50% of Americans have less than $250 in their savings account at month-end, according to a survey by “The Balance” (a personal finance news portal) in Feb 2021.
And more than 60% of people don’t even have an emergency fund.
Do you ever wonder why people struggle to manage their financial life & never realize the need before it messed up?
Our education system never taught us about money aspects like creating a budget, setting up saving or investment goals, and getting out of the debt trap (if you already into it).
You can improve your personal finance by start learning with small concepts like
- How to save money (avoiding unnecessary expenses)
- Be on your budget & track expenses (to know where you spend the most)
- Start investing at the right time (due to power of compounding)
- Right use of credit card (because carry highest interest rate)
- How to avoid the debt trap ( and manage your current debt)
Books have played a major role for me to learn the fundamentals of personal finance management & how tiny changes can make a huge impact in the long run.
Sharing a few of my learnings
- Start investing early even with as small as $100. Don’t wait for a big amount to start the investment
- Pay your credit card bills on time. Don’t use your credit card if you can’t pay
- Do your own research before making any investments. Free advice harms more than the benefit
- Rich spend on businesses, poor spend on luxury
I have prepared a list of the 11 best personal finance books for beginners, that would help you get a deeper understanding of managing your money and making the right decisions.
Best Personal Finance Books For Beginners in 2022
#1. I Will Teach You To Be Rich by Ramit Sethi – Best Book on Money Management
“I Will Teach You to Be Rich” guides on the basic financial aspects of our daily life like saving money, spending wisely, dealing with credit cards and investments.
You learn to track your expenses and understand how to spend money wisely on what you love (rather than on unnecessary stuff).
For example, if you are a fitness enthusiast, you can cut the money by unsubscribing your Netflix & iTunes monthly subscriptions. Spend that money on gym subscription or paying a nutritionist to improve your fitness.
Whenever you want to watch Netflix, you can pay for the per episode rather than paying for monthly subscriptions.
You also learn how to find “no-fee, high-interest” bank accounts that let you earn some interest over saved money.
The book also teaches you with some practical examples to save money like negotiating with banks for waiving off the annual credit card fee. You would also get “ready to use” scripts to use in real-life scenarios like a script on negotiating for a pay raise in your company.
You will further learn to invest monthly for retirement like opening IRA accounts, and even stocks in a simple manner.
Lastly, Ramit tells you to manage big expenses like wedding or buying a house smartly by starting saving at an early age.
Ramit Sethi’s writing style is very cheerful and you learn various financial aspects starting from handling everyday finances to investing in stocks effortlessly.
Best for – who are in their early career and want to learn all financial aspects from saving money, expense tracking, dealing with credit cards and investing.
Key Takeaways from I Will Teach You to be Rich
- A little action today leads to huge results in the future because $10 or $20 monthly savings today grows to hundreds or thousands in future.
- Spend consciously for guilt-free living by spending on what you love and avoiding unnecessary expenses like buying a new model car to impress your colleagues.
- Automate your finances to invest consistently and pay bills on time to avoid debt
#2. Rich Dad Poor Dad by Robert Kiyosaki – Best Personal Finance Book For Young Adults
Rich dad Poor Dad will teach you about rich and poor people’s different mindset and how rich people think for wealth creation.
You would learn the difference between working for money (Poor people mindset) or making money work for you (Rich people mindset). Means acquire assets, not liabilities.
Robert Kiyosaki says, “You must know the difference between an asset and a liability, and buy assets. Rich people acquire assets. Poor and middle class people acquire liabilities, but they think they are assets”.
Asset is anything that puts money in your pocket like business, stocks, mutual funds and real estate. When you invest in assets the value of your invested money grows over time.
Liability is something that pulls money out of your pocket such as buying a new car. Because you have to pay interest on the credit, you pay for the maintenance regularly, and the value of the car depreciates over time.
Best for – Building mindset to create wealth-generating assets like businesses, real estate and stocks.
Key Takeaways from Rich Dad Poor Dad
- Don’t work for money, let money work for you by creating multiple assets.
- Fear & Greed are responsible for poor financial decisions. Not leaving the job in fear of what others would say. Greed of getting a pay raise to spend on liabilities like buying a new car.
- Learning financial management at an early age is important for financial abundance
- Don’t use credit cards as a way to find that extra money
#3. Best Personal Finance Book For Mindset – The Psychology of Money by Morgan Housel
The Psychology of Money has 19 short lessons that teach you to make better financial decisions by learning from other people’s psychology about money.
You would be amazed to explore the strange ways people think about money because very few people make financial decisions based on spreadsheets, most of them make decisions at the dinner table or in a company meeting.
Handling your finances is more related to emotional behavior like ego, pride, than logical numbers.
For example, people are more interested in buying a big house for happiness, than tracking their monthly spendings because it is overwhelming or tedious.
The book emphasized understanding the psychology behind money.
As Morgan says, “We are taught about money like physics (with rules and laws) and not enough like psychology (with emotions). Physics isn’t controversial. It’s guided by laws. Finance is different. It’s guided by people’s behaviors.“
The book also guides you that good investing isn’t about earning huge returns because huge returns can happen one time and can’t be repeated. It’s more about earning good returns for the longest period of time.
To become a good investor, the most important thing you can do is to increase your time horizon.
In another lesson, morgan says, “No one is impressed with your possessions as much as you are.” You may think acquiring more possessions would result in people admiring or like you more, but the reality is people would admire you for your humility, kindness, and empathy for others.”
No point wasting your money on maintaining social status beyond your means, rather you should focus on your dealings with others.
The book also teaches you the importance of freedom that money can provide.
Morgan says,”Freedom to do what you want, when you want, with who you want, for as long as you want is priceless. It is the highest dividend money pays. More important than your salary, the size of your house, or the prestige of your job.”
Your life’s control in your hand makes you happier, than buying materialistic things. Your goal should be to get that freedom in your life, rather than sweating day and night to acquire possessions.
Best for – improving financial decision making
Key Takeaways from The Psychology of Money
- People make decisions emotionally, not logically. That is the reason most financial decisions are taken on the dining table, not on your computer desk.
- Maintaining a lifestyle below your income is requirement for avoiding debt
- Time is the most powerful force in investing, increase time horizon to become a good investor
- Good investing is not about making good decisions but consistency in not screwing up
- Money can provide you freedom to spend time with your family that gives more happiness than buying a big house.
#4. Best Finance Book for Women – Nice Girls Don’t Get Rich by Lois P. Frankel
The book guides to avoid 75 mistakes that women make in money matters like fear of math and numbers, or spending randomly when upset.
Lois talks about some mistakes like
- Remain financially illiterate – You should learn to manage your major purchases, investments, and banking.
- Spending as an emotional crutch – Understand your emotions; don’t make purchases just to lift your spirits.
- Saving instead of investing – Fear of losing money can keep your funds in low-interest accounts. Get educated and get wealthy.
- Spending big for social status – Keep your life simple. Don’t move to a big house with a big overhead and a lot of maintenance.
- Depending on the partner for financial advice – You should take command of your finances and create your own goals because you can’t be dependent the whole life, divorces and even deaths are part of life.
The book guides you that being financially illiterate will not help. You should learn how money grows. Track your spendings, bank accounts and learn about different investment options available.
If you are married, the book will motivate you to create your financial goals and strategies rather than depending on your man.
Lois says,” This is not “Not Trusting” your partner, this is ensuring your future.”
If you are a woman who thinks handling finances is not your cup of tea, then this book encourages you to take charge of your financial life.
Best for – girls who think financial management is tough
Key Takeaways from Nice Girls Don’t Get Rich
- Avoid financial mistakes such as ignoring value of creating assets, depending on partner for financial advice
- Never avoid planning for unexpected disability like a car accident, because a disability can rob your entire life’s savings.
- Getting rich is not only accumulating money, but managing well too
- Never see money as a means to create lifestyle only
#5. The Richest Man in Babylon by George S. Clason – All-Time Relevant Personal Finance Book
This old classic book gives you timeless wisdom on money through a fictional story.
The Richest Man in Babylon is a fictional story of a Babylonian character called Arkad, a poor clerk who became the “The richest man in Babylon”.
Arkad’s advises you about ‘Seven Cures’ and ‘Five Laws of Gold’ as personal finance advice from his experience of rags to riches.
- Seven Cures on how to generate money and wealth like paying yourself first, saving one-tenth of income, living within your means, investing in what you know and more.
- Five Laws of Gold on how to protect and invest wealth such as the importance of long-term saving, investing in what you understand well and home ownership.
The book basically guides you to control your expenditure and never spend more than you need. Because spending only on the needful and saving more is the way to create wealth.
George asks you to avoid spending money as soon as you earn it. And you should surely save at least 1/10th of your income and even more if you can afford it.
You will learn the importance of expert advice. There’s a quote in the book, “If you have a wise friend, never hesitate to take financial advice when indecisive”.
George also emphasizes the power of passive income sources that generate income even when you are not working.
Best for – who feel saving money is difficult
Key Takeaways from The Richest Man in Babylon
- Keep your expenses below your income
- Save at least one-tenth of your income
- Take financial advice from an expert when indecisive
- Protect your family future with insurance
- Make passive income streams to generate income without working
#6. Best Personal Finance Book for Debt Payoff – The Total Money Makeover by Dave Ramsey
Dave Ramsey is one of the most influential personal finance advisors with 13 million plus followers around the world.
He fought with bankruptcy and millions of dollars of debt. He started teaching people what he learned from his own experience of paying off debt and creating wealth.
His book Money Makeover provides you with practical baby steps to get out of debt trap.
The book has two parts – The 1st half provides you 7 steps to handle your money, and the 2nd half provides you practical steps to pay your debt off using “Snowball Strategy”.
In “Debt Snowball Strategy” you pay the smallest or easiest to pay off the debt immediately and then move to the larger one and so on to eliminate the debt.
Dave conquers your social stress like maintaining a luxurious lifestyle to impress others. He quotes, “We buy things we don’t need with money, we don’t have to impress people we don’t like.”
He tells you to focus on becoming rich rather than appearing to be rich by avoiding unnecessary expenses and investing money for the long term.
Best for – who are in a debt trap
Key Takeaways from The Total Money Makeover
- Start emergency fund for unexpected situations in life like sudden job loss
- Use “Debt Snowball Strategy” to pay smallest or easiest to pay off debt immediately and then moves to the larger one
- Build a retirement fund for a comfortable life in your older age
- Don’t waste money in acquiring things to impress others
#7. Best Book on Financial Independence – Your Money or Your Life by Vicki Robin
Are you familiar with being stressed out because of long working hours, no time to see families, and working hard to support your lifestyle and materialistic possessions?
If you are feeling the heat then this book is for you.
The book will give you a new perspective on money management, and enjoying financial independence.
“Financial independence means no need to work for money, instead work for what you love to do, enjoy free time with your loved ones and contribute to humanity”, Vicki says.
Viki will help you with a 9-step program to live more deliberately and meaningfully.
- Step 1: How much money you’ve earned in your lifetime
- Step 2: Calculate your real hourly wage
- Step 3: Track your expenses
- Step 4: Ask yourself 3 questions about satisfaction, values and purpose of life
- Step 5: Create a visual chart of your monthly income & expenses
- Step 6: Spend less
- Step 7: Redefine work with respect to the value of your time and energy such as your work allows free time to enjoy time with family or contribute for social service.
You will also learn about attaining new skills for side hustles that will generate you multiple income streams for financial independence. You can learn how to open an online store or start a blog.
Best for – interested being financially independent at early age
Key Takeaways from Your Money or Your Life
- Set realistic priorities in life between values and social status
- Learn new skills to generate multiple income streams like blogging
- If you have possessions but you fail to enjoy time with family, then all your possessions are a waste
- Decrease expenses while increasing income for financial independence
#8. The Simple Path to Wealth by J. L. Collins – Best Book For Understanding Finances
You learn to set your personal finances in the right order by paying off debt wisely, eliminating non-essential spending, and start investing early.
The book guides you to spend less than what you earn and invest the surplus. Collins also teaches you to remain debt-free, otherwise, you can’t save or invest.
Collins recommends you prioritize your debt repayment strategy –
- Debt with more than 5% interest rate: Pay off at the earliest
- Debt between 3% and 5%: Put on second number after paying off the higher interest debt
- Debt at less than 3% interest: Pay off slowly but start investing in parallel
The book also tells you that “Money buys freedom”. Means you would sacrifice your freedom if you over-indulge in making money. So never sacrifice your life’s freedom for money.
Let money work for you, rather than you working for money. Collins shares investment strategies to let the money work for you like investing in index funds.
You learn about the stock market. Why do people lose in the stock market? Importance of index funds and good returns.
Best for – mastering your finances
Key Takeaways from The Simple Path to Wealth
- Avoid debt
- Always spend less than your income and invest the surplus
- Pay your high interest debt immediately
- Invest in low cost Index funds because they invest in overall market index and become less risky in long term
Best Investing Books For Beginners in 2022
#9. Overall Best-Investing book – The Intelligent Investor by Benjamin Graham
The book will guide you about long term investing in the share market for wealth creation. Long term stock investing is also called Value Investing.
You will learn about how to analyse company asset’s, earnings and other important information that will help you select a company for your investment.
Graham teaches how to diversify your portfolio to reduce the risk of losing money.
According to Benjamin, value investing is not gambling, it’s more about investing in the undervalued stocks by understanding the businesses, evaluating the fundamentals of companies and having a long investment horizon.
If you are serious about investing money in stocks for the long term, you must read the intelligent investor.
Best for – everyone wants to start investing
Key Takeaways from The Intelligent Investor
- Value investing is not gambling because you understand the fundamentals of a company in value investing, rather trying your luck with little information that you do in gambling
- You can’t understand the market in the short term
- Learn from mistakes and never repeat
- Minimize the risk by diversifying your portfolio
Also check – Best stock analysis apps
#10. The Little Book of Common Sense Investing by John C. Bogle – Best Book For Beginner Investors
The book will help you to understand index funds and how they are ideal for a beginner investor.
J.C. Bogle guides you how to make index investing work for you and achieve your financial goals.
You will learn not only the strategies to find low-cost index funds, but also select the right index fund for your individual needs.
Bogle emphasises on investing in a broadly diversified, low-cost portfolio made of index funds rather than investing in stocks or mutual funds.
Because you need not get into the complexities of picking individual stocks or selecting a fund manager, and sector rotation in mutual funds.
The 2017 revised & updated version of the book gives you insight about the modern market with latest market data.
Best for – who wants start investing without understanding of stocks
Key Takeaways from The Little Book of Common Sense Investing
- Invest in low-cost index funds
- Individual businesses come and go, focus on broader diversification
- Market timings and fund selection are important for better returns
#11. Best Investing Book on Risk Management – Fail-Safe Investing by Harry Browne
A lesser-known book that is different from other investing books because other books focus on investing strategies but Harry Browne will teach you about how to protect your money while investing without affecting the portfolio performance.
The Fail Safe Investing sticks to Warren buffet’s 2-point investment Rules –
- Rule 1 – Don’t lose money
- Rule 2 – Never forget Rule 1
Browne suggests you structure your investment portfolio to generate decent annual returns while protecting from uncertain economic conditions like inflation, deflation, and recession.
Best for – understanding how to protect your investments from bad times
Key Takeaways from Fail-Safe Investing
- No one can predict the future, so always play safe
- Investment is not speculation
- Control your money yourself rather than depending on others decisions
- Debt and leverage are dangerous things, so avoid them as much as possible
- If you are in doubt, don’t make decision despite the lucrative results
Also read – How to trade forex with $100
Final Words
If you want to learn money management, then go with Ramit Sethi’s “I Will Teach You to be Rich” because the book has breezy language that engages you to understand boring topics easily.
The book also touches on multi-dimensions of financial management in a practical way that will help you a lot in saving money and raising your income.
If you want to learn more about financial independence, then go with “Your Money or Your Life”, because the book will help you set your priorities and values, how to learn a meaningful life, and retire at an early age.
If you want to learn stock investing seriously, there’s no book better than “The Intelligent Investor”, which has everything you need to learn about long-term value investing in stocks.
