Some books are worth more than their weight in gold. I share 3 books that have delivered results for me and key takeaways for your financial life.
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I read a lot, usually about 50 to 100 books a year. As a kid, I spent most of my allowance on books. The day I discovered a second-hand bookstore, I came home with 47 books and a year’s pocket money spent. It was paradise on earth.
I started out reading fiction, but as I got older, I read more non-fiction, from books on psychology to books on investing, behavior change, education, and more.
Some books are so good they are worth re-reading again and again. In this article, I share three such books. I chose them because they are especially relevant for setting and achieving financial goals.
I read all three for the first time in 2017 and still refer to them often. Each time something different resonates, forcing me to rethink how I see money and time and what I want to prioritize.
Here are a few ways these three books changed my financial life.
The Richest Man in Babylon
The Richest Man in Babylon was first published in 1926. It’s so easy to read as it’s filled with stories. Two friends seek the advice of the richest man in Babylon, Arkad, on how to become rich. We discover how Arkad built his wealth through memorable short stories that are still relatable today.
I read the book in 2 hours one evening in 2017; likely the best 2 hours I spent that year. Here are two key lessons I still use today:
1) Pay yourself first
Most people spend first; if there’s anything left, they save. Paying yourself first means you save first. Each time you earn money, you keep some for yourself before you spend (yup, even before you pay rent!). This completely changed how I thought of money and saving. Before then, I never had a set amount to save each month – I was one of the people who saved what was left at the end of the month.
Paying myself first forced me to set a savings goal and then save each month consistently. The more I saw my savings grow, the freer I felt as I had a nest egg to rely on if anything happened. I saved more. Each time I got a raise, I saved and invested the money instead of spending more.
Paying myself first forced me to set a savings goal and then save each month consistently
2) Improve your skills to earn more money
Investing in yourself is never a waste. The more you know and the more skills you have, the more opportunities you can take advantage of.
The jobs of the future are not the jobs of today. I remember getting my first email address in 1997 as a ten-year-old. At that time, it was impossible to predict that my first job after college in 2008 would be helping hospitals analyze their data to improve health outcomes. The technology powering large data analysis had yet to be invented.
Investing in yourself is never a waste
Here are a few statistics from The World Economic Forum’s The Future of Jobs Report 2023. In the next 5 years,
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- 23% of today’s jobs will change – 83 million jobs will be lost, and 69 million new jobs will be created.
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- Employers estimate that 44% of workers’ skills will be disrupted with analytical and creative thinking in high demand.
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- Six in 10 workers will require training to meet the additional skills needed for their jobs.
To meet the needs of future jobs, you need to invest in yourself and continuously learn new skills.
The Intelligent Investor
The Intelligent Investor is one of the most famous and influential books ever written on investing. Benjamin Graham published it in 1949 and revised it several times before he died in 1976. This book covers the principles of value investing, which Graham taught to his most famous student, Warren Buffett.
While some of the formulas are outdated, the fundamental lessons in this book are as relevant today as they were over the last 74 years. Here are a few lessons I learned from this book:
1) Investing is not only about math and formulas but also about psychology and emotions.
The goal in investing is to “buy low and sell high.” This seems simple enough, but the rubber hits the road when everyone around you panics, and you need to remain calm and follow your investment strategy.
Investing for the long term helps you manage your emotions as you are less troubled by the market’s short-term fluctuations. Instead, you invest in assets that will hold their value and grow your money.
Investing for the long term helps you manage your emotions
2) Investing is different from speculating
When you invest, you focus on the long term, prioritize preserving your capital, and invest in assets like you own them. Speculating is riskier – you rely more on chance than analysis and research. If you must speculate, limit it to money you can afford to lose (ideally less than 5% of your net worth).
3) Invest in companies with solid fundamentals and always have a margin of safety
First, you must research to identify companies with solid fundamentals. Graham includes formulas and tips on how to find such companies. While some of these formulas are no longer applicable, what is relevant is the depth to which he analyzed companies.
He didn’t take financial statements at face value. He read the footnotes and supplementary information going back several years to fully understand the company. If you don’t want to do this level of analysis, investing in individual companies is risky. Instead, you can invest in diversified assets like ETFs or index funds.
Related article: How To Invest Money Now In 3 Seemingly Simple Steps
There are many more nuggets in The Intelligent Investor. I used the principles to decide on my investment approach. The stocks I picked using Graham’s principles have outperformed all my other stock investments. It is essential reading if you want to invest in high-quality stocks that will perform well long term.
The stocks I picked using Graham’s principles have outperformed all my other stock investments
The 4-Hour Workweek
The 4-Hour Work Week changed how I think about time and retirement. It was first published in 2007, and while the title is polarizing, the book’s core message is a wake-up call.
What would you do if money was not an issue? If you had $100M in your bank account, how would you spend your time?
Once you have your answer, figure out how to do this now. You don’t need to wait till an arbitrary retirement in your 60s or 70s to enjoy your life and do the things that matter most to you.
Tim Ferriss challenges the traditional notion of work and retirement. He offers practical tips and shares real stories on how to free up your time to focus on what matters most to you and, thus, live a fulfilling and meaningful life.
There are a lot of tips in the book, but here are the two I have used the most.
1) Don’t wait for retirement to enjoy your life or do what matters most to you
Time is the scarcest and most uncertain resource. No one knows how much time you’ll get in life. Reading this book forced me to think deeply about what mattered most to me and to do a time audit to see if how I spent my time matched my values. It didn’t. So I made a lot of changes.
For example, family and friends matter most to me. I am happiest when I am with the people I love most. But my days were spent working roughly 60 hours a week.
I made a conscious effort to take as much time off as possible and never work weekends so I could spend more time with my loved ones. Multiple times, I said no to projects at work that would interfere with my vacation; I never wanted to cancel my travel plans to spend time with friends and family. Long-term, I also knew I needed to switch industries to reduce my work hours.
Time is the scarcest and most uncertain resource
All this was possible because I knew what mattered most to me, and I designed my life to prioritize it.
2) It’s not as expensive as you would think to live the life of your dreams
Most things cost less than you think, especially if you rent them instead of buying them.
For example, have you always wanted to buy a boat and sail across the ocean? How about renting one instead?
One of my favorite recent trips was going to Panama with a friend. We spent 3 days on a private boat sailing through the San Blas Islands, some of the world’s most beautiful beaches and pristine water. It was just us, the captain, and his first mate. Our trip included all meals plus transportation and cost $1400 each. Much cheaper than buying a boat, and we got to experience boat life.
Whatever your budget, there are many ways to have fun without breaking the bank. I have gone on incredible trips and had as much fun on $500 trips as on $5000 trips.
So, what’s your dream? What’s on your bucket list that you have always wanted to do but thought you couldn’t afford? Have you looked up how much it would cost? How can you rent instead of buy or find more affordable ways to enjoy life now instead of waiting indefinitely?
Whatever your budget, there are many ways to have fun without breaking the bank.
3 key takeaways for your financial life
If you forget everything else in this article, remember these 3 and put them into practice today. You will surprise yourself with the results you get when you:
I recommend reading the three books to get all the nuggets not covered in this article. When you do, please share what resonated most for you in the comments.