Money is not complicated. We have one job—spend less than we make. It is a simple math equation but one that eluded me for most of my life (and has eluded many Americans for generations). Because we live in a capitalist society that nurtures spenders, it becomes easy, tempting, and “normal” to complicate money. It is also tempting to believe that saving is only for the rich. As I have learned through my own transition from spender to saver, and from advising, teaching, and observing thousands of people on their financial paths, it is the human brain and not money itself that is the culprit. What most often makes us spend irrationally is our relationship to others. As Jason Zweig says, “The roots of envy and social comparison run so deep that they are an instinctive part of our biological makeup.”
As the global pandemic holds a magnifying glass up to hard financial truths, it also finds many of us hungry to use what we’ve learned during this crisis to make lasting changes. We can start with inspiration, by entering the worlds of those who have exited the hedonic treadmill and have revealed the life that can be built by our own design when we live below our means. Next, we can meet researchers who humbly recognize that the fundamentals of economics have been flawed, as they rely on the assumption that humans are rational actors. Their research does something more profound than just help us see the glitches of our brains when it comes to money—it removes the shame of our shortcomings.
No longer do we have to see our financial quirks as moral failings. Free of the baggage of shame, we can read books that offer both financial advice and the habits to adopt to make us successful for a lifetime. I have read loads of books about money, but I can point to a handful of them that have started to rewire the messes in my brain that deal with money and that influenced me as I wrote my own book, But First, Save 10.
Thinking in Bets: Making Smarter Decisions When You Don’t Have All the Facts by Annie Duke
Forgive me for fangirling, but Annie Duke is my hero. This female world poker champion tells a better-than-fiction story of using gender stereotypes deployed by her male counterparts against them to win millions. Come for the stories of her experiences at the poker table. Stay for the advice. Annie Duke offers advice that works across disciplines, jobs, and habits—for people to think in bets, or probabilities. In a world where we seem to be encouraged to take a side, to be definitive, to see in black and white, Duke reveals her success came from being unsure. She uses her own experiences and studies to show that the same tactics that helped her win poker games can help people win at much more. In the world of money, being unsure can specifically help with investing. Picture the entire investments industry built up and defined by pounding the table on stock calls, being certain on market timing, or plowing money into a “hot mutual fund” being thrown on its head as we learn that those entering investing timid or unsure actually end up on top with performance. I am not alone in feeling like an imposter in the financial world; many women find themselves distrustful of what investing offers and aren’t convinced or inspired by the desire to “win.” The ability to run numbers is believed to be at the heart of confidently investing, but Duke warns against this math ability. Those who run numbers that sound smart often make bad decisions and recommendations. We are reminded that, at the core, those numbers are based on assumptions and opinions, not facts or truths. In the end, uncertainty prevails and understanding probabilities can help investors stay the course in good times and bad. Prepare to feel liberated and to newly embrace uncertainty as a strength. This is not just a book about money; this is a life manual.
Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence by Vicki Robin and Joe Dominguez
There is a reason this book by Vicki Robin and Joe Dominquez, originally published in 1992, was revised and re-released (sadly, posthumously after the passing of Dominguez). It is the money book for the ages. In an argument made with sometimes tough talk but always with love and compassion, the reader is jolted into the reality of the hedonic treadmill we’re cajoled to live on. The authors capture our vicious cycle: “The bottom line is that we think we work to pay the bills—but we spend more than we make on more than we need, which sends us back to work to get the money to spend to get more stuff that sends us back to work again!” Then we are walked through the argument that what we all should value as our most precious commodity is really our time. On page 54, we are delivered the truest truth: “While money has no intrinsic reality, our life energy does—at least to us. It’s tangible, and it’s finite. Life energy is all we have. It is precious because it is limited and irretrievable and because our choices about how we use it express the meaning and purpose of our time here on earth.” Who says a financial book can’t be poetic at the same time it is nerdy in its accuracy? Beware, though: Your Money or Your Life has swept up many a reader into the FIRE (Financial Independence Retire Early) movement. The writers acknowledge that “saving has clearly become un-American,” as our economy is necessarily fueled by our consumption. So in their quest for true financial independence, readers might be sidestepping their patriotic duty to spend. It is no coincidence that this book is zooming to the top of reading lists in 2020; I think 2020 has a lot of folks ready to live life differently, economy be damned.
The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns by John C. Bogle
You might read this title and say, This is a book for people interested in investing… that’s not me. Well, think again. Nearly anyone who wants to have a shot at retiring is going to have to step up to the stock market plate. And while in the past, people trusted advisors, brokers, money managers, and insurance agents, John C. (“Jack”) Bogle sheds light the hidden costs within these services that erode too much of people’s money. This book is gives its readers a shot at understanding what is happening in the market. Bogle will certainly go down in history as one of the greatest disruptors in investing with his creation of the passive mutual fund, one of the most ubiquitous forms of investing today. His funds can be found in retirement plans, college plans, and in many personal investors’ portfolios, and holdings in the company’s funds have topped $5 trillion. Yet he himself never made it to the billionaire club. See, Jack Bogle made the decision to create mutual funds that accrued all benefits to shareholders rather than the company. To be such a genius, so dogged in his beliefs, to understand and remain committed to what is right and good for the average investor—it seems patently unfair that he also had the gift of the written word. In this book that is indeed “little,” Bogle uses plain English and explains or discards jargon to take the reader on the journey of investing. He gives his vision for saving and allowing investing in the stock market to compound those savings over time. And then he drops the gauntlet on an industry that has had a chokehold on investors via fees and underperformance. What if we can actually do just as well on our own as we could do when we hire someone to make decisions for us? As Bogle so dreamily states, “Fund performance comes and goes. Costs go on forever.” I like to think that Bogle writes all his books with complete honesty, backed by facts, and always told with a friendly twinkle in his eye.
Nudge: Improving Decisions about Health, Wealth, and Happiness by Richard H. Thaler and Cass R. Sunstein
Saving is easy. You just spend less than you make. Everyone knows that, and there is a reason we aren’t doing it. As the authors share, people spend more time picking out a tennis racket than choosing their savings rate. Although I’m not a tennis player myself, apply this to any decision that is the result of short-term googling and point taken. It turns out that people will save for retirement and likely not stop saving if they are automatically enrolled in the retirement plan versus having to take the action step of making a positive election. Enter the world of libertarian paternalism, the notion that people are not the rational economic actors maximizing our own benefit as economics models have counted on. In fact, we are downright crazy. Therefore, by little “nudges” through choice architecture, automation, opt-out programs, and even peer pressure, we can actually rig our choice-making environment to make better decisions. This book is based on observations and research that will blow your mind. Why? you ask. Because the authors take seemingly impossible tasks like saving and making better eating choices and tell us what works on our irrational brains to trick ourselves to our benefit. And, it is mind-blowing because these behavioral scientists speak our language. I have seen the behavioral studies with more symbols and numbers than complete words or sentences. None of that is in here—just great storytelling, explanations, and applications of the science of libertarian paternalism. This book hits on a lot of public policy and company-level policies on money, our health, and what really brings us happiness as humans. What I love most is we can also use the same science to make better choices on our own behalf. We see what we are up against with our human brains, and Nudge gives us the proven ways we can circumvent those irrational urges.
The Simple Path to Wealth: Your Road Map to Financial Independence and a Rich, Free Life by JL Collins
This book lives up to the promise of its title, and is a self-publishing success story. What started as the author’s letter to his daughter explaining how she could build wealth became a book written so gently and lovingly that we are bound to follow its path. While I was already on the road to financial independence pretty early with my husband, this book cheered me on to do more. Anything I was telling myself about why I saved and how I spent was all just a construct of my brain and of influences around me. There is no fixed lifestyle that my brain would declare “enough,” so why not artificially set the means at fifty percent of what I make. (To be clear, I have not achieved a fifty-percent savings rate—yet.) JL Collins draws the reader into the simplicity of a decision he and his wife made to save half of their income and live on the rest. Much of the savings were invested in one passive Vanguard fund covering the entire US stock market. An incredibly rich life unfolded. Collins has become a father figure of financial independence to so many people reading his book or blog or hearing him speak. In a world of financial literacy built on shame and self-judgement, JL Collins shows us that there is a different and probably better way. Bring people to building wealth through attraction. Show people the joy and peace to be had in a life of simple wealth, and the truth of that existence will certainly resonate deeply for those feeling the fear and anxiety that comes with living a life at or above our financial means.
The Happiness Hypothesis: Finding Modern Truth in Ancient Wisdom by Jonathan Haidt
Can money buy happiness? Yes, it can. Before you roll your eyes and assume this is another “one man’s quest to find happiness and share his secrets” book, I can assure you it is not. This is a heavily researched and cited piece of work written to show us all the actions, purchases, and situations we can seek or find ourselves in that are statistically proven to bring us happiness. And yes, some of these cost money. I read this book nearly ten years ago as I was starting my financial advisory business, and one particular study still impacts me to this day. Researchers found that lottery winners and quadriplegics one year after the win or the accident were just as happy as they were the year before. Lottery winners fully adapt to the new lifestyle afforded by those winnings. Quadriplegics found new normals in their rebuilt lives. What does this have to do with money? Everything. It is absolutely the single most important concept for money. When people set a course to get out of credit card debt or achieve a savings rate that will help them retire, what do they have to do? They have to change their lifestyle, which the brain can process negatively, and then they must live on that lifestyle, which the brain then fully adapts to in a positive way. Obviously, it is much easier to ramp up a financial lifestyle than to back one down, but this power of our brains to adapt and find joy and happiness regardless of recent limitations in our circumstances should be the driving force behind our decisions. So, assuming one can reduce a lifestyle to achieve something like retirement or other long-term financial goals, how do we think about the rest of the money that we are spending? This book offers glimpses into ways we can use it for experiences like vacations that are proven to increase happiness. Blasphemy, right? A book recommendation that might actually encourage you to spend more? Yes, that’s right. This book helps us find ways to enhance our own lives with the money left for us to spend. After all, what are our goals with money if not to seek and find happiness?
The Next Millionaire Next Door: Enduring Strategies for Building Wealth by Thomas Stanley and Sarah Stanley Fallaw
The original Millionaire Next Door was one of the first books I read on money, and it was earth shattering. I had a choice: I could live a life where I looked and acted and seemed wealthy, or I could live a life where I was wealthy. Those two realities rarely intersected. And, no, these were not platitudes or hunches offered up by the authors. They were observations made after thousands of interviews with millionaires. While it’s hard to imagine improving on the original book, I think The Next Millionaire Next Door is the book for our time. A lot has changed in our national economy over the last twenty years, and more ubiquitous consumer spending has come with greater debt. What is fascinating is that according to the new research and interviews by father/daughter team Thomas Stanley and Sarah Stanley Fallaw, the habits and make-up of millionaires still look like they did decades before. They are still mostly self-made. They are still hyper-aware of where their money goes. And, yes, sixty-five percent of them still live on a budget. One of the biggest changes in our society is the advent of social media: no longer do you have to drive around to see the expensive houses, cars, and clothes; they come to us in a constant onslaught as we scroll through newsfeeds from the comfort of our own homes. What is the hard truth? I found it summed up on page 56:
Once we understand that a lifestyle of consumption, one that is more interested in appearing wealthy, is driving most Americans into a lifetime of dependency, work, and little economic freedom, we can begin to create an alternative plan for our lives and lifestyle. It may look very different than our parents or grandparents, and unless you are lucky, it will look very different than those around you or on your social media feeds.
The authors then go on to remind us that “[our] financial future is up to us, not to our employer, government, or even family members.”
The 21-Day Financial Fast: Your Path to Financial Peace and Freedom by Michelle Singletary
If we can all agree now that spending money is less about decision-making and more habit-based, then this is the book to break those habits. Michelle Singletary is a widely respected and acclaimed author and journalist with the Washington Post. Her simple-to-understand communication style offers readers deep wisdom. Unlike many commentators who use shame and ridicule to motivate, Singletary uses an inner joy and peace that draws the reader in. The 21-Day Financial Fast is a book that could easily be overlooked for people “over” the diet books. But this is no diet book. It is a book dedicated to guiding the reader through twenty-one days of living only on the bare necessities of life. What would it look like to not dine out, get a haircut or manicure, stop by Starbucks on the way to work? Oh, wait, it might look a lot like what many of us are living now, during the pandemic! Hence, why this is the book for us to pick up now, while it might actually not be super hard to follow her fast, to observe our changed or changing habits, and to lock in these positive changes for the future. Singletary believes that strong financial management and saving is not about the accumulation of money itself but the means to live our best lives. For her, this is grounded in Biblical truths and her faith. She begins the book acknowledging that talking in Biblical contexts may not be a motivating principal for all but that some of the basic principles that motivate her can be universally motivating. I can vibe with that.
Financial Fornication: Avoid Financial & Credit Dis-Ease by Tarra Jackson
I picked up this book for the title, and I stayed in Jackson’s world for her wisdom on debt. Where, exactly, is the intersection between debt and sex? We have a society obsessed with sex—having sex, talking about sex, being comfortable with sex. But money? That’s taboo. Point taken. Tarra Jackson defines financial concepts in sexually analogous terms, beyond just the need to communicate more and give some financial version of the “birds and the bees” talk. No, she wants us to understand how we can cheat on our true selves with money. When we spend on a credit card and pay it off in full, we are in a long-term committed relationship with money and our goals. It’s when we spend on a credit card that we then don’t or can’t or choose not to pay in full at the end of the month that we have a financial one night stand. Jackson’s definition of financial fornication is “the excessive and compulsive use of revolving credit or other unsecured credit (not secured by collateral) for items or purchases that are not significant or could be paid with cash.” We live in a society determined to normalize debt of all kinds, which according to Jackson makes us financially promiscuous and prone to financial STDs. Yep, STDs. Why not use shocking language to describe the shocking impact of debt? And with one-liners like, “Ignorance is not bliss, it’s expensive,” this book does what it promises—it educates.
And to close out this wonderful list, we just had to include Sarah-Catherine’s new book, But First, Save 10: The One Simple Money Move That Will Change Your Life, out now from Et Alia Press! – Ed.
But First, Save 10: The One Simple Money Move That Will Change Your Life by Sarah-Catherine Gutierrez
Imagine if a young woman could start her first job making one massive, positive, lifetime financial decision right out of the gate: saving ten percent for retirement. That decision to save offers her a ticket to an identity as a saver, the inspiration to build an emergency fund as an insulating moat around her retirement plan, and the curiosity to take a step further into a world of budgeting, ahem, cash flow management (nix the “b” word). I believe that financial pain does not have to be a rite of passage, but often it’s financial pain that is the motivator of good financial decision making. Enter But First, Save 10, a book written specifically to Gen Z women that gives us inspiration to save money, an understanding of the human brain, shortcuts necessary to become a saver, specific direction on how much to save, and step-by-step flow charts on precisely how to automate that saving for a lifetime of success at any income level. It is the book I wish I had in my twenties, and I’ve heard many early readers say the same. From my experience working with savers and spenders, I have witnessed the oddest phenomenon: those who had similar journeys to my own describe their life shift from spender to saver in life-or-death, hyperbolic language. Those who saved from the beginning because mom or dad, aunts or uncles, talked about it and normalized it shrug at their condition. For them, saving was never hard. If done from the beginning, no lifestyle has to be reversed, no expensive car has to be traded down, no dining out or convenience habits have to be curtailed because they were never there in the first place. For the rest of us, we have to learn these habits and buck the taboo surrounding talking about money. But First, Save 10 is my vision for a generation of readers who can get this wisdom told with a mixture of data, humor, candor, and stories. By teaching a simple approach designed to yield abundance and joy, I hope to help others plan retirement on their own terms and buck that unfulfilling job or start a dream business, providing a ticket to a life of true freedom, however defined.