financial concerns of an entire generation as some sort of Twitter fueled temper tantrum. The fact that our degrees now come with a mortgage's worth of debt and the worst job prospects since 1931 seems to get entirely missed. (Did they get it wrong in the 1960's? Should the new slogan be "don't trust anyone over 40"?) That's why I like this book so much. Written specifically for Millennials, The Money Book manages to walk that apparently difficult line of talking to people under 30 without coming across as either patronizing or trite. This book breaks down the common concerns of new and recent graduates, addressing both abstract topics such as the details behind a credit score and concrete ones such as when to change careers. With its emphasis on student debt, starting career and early life issues, The Money Book manages to talk about topics that its readers actually care about. What's more, it does so in a readable and intelligent manner rare to much writing on this topic. Skip the books that promise you'll get rich quick. If you're still starting out, this one is for you.
From:U.S. News Sometimes you just can't argue with success. Warren Buffett is well known as one of the most successful investors in the country, not to mention one of the richest as well, so it's probably safe to say that when it comes to money, he knows what he's talking about. Now you can too. In this book, Carol Loomis puts together articles written both on and by Buffett over the course of his career since 1966. Put together it makes for some pretty interesting reading, charting not only Buffett's successes but also his occasional mistakes along the way. Peppered in are articles written by the investor himself, explaining his thinking and ideas that helped him build Berkshire Hathaway. Reading this book won't make you the next Warren Buffett, and in fact it probably won't have you "tap dancing to work" the next morning either. Still, sometimes it's worth looking to the masters, and as a case study of personal finances done right, you can hardly do better than Warren Buffett.
From:Under 30 CEO The premise of this book is simple: there are lessons wealthy parents teach their children about money that the rest of us should know. From that idea Kiyosaki wrote what has become one of the most popular personal finance books of all time, and for very good reason: much of it simply makes sense. One of the most valuable parts of Rich Dad Poor Dad is its novel take on financial literacy, arguably also one of the most controversial parts of the book. Kiyosaki challenges many of the traditional assumptions we make about money and assets. He encourages his readers to think about assets as something which can actually put money in your pocket when you need it rather than static investments that build value. Your home, under this thinking, doesn't count since it can't pay the bills in a pinch. Your portfolio and education do. Overall, Rich Dad Poor Dad's greatest strength is that it lays out a way of thinking instead of just simple spending and saving tips. Kiyosaki encourages his readers to think long term about building value rather than just making rent, and in doing so has written a book that, while controversial, is well worth a read.
From:The Simple Dollar Unlike the other entries on this list, The Wealthy Barber takes the form of a novel to deliver its lessons. Ordinarily I try to avoid the modern day parables. As a general rule, they try too hard, aim too high and inevitably end up falling short. More simply put, they almost always end up somewhere between hackneyed and twee. (My apologies to all the fans out there of The Secret.) While Chilton's book certainly won't be winning any awards for the quality of its prose, it does do a good job delivering its central ideas about saving, investing and building up value over a lifetime. The Wealthy Barber makes no bones about the fact that it's a personal finance book masquerading as a novel, and in part that's what makes it work. It isn't trying to be something that it's not; it simply wrapped up the message with a new bow. In particular, the book's emphasis on the "10% solution" is valuable even if a little clichéd. The eponymous Wealthy Barber says that he got rich by simply putting away ten percent of his income all year, every year for his entire life. While the idea that a barber became a millionaire in increments of ten percent is a little tough to swallow, the central idea certainly bears repeating. We should all be putting away at minimum 10% of our income for retirement, probably a whole lot more. Sometimes a cliché is a cliché for a reason, and The Wealthy Barber makes its argument well. If you're looking for more novels with a good finance message at the heart, I recommend The King of Torts by John Grisham. You won't find any economic analysis in there, but it is a great story about the dangers of greed and the value of living within your means. Plus, it's a great summer read.
From:The New York Times I'll be honest, this one is a recommendation straight from me as well. Aside from Silver's The Signal and the Noise mentioned above, Freakonomics may be my single favorite book on the subject of economics and moving money. The basic thesis of Freakonomics is that the principles of economics can explain just about everything, a pretty ambitious goal that Levitt and Dubner accomplish by broadening their scope. Economics, they argue, isn't just about how money moves, it's also about how people react to incentives. Money is simply one of those incentives. Through that lens the authors analyze an extraordinarily wide variety of scenarios, from classrooms and real estate agents to the inside structure of the Ku Klux Klan. All of it gets fed through the model of statistics and incentives to try and discover what people want and how they're willing to achieve it. Freakonomics is a worthwhile read if for no other reason than that it takes the money out of economics. It strips the system down to its barest elements: not that we're all trying to compete for money, but that we're all competing for incentives. Money is just the most common expression of that. As a book about how we make decisions, and how those decisions build to create the systems of modern economies, Freakonomics is just an extraordinary read and comes highly recommended.