Sunday, April 15, 2012

All About Money Books!

OK, I admit it: I have a problem.

I have become obsessed with money. Not in an "I desperately need to get rich and FAST" way, but rather in a " does one invest? What are we supposed to do with money so we can actually retire someday?" kind-of way.

My husband and I are at a point where we want our money to work FOR us. We have money to save, but we don't want it to sit in a regular bank account collecting nothing but dust. However, we are completely ignorant in the area of investing, so I decided to start doing some serious research. I consider myself fairly smart, surely I could figure this stuff out.

So this post is about a number of books I have read in the past month. If you are not interested in money or investing or anything, you should stop reading now as this post will bore you. But, perhaps some of you are like us and want some suggestions on books to read.

In no particular order, here are the books I have read:

 The Millionaire Next Door
By: Thomas Stanley, William Danko

I really enjoyed this book. It is not a book about investing, so much as understanding who the truly wealthy in this county are. There are some surprising facts: like that those people who drive really fancy cars and wear Rolex watches certainly do have money, but they do not have WEALTH- and there is a huge difference. The average millionaire (over 80% of them) live in middle-class working neighborhoods, drive cars no newer than 3 years old, and still clip coupons. They got their millions by making a lifetime of frugal choices. One millionaire never made more than $25,000 a year, but he lived on less than he made and invested wisely and is now a retired millionaire. It is a great read!

Rating: 4 of 5 stars

 The Boglehead's Guide To Investing
Authors: Taylor Larimore, Mel Lindauer, Michael LeBouef

If you are serious about investing, then I think this is an absolute MUST READ. These are three guys who are in their 60's, have made millions on their investments, and want to share their knowledge. They are not in it for profit- these are genuine nice guys who genuinely want to help the average person figure out the complicated world of finance. What they have to say is invaluable. They write in a pretty simple manner (though even in a simple manner, a lot of what they wrote went over my head- so much for me being able to understand the world of investing!). They go through the basics, dispel tons of myths about investing, and teach you step by step what to invest in and how to do it.

Rating: For a book about investing, a 5 of 5 (though this is certainly not light reading!)

The Total Money Makeover
By: Dave Ramsey

If you are in debt at all, you MUST get this book! This book is a step by step guide to get out of debt, stay out of debt, and build wealth. It is not an investing book. It is a course in financial management to get you on track to retire well. I mean it, if you have ANY debt (even if it is just your mortgage) and you want to be rid of your debt and putting money into retirement accounts, college funds, etc. you really should read this book. I'm sure you have heard of Dave Ramsey, but if not- you should check him out.

Of all the books, he offers the most hope that you (and I) can have the future we dream of. Millions of people have followed his plan and been successful. When I read this book, I felt like I could actually retire in style like I want to.

Rating: 5 of 5
 The Investor's Manifesto: Preparing For Prosperity, Armageddon, and Everything In Between.
By: William J. Bernstein

This book was a tough read. He is REALLY smart and offers A LOT of information, and a lot of it went over my head. However, he also brought up a lot of important and staggering statistics that are important to be aware of.

The most important assertion he makes is that only the last 1-2 generations of Americans have had to know about investments. For the most part, Americans have been able to rely on fantastic pension programs that have taken care of them in retirement. Now, to save money, companies no longer offer pensions and instead require average citizens- 98% of whom know NOTHING about investing- to be 100% in charge of their own investments and retirement. What does that mean? That 70% of Americans have absolutely nothing saved for retirement, that millions of Americans will never be able to retire, and that many of the elderly will have to rely 100% on the government for their retirement.

How is that for frightening? How is that for no longer having pensions? It is a serious problem- one I hope to not face because I hope to retire with millions in the bank, not zero!

He goes through some important information on investing- how to invest, how to avoid common pitfalls, and how to hopefully end up NOT poor- that is his goal. He doesn't want to make us rich, but he wants us to be able to retire with dignity and NOT in the poorhouse.

This book was a little deep for me- a lot went over my head. But, I still think it is an important read to try and understand investing.

Rating: 3.5 of 5
Early Retirement Extreme
By: Jacob Lund Fisker

This book was interesting. Jacob is a man who retired at the age of around 30 and lives off of his investments and whatever odd jobs he wants to take (he defines retirement as being able to do anything he wants, so if he wants to work a few weeks a year, he does, if he doesn't want to work, he doesn't, etc.).

His philosophy is simple: Live off of practically nothing and put 50-80% of what you make into savings and investments, and after 5-10 years you can retire as long as  you continue to live frugally. I love his message of anti-consumerism. (Some of you know I mentioned Mr. Money Mustache on my personal blog, and if this early retirement extreme is of interest to you, I HIGHLY recommend reading his blog to figure out how it is possible). My husband and I are not as extreme as he is, and are not committed to all that is required to sacrifice to make it work, but I still love his overall message. I read Mr. Money Mustache's blog constantly, and it is a great reminder to me of what really matters- and it has nothing to do with spending money!

However, this particular read was really heavy and a tough read. Mr. Fisker is incredibly smart and he went over my head a lot with all of his graphs and statistics and such. His ideas are fascinating, however. I just recommend the blog mentioned above over this book. Though the blog does have some cussing, it is a much more enjoyable read. (Mr. Fisker did have a blog in the past, but he doesn't update it anymore as he has decided to move on and do other things and passed the reigns on to Mr. Money Mustache).

Rating: 2.5 of 5

So, there you have it. If any of you have any other suggestions related to this topic, I would love to hear them. This is what I have learned as I have read: Even in trying to make investing simple, it is incredibly complicated. As a society, we need to do better at teaching each other, and our children, about this important topic so we can retire in dignity- not in the poorhouse!