5 Essential Books to Enhance your Financial Literacy

The 5 essential books to enhance your financial literacy.

Not all Readers are Leaders, but all Leaders are Readers.
-President Harry Truman

I was recently giving some financial advice for someone who will be joining the military soon.  Part of the advice that I gave this individual, that I also give everyone else, was that to always be reading.

Tom Corley once compiled a list of comparisons between habits of wealthy people and poor people.  It should be no surprise that several were related to reading and education.  Here are a few of them:

– 63% of wealthy listen to audio books during their commute to work vs. 5% for poor people.

– 63% of wealthy parents make their children read 2 or more non-fiction books a month vs. 3% for poor.

– 88% of wealthy read 30 minutes or more each day for education or career reasons vs. 2% for poor.

– 86% of wealthy believe in life-long educational self-improvement vs. 5% of poor.

– 86% of wealthy love to read vs. 26% of poor.

As this is a personal finance blog, I wanted to share the five most essential books you should read to improve your financial literacy.  If you only take the time to read one of these books, you will be leaps and bounds ahead of the average American in regards to having a financial education.

This book was given to me as a gift several years ago and was the catalyst for changing my financial life.  I have since purchased several copies and have given them away as gifts.

Of all of the books on the list, if you can only read one, The Total Money Makeover is the book you should focus your attention on.  It is written in such a way that anyone would be able to understand the financial concepts being taught.

In addition to a basic financial education, this book offers a proven path, called the Baby Steps, to move you from total debt bondage to a point of financial independence.  

I can not recommend this book enough to start your journey of financial education.  I am sure that once you have read it and began using the guidance in the book that you too will give this book away to someone in need.

I first got this book after reading the title because I was in disbelief you could automatically become a millionaire.  I wanted to put what David Bach was preaching to the test.

David Bach is 100% on point with his recommendations in this book, and his ideas have been the inspiration for many of the posts found on this site.

The book first introduces what he calls the Latte Factor.  This isn’t anything related to investing but instead helps you see that you are wasting your money on unnecessary items.  This will overcome your idea that you don’t have any money available to invest.

Once you have cut the waste, you then invest it.  But here is the key to Bach’s process, invest it automatically.  Using Employer deductions, such as allotments or TSP/401(k) contributions, you can direct your funds to a retirement account which will then grow automatically.

That’s right, spend one hour of your life getting this set up and live like royalty once you retire. Check this book out if you want to not only become financially independent but want to live the life you want in an early retirement.

Related Article:
Stop Eating your Retirement:  How to Become a Millionaire with your Current Income

One of the biggest beliefs of a millionaire in America is that they either inherited their large sums of money or got extremely lucky and won the lottery.  There is no way for a middle-income family to achieve this kind of wealth.

Dr. Stanley and Dr. Danko have studied millionaires and have placed all of their findings within this book.  What they discovered is amazing. Spoiler alert, but they discovered that 80% of millionaires are self-made.

In addition to that, the millionaires were not people you expected.  They were typically what we would call a “blue collar” worker that never earned a large paycheck.

What about the doctors, lawyers, and every other high dollar income job?  Dr. Stanley and Dr. Danko found that these people only lived the illusion they were wealthy when in fact they were probably in a worse financial position than people with ordinary incomes.

This is a great book to help you realize that the “wealthy” are broke and you have just as much potential as anyone else to achieve financial independence.

Related Article:
The Millionaire Janitor:  How a Soldier turned Janitor Became a Multi-Millionaire.

It is confusing to me that people want to spend 20+ years in the military to only retire and get another job to continue working. Why do you insist on working?  When are you going to stop working and start living the life you want?

That is the principle of this book.  When you are working, you are trading your time for your employer’s money.  There is an endless supply of money to be earned, but unfortunately there is only so much time each of us have.  And we aren’t getting that time back.  

This book will enlighten you to the idea of thinking how much of your life, not money, that are you giving up to obtain something.  I used this principle a lot back when I was younger.  For example, if you spend $12-$15 each day on lunch, you actually spent about 1 hour of your life working at your job to buy lunch.

People tell me that I am crazy for thinking I will retire in my 40’s.  Aren’t they just as crazy for working into their 70’s or 80’s?

The Richest Man in Babylon has less of a textbook feel to it than the previous books.  Instead, it tells several stories of people who overcame being commoners to achieve financial independence.

These stories are told in such a way that their lessons are easy to understand to place into practice with your own life.  

It is really interesting that this book was written about 90 years ago, but the teachings from this book are still being repeated by current day personal finance gurus. 

I highly recommend this book for someone who has just a couple bucks and is looking for a story to read but at the same time get lessons which will change your financial position for life.

Related Article:
7 Cures to the Lean Purse from the Richest Man in Babylon

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