There are many good financial books that have become popular. Some books like The Richest Man in Babylon profess to share fundamental and timeless insights on how to become wealthy. There are popular books like “I will Teach you to Be Rich,” which claim to give readers insights into the habits of the wealthy. There are also many simple books that give important advice from practical wealth builders. This is not to say one shouldn’t strive to be the Richest man in Babylon, or anywhere for that manner, but it does mean that sometimes a straight-forward and realistic approach can be best. The books that I recommend are easy to read, non-technical, and most importantly, do most of their work in alleviating anxiety in our financial lives.
I have chosen three books that attack different aspects of the financial planning process. This is a great list for people who are considering financial planning or wish to get the most out of it. I would dare to say that even for those who do not wish to work with a professional financial planner at this time, these books can be helpful tools to designing a plan for oneself.
Simple Wealth, Inevitable Wealth: How You and Your Financial Advisor Can Grow Your Fortune in Stock Mutual Funds by Nick Murray.
“No matter how much money you have, if you’re still worried, you aren’t wealthy.” – Nick Murray
This is a book I give to clients. I especially recommend this to clients who are apprehensive about the financial planning process.
It is a useful book because it takes a holistic approach to financial planning. It applies facts, particularly historical facts to this process. For instance, what might a portfolio look like as someone went through the economic crash of the 1970s? The book explores different scenarios from different perspectives. And that is the essence of this book. It’s a book about perspective. Primarily, having the correct view for planning your own financial and investment life. There will always be another new investment tool. Tomorrow will bring some new financial strategies. This is particularly true in turbulent times of change. What proves to be the difference between those who accumulate and keep wealth and those who do not is having the proper high level view of their life and finances.
This book shows the importance of having a long-term financial plan. It illustrates this with historical market declines. The book even provides a structure for your investment while taking into account a variety of variables such as diversification, asset allocation and time horizon.
Whether you think you have an expanded focus on finances or you know that you need work in this area, this book will give you the ten thousand foot view of your financial life.
Factfulness: Ten Reasons We're Wrong About the World--and Why Things Are Better Than You Think by Hans Rosling
Bill Gates said this is one of the most educational books he’s ever read. In fact, if you are on the fence about buying this book, watch this 4 minute video from “Gates Notes,” the book club by Bill Gates.
The book uses facts to prove beyond any shadow of a doubt that the world is fundamentally better than we all think it is. Most of us, as we contemplate the future, especially as of writing this in quarantine 2020, see only negative and badness on the horizon. T helps to alleviate your worries about the future, to have facts. Similar to hearing facts about the safety of flight can alleviate anxiety about flying.
Factfulness discusses ten instincts that all of us in modern society have and illustrates why these instincts work against our understanding of the world. For instance, the fear instinct. We pay too much attention to things that are scary, despite contrary evidence. Or the negativity instinct. We hear one story about a plane crash, then we panic and cancel our flight plans. Although, somewhere inside of us we know that car crash fatalities are far higher than plane crashes.
Hans Rosling is a statistician who has spent much of his career thinking of ways to help non-statisticians understand statistics! This book does a splendid job bringing stats to life. One of his missions in life has been to dislodge the term “developed country” versus “developing country.” These dichotomies, like rich and poor, are too much like a dull axe. They are insufficient tools. What is needed are finer edged tools. Rosling therefore breaks the world up into four pillars and gives us visuals for each. For instance, he draws pictures of normal household appliances such as a kitchen sink and a toilet and then he shows what this looks like in the four pillars of wealth. Starting with the poorest he moves toward the richest pillar and you can see there are various stages to gaining wealth.
The purpose of the book is to help us visualize the reality of the situation we are all in. It’s an amazing, dynamic, sometimes scary, but overall improving world that we live in.
Crash-Test Investing: How to Put Seat Belts on Your Portfolio for the Bumpy Road Ahead by Brad McMillan
I love a good analogy. This book uses the analogy of a road trip and goes through the different precautions we take when planning out our trip. Normally, trips are not simply about arriving at our destination and returning home. There are road stops, also detours, and of course planned activities we love. For the purposes of investment, we also must recognize that life can throw us some bumpy roads. We may hit a pothole and blow out a tire. A hurricane can detour us way off our plan. And of course accidents can occur. That’s why you need a seatbelt.
Brad explains the portfolio equivalent of a car’s seat belt in this book. He explains the real reasons you should be diversifying, spreading our risk and having a proper time horizon.
These seem like obvious considerations when making a plan. Yet, we tend not to do them. By having a simple reminder to buckle up, we can sit back and enjoy the open road.
Watch the video on Facebook for an extra book recommendation from my co-host Kirk Barbera!