Key Takeaways
- Understanding personal finance can give you the skills and knowledge needed to manage your money more effectively, including investing
- For optimal impact and applicability, it is best to establish one’s financial goals before reading books about personal finance.
- By reading personal finance books, you can educate yourself on a host of topics, including investing, real estate, budgeting, and saving.
Understanding personal finance can give individuals the skills and knowledge needed to manage their money more effectively, including when it comes to investing. Such financial literacy can come from reading top books about finance. We already talked about the best books for investors. Here is our list of the best personal finance books, and more.
What is Personal Finance?
Personal finance essentially focuses on individual financial goals and generally comprises individual banking, budgeting, savings, real estate, and investing. It can also be described as the art of managing money.
Knowing how best to put one’s money to work can help people realize their financial goals, including through investments.
What Should You Consider Before Reading a Personal Finance Book?
It is wise to take advantage of the financial expertise offered in the best personal finance books. However, such information will be more relevant and personally impactful if the following factors are first considered:
- Your current financial situation. To help make sure what you read applies to your situation, it’s a good idea to look for a book that improves your investment knowledge and zeroes in on where you are financially.
- Your financial goals. For optimal impact and applicability, it is best to establish your financial goals before reading books about personal finance. In general, financial goals are targets an individual establishes to achieve financial milestones within a certain timeframe.
- Your lifestyle. Before buying a book about personal finance, you should factor in what your lifestyle is now, and what you want it to be. After all, the way you live will inform what moves you need to make to get where you want to be financially.
What are Topics Covered in Personal Finance Books?
By reading personal finance books, you can educate yourself on a host of topics, including investing, real estate, budgeting, and saving.
- Investing. Investing is a key way to put your capital to work and prospectively build wealth. Thus, it is a fundamental part of personal finance. In particular, it is important to understand the importance of having an investment portfolio that contains, in addition to stocks and bonds, alternative assets such as art or real estate. Such diversification reduces overall risk exposure to maximize returns.
- Real estate. This covers real property that can be used for commercial, residential, or industrial purposes. As a popular alternative investment, real estate can offer cash flow, tax breaks, and protection against inflation. It can also reduce portfolio volatility through diversification.
- Budgeting. Having and following a budget – a plan that shows one how they can spend their money — is essential to living within one’s means and saving enough to meet long-term financial goals. Basically, budgeting is a personal finance tool for taking control of one’s money.
- Saving. Essentially, savings permits a person to enjoy greater life security. Having money set aside for life’s inevitable emergencies also allows individuals to try new things or take on more potentially profitable risks.
- Debt Management. You can also learn a bunch about how to manage debt. A good personal finance books can help you explore ways to reduce debt and maintain a good credit score.
- Tax Planning. Taxation is another important topic you will find plenty of in personal finance books. Don’t disregard the strategies to minimize tax liability and take advantage of tax benefits.
What are the Best Personal Finance Books?
There is no shortage of personal finance books available to help individuals make smarter decisions with their money. The following is a winnowed-down listing of some of the best books one should consider:
- “Finance for the People: Getting a Grip on Your Finances.” Full of illustrations and practical advice, this book by Paco De Leon offers easy to understand and valuable insight into financial planning, business consulting and banking, and banking.
- “The Total Money Makeover.” This book by Dave Ramsey distills the best ways to improve one’s money habits, get rid of debt, and build up a nest egg for the future. It is a straight-forward game plan for handling money better.
- “The Millionaire Next Door.” Thomas J. Stanley and William D. Danko spill the beans about wealth accumulation in America, and how one can achieve that through money management – not just income. The book offers ways one can upgrade their net worth.
- “What to Do With Your Money When Crisis Hits: A Survival Guide.” Those who continuously bounce back and forth in their financial life between feast and famine would do well to read Michelle Singletary’s book. A Washington Post finance columnist, Singletary moves past establishing an emergency fund to the steps needed to build real economic resilience amid a financial storm.
- “Stacked: Your Super Serious Guide to Modern Money Management.” This book by Joe Saul-Sehy and Emily Guy Birken is aimed at recent college graduates and anyone seeking a new financial start. It offers tips for establishing financial goals as well as how to talk with one’s partner about the sticky subject of budgeting. Every chapter concludes with a list of personal money milestones to shoot for so that one is not only reading about financial empowerment – they are already putting the work in.
- “A Random Walk Down Wall Street: The Best Investment Guide That Money Can Buy.” Economics professor and financial adviser Burton G. Malkiel demystifies stock market investing. The book discusses index funds, current investment fads, NFTs, cryptocurrencies, tax-smart investing, and more. It is book is aimed at investors of any age, risk tolerance, and experience level.
- “Personal Finance QuickStart Guide: The Simplified Beginner’s Guide to Eliminating Financial Stress, Building Wealth, and Achieving Financial Freedom.” This would be an excellent choice for financial planning novices. The first half of the book, authored by Morgen Rochard, sets forth how to evaluate net worth, establish goals, and pinpoint potential obstacles. The second half goes into how one can make their money work for them, and explains the various types of investments, the impact of inflation on one’s finances, and factors that affect one’s savings ability.
- “Your Money or Your Life: Transforming Your Relationship with Money and Achieving Financial Independence.” Vicki Robin and Joe Dominguez help people establish what money means to them, how much money is sufficient, and how to achieve financial independence while conserving the earth’s resources. It underscores the importance of spending within one’s means and learning how to produce enough passive income to live the life chosen.
- “Get Good with Money: Ten Simple Steps to Becoming Financially Whole.” Tiffany Aliche, widely known as the “Budgetnista,” offers her 10-step process for gaining financial peace, homing in on short-term actions that seek to gain favorable long-term results. Her advice rejects traditional financial advice that she says can be unrealistic and overly complex.
- “I Will Teach You to Be Rich.” An easy to read and actionable book, “I Will Teach You” by personal finance author Ramit Sethi presents a six-week plan for achieving one’s self-defined “rich life.” Readers learn things such as how to optimally use credit cards, open an interest-earning high-yield savings account, and automate accounts to easily save money each month.
Why is it Important to Understand Personal Finance Early?
Early exposure to personal finance gives individuals a heightened understanding of the importance of long-term financial planning. The earlier people learn about subjects such as retirement savings, compound interest, and investment options, the better off their financial futures can be.
Gaining such knowledge can help individuals build strong financial habits, make informed financial decisions, avoid debt and financial stress, inspire entrepreneurship, plan for retirement, and empower financial independence.
It can also help people understand the importance of building a diversified investment portfolio that can improve returns and reduce overall risk. In other words, lessening exposure to any one type of asset – which can be achieved be mixing in alternative investments – can help reduce portfolio volatility over time.
Alternative Investments and Portfolio Diversification
Traditional portfolio asset allocation envisages a 60% public stock and 40% fixed income allocation. However, a more balanced 60/20/20 or 50/30/20 split, incorporating alternative assets, may make a portfolio less sensitive to public market short-term swings.
Real estate, private equity, venture capital, digital assets, precious metals and collectibles are among the asset classes deemed “alternative investments.” Broadly speaking, such investments tend to be less connected to public equity, and thus offer potential for diversification. Of course, like traditional investments, it is important to remember that alternatives also entail a degree of risk.
In some cases, this risk can be greater than that of traditional investments. This is why these asset classes were traditionally accessible only to an exclusive base of wealthy individuals and institutional investors buying in at very high minimums — often between $500,000 and $1 million. These people were considered to be more capable of weathering losses of that magnitude, should the investments underperform. However, that meant the potentially exceptional gains these investments presented were also limited to these groups.
To democratize these opportunities, Yieldstreet has opened a number of carefully curated alternative investment strategies to all investors. While the risk is still there, the company offers help in capitalizing on areas such as real estate, legal finance, art finance and structured notes — as well as a wide range of other unique alternative investments. Learn more about the ways Yieldstreet can help diversify and grow portfolios.
Summary
Gaining financial literacy — the earlier the better – can help individuals make sound financial and investment decisions, including regarding alternative investments.
Learning how to wisely earn, save, spend, and invest can generally lead to overall stability and wellbeing, including in retirement. A smart way to gain such knowledge is through the expertise offered in top personal finance books.
What's Yieldstreet?
Yieldstreet provides access to alternative investments previously reserved only for institutions and the ultra-wealthy. Our mission is to help millions of people generate $3 billion of income outside the traditional public markets by 2025. We are committed to making financial products more inclusive by creating a modern investment portfolio.
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