Wednesday, April 4, 2012

Books That Changed My (Money) Life

I have lost count of the many books I’ve read since I first began contemplating money. Among those dozens there have been several books that turned out to be especially memorable or influential. I have summarized them here for your consideration:
Your Money or Your Life, by Vicki Robin and Joe Dominguez
This book helped me to understand how consumption is related to wealth and financial security. The book encourages you to reorder your material priorities through debt elimination, robust savings, and cutting living expenses to the bare minimum. This is done to achieve financial freedom so that you can live the life you want to live. The author Joe actually walked the talk. By careful investing and extreme frugality he was able to retire from paid work in his early 30’s. While some of the author’s investment philosophies did not stand the test of time, the basic premise remains sound. The take-away for me was this: I can retire young if I want to, and when I retire is based almost entirely on how much stuff I choose to buy during my life.
The Simple Living Guide, by Janet Luhrs
This little dude
has the right idea.
While Your Money or Your Life suggested radical ways to think differently and live frugally, The Simple Living Guide demonstrated what a life lived that way might look like. As the author says, “Simple living is about living deliberately... It is about knowing why you are living your particular life.”  The underlying message is to be carefully aware of how increased consumption puts demands on you that can inadvertently rob your life of joy and meaning. 
One anecdote from the book that sticks with me involves a conversation that the author had with her children. While riding in the family car, her oldest child asked why the family did not have a nicer car. The author replied that they COULD buy a newer, nicer car, but then mommy would have to work more often. The author then asked the children which they would prefer, a new car or more time with mommy. The children wisely chose mommy time over the car, and the car was no longer an issue. Notice that the author did NOT reply to her child’s question with, “Because I can’t afford it.” The author’s reply, completely void of helplessness or self-pity, effectively demonstrated that life is all about choices, and those choices must be made mindfully.
Life or Debt: A One Week Plan for a Lifetime of Financial Freedom, by Stacey Johnson
Life or Debt offers up good solid advice on reducing debt, living beneath your means and investing wisely, along with many money saving tips. To be honest, there are other authors who have covered this material more effectively. (Sorry, Mr. Johnson.) This book will not waste your time, but unless it is your first exposure to the ideas presented, neither will it change your life. The reason this book made a difference for me is because it was the book that instructed me to write down all my purchases. Although it took me several years to follow through and take this advice (You can read about that HERE), it turned out to be very good advice to take.
The Millionaire Next Door, by Thomas Stanley and William Danko
This book was based on an exhaustive multi-year research project.  The goal was to profile typical American millionaires and their habits, and the results were surprising. The research revealed that the typical millionaire was not some big shot cash-flasher like we see on TV, but your unassuming next-door-neighbor. 
Our culture teaches us that to be rich is to live a high consumption lifestyle. Think of Robin Leach and his Lifestyles of the Rich and Famous show, MTV Cribs, or any of the other modern programs that supposedly represent what it is to be wealthy. What Tom and Williams discovered was that most millionaires drove a two-year-old domestic sedan, lived in a modest neighborhood, wore a Timex watch, and were not at all concerned about what anyone thought of them. In other words, most rich people don’t look like rich people – and that’s why they become and stay rich. Meanwhile, some people who appear to be very affluent are often far from it. Many are just a few bad moves away from losing it all. A fascinating study for anyone interested in money or sociology.
The Richest Man in Babylon, by George Clason
This book was written in the 1920s and you can tell, but the advice is timeless.  Set in ancient Babylon, Richest Man is a charming set of parables designed to teach money basics. It teaches such lessons as staying out of debt, saving the first 10% of all you earn, and prudent investing. It is probably the most entertaining money book there is due to its story format, and the fact that it is still in print after 90 years provides a clue to its continued relevance and enduring popularity. This might be the best first money book for anyone new to the topic. I intend to give a copy to each of my children when they start earning their own money.
The Total Money Makeover, by Dave Ramsey
I am a huge Dave Ramsey fan, and this book is why. For many years my wife and I have been practicing careful budgeting and aggressive saving, and we’ve had good results with our investing. I honestly thought that there was not all that much left for me to learn. I was wrong. 
Dave inspired us with his radical concept of being completely debt free. We have always tried to minimize our debt as a percentage of income, but being totally debt free takes it to the next level. Dave dares you to imagine what you could do with your income if you had no payments. He dares you to cut up your credit cards and build up an emergency fund so you only ever use cash. The result of that level of freedom is something he calls “Financial Peace,” and there is no better way to describe it. 
About 18 months ago my wife and I finally drank his Kool-Aid and made a commitment to live debt free. We followed his plan, went crazy, got intensely focused and paid off everything. As of this writing we have no debt except for our mortgage. Our car payments, credit cards, home equity loans, student loans and medical bills are all history. Following the next step in the Money Makeover plan, we had also saved up an emergency fund equal to about six months of basic living expenses. Was doing this easy? Hell no! Was it worth it? Oh yeah!
Being debt free and having an emergency fund sure does help when storm clouds gather. Taking Dave’s advice allowed me to be in a good financial position when I unexpectedly lost my job in December of 2011. Being debt free and having a cash cushion turned what could have been a total disaster into an opportunity. When I learned that the company where I had worked for 11 years would be closing, I knew we’d be okay. Financial peace indeed.
I recommend all the books I’ve listed above; but if you only ever read one, let it be The Total Money Makeover


  1. Ok, this isn't a financial book per se, the Alabama Stitch Book by Natalie Chanin, which is a book about hand sewing, the slow food movement, using local resources, and recycling. Mostly its a sewing book that teaches some ways to make, reuse clothing in beautiful (not teenage hipster) ways. It got me sewing again, gardening, led me to a web group where you pledged to not buy any new clothes for a certain length of time, but to remake thrifted clothes or what you had in your closet, I haven't bought "new" clothes in about four years, I've taught my daughter to sew and knit, felt really creative for the first time in a long time and started a business. The point is it's possible to find ways to save money that can be as rewarding as ways of earning it. And in doing so I have managed to get my family back to the way I was raised, not to waste anything, to appreciate what we have, and enjoy the process.

    1. Appreciation, enjoyment, creativity, deliberate and mindful consumption; your comment illustrates nicely that abundance is all about attitude! As you have demonstrated, saving money can be a fun and enriching lifestyle choice, rather than an exercise in austerity and sacrifice.

      Thanks for sharing your recommendation. My wife is preparing to take her first sewing class, so this might be a good time to get that book into our home – from the library, of course.

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