Reading Rainbow: Finance Edition


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Financial Books

I don’t like to read. Well, at least I didn’t. In hindsight, this is probably a good reason why I struggled in high school (along with that not doing homework thing). The Great Gatsby?! Ugh, spare me. That was all until I discovered a subject matter I could get into: finance & money. I really started digging into the genre in college and started devouring it book after book. I read quite a bit, but eventually there was only so much I could put into practice as a starving student on little-to-no income.

It’s now years later. I’m in the thick of salaries, babies, mortgages, budgets, loans, savings, etc. Of all the books I’ve read, only three really stick out in my mind. They are the ones that affect my daily financial decisions. Here they are and what I took from them:

  1. The Millionaire Next Door – The majority of American millionaires are not what or who you think they are. They aren’t keeping up with the Joneses; they’re frugal, they save, they work hard, and they stay dedicated to their financial goals. They likely aren’t driving the latest model cars. These are normal people with normal jobs that have managed to become wealthy by small, smart decisions with their money.They are consistently hitting singles and doubles rather than swinging for the fences and maybe getting a home run here or there. Overall, it can be done.
  2. Rich Dad, Poor Dad – Cash-flow. That’s it! This book touches on so many things, but what it’s made me think about constantly is cash-flow. Not just can my paycheck cover this month. Instead, I want to get to a point where my recurring expenses are covered by passive income. Am I there yet? No. In fact, I don’t have any passive income. But I think about it all the time. It motivates me to keep those regular expenses as low as I can, so someday if/when I do have some passive income, it’ll need to cover less. For this reason, I generally loathe recurring payments of any kind. Some are unavoidable, but others just take a little effort and planning to avoid. I’d rather take a hit and pay for something upfront instead of dragging it out with monthly payments. If I can’t pay for it upfront, then I tell myself I can’t afford it and try to do without because otherwise it would increase the cash-flow I need to survive.
  3. A Random Walk Down Wall St. – Forget expensive mutual funds and fancy money managers when it comes to investing; stick with Index Funds. History has shown that when you take into account the fees paid out to these fund managers, odds are your money won’t have done any better than the rest of the market over the long term. I invest in Index Funds where I can and consider it a set it and forget it investment.

**I purposefully didn’t go back and read or skim these books before sharing my thoughts. This is just what my tiny brain remembers from reading them many moons ago.**

If you’ve read any of these, you’ll notice that none of them offer step-by-step advice in any one area (at least I don’t remember if they do). Instead what I’ve taken away are certain financial principles. They are critical pieces of my financial mindset that I’ve ingrained into my thinking, lifestyle, and goals.

Have you read any of these books? Did you take something else away from them? Do you have other books that have helped shape your financial philosophies?

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7 Comments

  • Reply Ashli @ The Million Dollar Mama September 2, 2016 at 9:45 am

    I love reading – the problem is that I have so many books on the go, that it takes me forever to actually finish one haha! One of my favorites is “Warren Buffett – The Making of an American Capitalist.”

  • Reply Tabitha September 2, 2016 at 5:34 pm

    Regarding the index funds *how* do you invest in them? I’ve done research online (i.e. googling and reading articles) but I haven’t found someone who actually gives a basic ”step-by-step” and as dumb as it may sound I think I need someone to give me an example like, ”I sit down to my computer, I open xyz, etc. etc.” I don’t know, I figure it’s probably extremely flexible, but any help/ examples you could give would be great!

    • Reply Tyler September 2, 2016 at 6:59 pm

      Great question. We often talk theory, but how does the rubber meet the road? For a simplified answer you should think of Index Funds and ETFs as being essentially the same. There are differences, but they behave very similarly. The main difference is that Index Funds have higher minimums in order to purchase them while ETFs trade more like common stocks. I think it is most common for people to come across Index Funds when choosing investments for 401ks or other retirement accounts. If you have a plain-Jane, taxable brokerage account and just want to throw a couple hundred bucks at something, then you should probably buy shares of an ETF. Enough babbling, here is your real world example (**not investing advice**). Open a brokerage account (I like RobinHood because trades are free). Once you get all signed up, transfer $250 from your checking account, once the money arrives search for SPY (just as an example ETF–it tracks the S&P 500). Current price at writing is $218.41 per share. You can elect to purchase one or more shares, click buy, and bam! You’ve now invested in an ETF. Probably worth a post about the difference between Index Funds and ETFs and when one is more appropriate than the other. Hit me up if I haven’t been clear. **This is not investing advice.**

      • Reply Tabitha September 5, 2016 at 2:09 pm

        Awesome! Yes – something like this is exactly what I was looking for. Probably the whole ”not investing advice” is why I couldn’t find something like it, but thank you for laying it out! I like examples that I could then theoretically plug my own numbers into. Also (and this probably shows how little I know) could you expand upon ”taxable brokerage account”? Are there ”non”taxable brokerage accounts? And yes a post about ETFs and Index Funds would be great! :-)

        • Reply Tyler September 6, 2016 at 8:06 am

          Think of “taxable” as “normal.” If you go open up a brokerage account today it will be taxed normally or without any exceptions. Non-taxable or accounts with deferred taxation are typically retirement accounts of some sort (IRAs, 401Ks, 403Bs, etc.). They all have different rules and requirements that you must follow for their special tax treatments, and typically opening one up requires a bit of extra paper work.

          • Tabitha September 7, 2016 at 11:19 pm

            Sweet – thank you again!

  • Reply Melanie September 19, 2016 at 4:31 pm

    I have read the first two but have the random walk down Wall Street book on my to read list. I have to say the total money makeover by Dave Ramsey is a top financial book for me for sure.

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