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Behavioral Finance

5 Finance Books That Can Help You Get it Together

Ever wondered what’s on our bookshelf? We share five finance books that we love, because we’re sure they can help you on your journey to become a smarter investor.

Articles by Nick Holeman, CFP®

By Nick Holeman, CFP®
Financial Planning Expert, Betterment  |  Published: May 6, 2019

As a CERTIFIED FINANCIAL PLANNER™, I’ve asked hundreds of clients about the hurdles they face when getting their finances on track.

Two common answers I hear are, “I just don’t know where to start,” and “What if I mess up?”

Underlying both of those responses is a lack of confidence in making financial decisions. I have found that a great way to improve confidence is through education. Unfortunately, most of us don’t have the time to read decades’ worth of empirical data and financial theory.

Luckily, you don’t have to, because we do it for you. At Betterment, we read Nobel Prize-winning research, and we use it to build the investment strategies we recommend.

There are also plenty of incredible books that distill complicated jargon into easy-to-understand principles. Below is a curated list of five books on all things related to personal finance, saving, and investing.

1. The Millionaire Next Door: The Surprising Secrets of America’s Wealthy

by Thomas J. Stanley & William D. Danko

Source: Amazon

This is my favorite finance book of all time. The authors conducted one of the most rigorous studies of millionaires to ever take place, and took a data-driven approach in order to find what America’s millionaires did differently to achieve such financial success. Spoiler alert—most millionaires are not famous athletes or movie stars.

This book also destroys the myth that being wealthy is synonymous with conspicuous consumption. Instead, it highlights that most millionaires succeeded by spending far less than they earned, avoiding lavish homes and cars, and instilling good financial habits in their children so they would be financially independent from their parents.

This book is worth another read every time you need a reminder of what good money habits look like. And although I haven’t read it yet, the sequel just came out with updated data and findings.

2. The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns

by John C. Bogle

Book cover for The Little Book of Common Sense Investing

Source: Amazon

Written by the late John Bogle, founder of the behemoth Vanguard, this book is Investing 101 for investors of any experience level. It shatters the myth that the best way to make money in the stock market is by taking big bets on individual companies, and by getting in and out of the market at just the right time.

Instead, it teaches time-tested investing strategies like controlling risk, utilizing diversification, reducing your fees, using index funds, and avoiding market timing. Betterment believes whole-heartedly in these same strategies, and it’s exactly why so many of the investments we use and recommend are Vanguard index funds.

3. Set for Life: Dominate Life, Money, and the American Dream

by Scott Trench

Book cover for Set For Life

Source: Amazon

Author Scott Trench, CEO of BiggerPockets and cohost of the BiggerPockets Money Podcast, wrote this book in a format that is extremely intuitive. He outlines the three stages of wealth creation and how you can achieve each of them.

My biggest takeaway after reading this book is that in order to jump-start your ability to build wealth, you must control “the big three”, which means the costs for housing, transportation, and food. For most households, these items make up the vast majority of your living expenses. Despite that, many people choose to ignore these costs or label them as non-discretionary, thus mentally accepting the fact that they have no control over them.

Scott encourages you to consider techniques such as house hacking. He also explains how powerful real estate and index funds can be as investments.

4. The Total Money Makeover: A Proven Plan for Financial Fitness

by Dave Ramsey

Book cover for The Total Money Makeover

Source: Amazon

Dave Ramsey is an author, podcaster and public speaker who has helped countless individuals get out of debt and take control of their own lives.

Dave is most well-known for his 7 Baby Steps principle. These are the 7 steps that he recommends in order to achieve true financial freedom. They include actions like building an emergency fund, saving for retirement, and giving back.

You may not agree with all of his advice, but this book will help provide you with a foundation and a plan. Then, feel free to tweak that plan slightly to meet your individual needs.

5. Nudge: Improving Decisions About Health, Wealth, and Happiness

by Richard H. Thaler & Cass R. Sunstein

Book cover for Nudge

Source: Amazon

This book’s co-author, Richard Thaler, won the 2017 Nobel Prize in Economics and is a behavioral finance legend. I found it particularly interesting to learn about all the behavioral biases humans naturally have, and how that can affect our financial decisions. Examples of biases include loss aversion and recency bias.

Thaler’s theory of libertarian paternalism outlines how we can help reinforce better behavior and better outcomes without limiting choices and individual freedoms. Some great examples the book touches on involve 401(k) investment choices, school lunch menus, and even organ donation. After reading this book, your view on the world will be forever changed—and so will your view of money.

Let’s get it together. Together.

The education provided in these five books can help arm you with the necessary knowledge and confidence to take control of your finances. But remember, education alone isn’t enough. You must also take action.

Betterment makes it easy to get started with saving and investing for your future. And, we follow many of the principles outlined in this booklist, such as avoiding high-interest debt, using low-cost index funds, setting concrete goals, and using behavioral nudges to encourage better investing behavior.

Let us help you take control of your finances by signing up for an account in just a few minutes. Or, consider scheduling a Getting Started Call with one of our CERTIFIED FINANCIAL PLANNERS™ who can help you set up your plan and get on your way to a better financial future.

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