At every step of the way on your journey to financial freedom, financial education is key. This holds true whether you’re just starting out, or whether you’re zooming up the path. Why? Because reaching financial freedom is all about building and optimizing the simple, but not necessarily easy, habits for financial success. With this in mind, I’d like to share my top five favorite personal finance books.
1) “The Millionaire Next Door” by Thomas Stanley and William Danko
This is a book based on years of observation into the habits and makeup of America’s millionaires. The overall finding is that millionaires are not what we typically imagine — flashy, driving expensive cars, living in extravagant mansions. This is what the authors call “big hat, no cattle.”
Rather, millionaires are prudent and pragmatic, focusing on saving and investing instead of consuming. One of the memorable quotes is from a millionaire who states he drinks two kinds of beer, “Budweiser and free.” Obviously, this is a bit extreme but gets the general idea across.
This book showed me that I could actually achieve financial freedom. As silly as it seems now, I did not even think that was an attainable goal, despite my high income as a physician. I was staring down huge student loans and increasing expenses that I felt could never be controlled. “The Millionaire Next Door” showed me this was not inevitable and I could make the changes needed.
Now, this book is fairly philosophical and won’t necessarily give you an actionable guide to financial well-being. However, it does a magnificent job of giving you the evidence needed to change your mindset around personal finances and get your head straight re: what it really means to be wealthy.
2) “The Bogleheads’ Guide to Investing” by Mel Lindauer, Taylor Larimore, and Michael LeBoeuf
Jack Bogle founded the Vanguard brokerage and was a staunch advocate of broadly diversified, low fee index funds as the vehicles of choice for wealth building. His followers (I am one) are called Bogleheads.
Three prominent Bogleheads who also help run the Boglehead forum online wrote this book as a top to bottom guide to personal finance and stock market investing. This one is a must read. You will start it as a beginner and you will end feeling like an expert. The authors introduce all of the necessary topics and then do a deep dive into each of them. After reading this book, you will 100% have a better foundation to understand and implement more advanced investing concepts.
“The Bogleheads’...” provided me the foundation to create and understand the rationale behind my personalized financial plan. Even though this plan involves a very passive approach to long-term investing, understanding the strategy and facts behind it gave me the comfort and determination to pursue it.
3) “Rich Dad, Poor Dad” by Robert Kiyosaki
This book is a classic for a reason. I read it toward the end of the initial surge of my financial education as I transitioned from trainee to attending. It is a philosophical masterpiece regarding the mindset needed to gain financial well-being. It is not a how-to book but it carries a philosophical money mindset message with an even bigger impact. It will change the way you think about money, wealth, and freedom.
For me, the discussion on real estate was the most beneficial part of “Rich Dad...” What really got me to start thinking about real estate investing was the idea the author introduces of using real estate as an ATM. Kiyosaki gives the example of his wife wanting a new car. But instead of buying a new car, they buy a rental property. Then they use the cash flow from the investment property to buy the car. And they still have a cash flowing asset to boot!
This book showed my wife Selenid and I the big picture with real estate investing that we continue to use today as our real estate portfolio has ballooned to 18 units as of this writing! You can also see how we used this exact “Rich Dad, Poor Dad” principle to make a major purchase recently here.
4) “A Random Walk Down Wall Street” by Burton Malkiel
This is maybe the best finance book that I have ever read. It is detailed and goes into the research behind many of the concepts that I follow, like investing in index funds.
I read this book relatively recently as I sought to deepen my understanding of various investing strategies. The concepts discussed certainly go into the weeds. But the strength of this book is that it explains in depth various investment strategies, including active approaches. The author provides what I think is a fair and unbiased analysis of both active and passive strategies. I’ll spare the suspense: the passive approach comes out on top.
I have learned a ton of really important, advanced concepts from this book. It helped me to speak the language of investing better and also understand some of the rationalizations that active investors use for their approach. This understanding gave me even more resolve in sticking to my financial plan while expanding my knowledge base and perspective within personal finance.
5) “The Millionaire Real Estate Investor” by Gary Keller
If there is one book to read about real estate, this is it. The first half goes deep into the mindset necessary to be a successful real estate investor. Things like establishing a growth mindset and dealing with inevitable setbacks. And the second half details exact strategies for analysis, acquisition, and management of investment real estate.
This book will teach you all that you need to know if you are considering or already actively investing in real estate. Selenid and I first read this book right as we planned to start investing in real estate. And we re-read portions of it constantly. In fact, the majority of our real estate investing strategy, summarized here via the tortoise and the hare fable, is based off of this book.
Whether you want to be an active or passive real estate investor, the information in “The Millionaire Real Estate Investor” will make you a better investor. And I actually think that this book is worth reading even if you don’t plan to invest in real estate. It’s that interesting, and the mindset component is worthwhile all on its own!
Whether you are new to the personal finance space or just looking to gain insights and information, reading long, technical books like the above can feel intimidating. I know I certainly felt that way at the beginning of each.
To get through them, my favorite strategy is to microdose the information. Instead of picking up a book and saying you are going to read it when you have time, create a manageable plan and schedule to get it done.
For me, that means trying to read 10 pages each night before bed. But that is just what works for me. What works for you may be completely different. Find what that is — and make it a habit!
What are your favorite personal finance books? Share in the comments!
Jordan Frey, MD is a plastic surgeon in Buffalo, NY at Erie County Medical Center and the University of Buffalo. His clinical focus is on breast reconstruction and complex microsurgery. He is also the founder of The Prudent Plastic Surgeon, one of the fastest growing finance blogs. There, he shares his journey to financial well-being with a goal of helping all physicians reach financial freedom, practicing on their own terms.
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