So my friend just asked me if I had read and would recommend The Psychology of Money (Housel, 2021). And that got me thinking, what financial books would I recommend to others? The Index Card (Olen & Pollack, 2017) and Your Money or Your Life (Robin & Dominguez, 2008)…
These are the three books that I recommend to most people whether they’re asking for financial advice or not. I wish I had been given more financial advice earlier on in my life. When you read financial books, one of the things that you learn is that the earlier you start investing your money, the more time it has to grow. It’s a concept called time-money value (i.e. time value of money).
I first learned about this concept in a financial book that I was reading as a part of my public health program. The book covered this concept really well and for the first time in my life it clicked. If I’m not investing, I’m wasting my time – I’m losing out on the potential future gains I could get if I invested my money.
The first book that I read to try to make more money by investing was a book that I heard about on the PBS Newshour. It was a book called The Index Card (Olen & Pollack, 2017). This book gives ten pieces of advice that are just really practical. If you’re just trying to get into the mindset of utilizing your time to help your money grow – if you’re just trying to start accumulating passive income so eventually one day you can retire, The Index Card I think is a great place to start.
The other book that I recommend [is] Your Money or Your Life by Vicki Robin, I really like this book because it helps you understand how to save money – how to live below your means. She’s saying that time is valuable and you need to think about your money like your time. So if you get paid twelve dollars an hour and you go to a coffee shop every morning and buy a six dollar cup of coffee you are basically giving thirty minutes of your life to that coffee shop each morning. Thinking about money in this way I find is really helpful if you want to start spending you money more wisely.
Your Money or Your Life teaches you how to think about money. The Index Card teaches you where to put money. And The Psychology of Money talks about perceptions of money.
The Psychology of money really complements the book The Index Card well because at the time of writing the author seems to be a fan of index funds. Index funds are basically groups of stocks instead of one stock. An index fund picks a variety of businesses that the index fund thinks are going to be successful. So by buying the index fund you’re actually buying a little piece of a variety of businesses.
An example is the S&P 500. Inevitably one of these businesses is going to shrink over time. When that business drops out of the 500 another one will take its place. As long as most of those businesses are growing, it’s going to be okay if one of them shrinks and drops out of the 500. You leave to the index fund managers to try to cut your losses and to try to determine how much of your money they’re putting into each of those 500 businesses. But the beauty of it is that your risk is spread over those top 500 businesses in the United States. So the S&P 500 is a bet that the United States stock market and the top 500 businesses in the United States will do well. So if you’re confident in the United States then you can be comfortable putting your money in that fund. So that’s kinda the question you have to ask.
The Index Card and The Psychology of Money propose that index funds are safer than investing in single businesses alone. Your Money or Your Life is a great book to [help you with your] thinking about money, The Index Card is a great book to think about where to put your money, and The Psychology of Money is really a blend of the two. Morgan Housel makes a great distinction between wealth and riches.
Riches can be debt, loans, and stress. So, in other words, your life may not be that great. Because you don’t actually own your time you’re trying to maintain your luxurious lifestyle and pay off your debt.
But wealthy people, as Morgan Housel describes, they own their time because they have a reserve of money that they’ve put away that’s working for them. Vicki Robin talks about how time is so valuable. It’s the most valuable thing we have. Our time and our energy is our life. If we don’t have that, what do we have?
So three books I recommend: The Index Card, Your Money or Your Life, and The Psychology of Money.
Citations:
Fernando, J. (2024, May 14). What are index funds, and how do they work? Investopedia. https://www.investopedia.com/terms/i/indexfund.asp
Finkler, S. A., Smith, D. L., Calabrese, T. D., & Purtell, R. M. (2016). Financial management for Public, health, and Not-for-Profit organizations. CQ Press.
Housel, M. (2021). The psychology of money: Timeless Lessons on Wealth, Greed, and Happiness.
LisaFotios. (2020, September 8). Woman Standing Near Display Counter. pexels.com. Retrieved May 27, 2024, fromhttps://www.pexels.com/photo/woman-standing-near-display-counter-1402407/
Olen, H., & Pollack, H. (2017). The index card: Why Personal Finance Doesn’t Have to Be Complicated. Penguin.
PBS NewsHour. (2016, April 14). All the financial advice you’ll ever need fits on a single index card [Video]. YouTube. https://www.youtube.com/watch?v=JdUKhgW1gOo
Piacquadio, A. (2018, March 23). Pensive Man Looking at Computer Laptop. pexels.com. Retrieved May 27, 2024, from https://www.pexels.com/photo/credit-card-on-smartphone-screen-near-debtor-documents-6289024/
Pixabay. (2016, October 18). Woman Walking on Grass Field With Yellow Labrador Retriever Puppy. pexels.com. Retrieved May 27, 2024, from https://www.pexels.com/photo/woman-walking-on-grass-field-with-yellow-labrador-retriever-puppy-220968/
Quang Anh Ha Nguyen. (2018, February 19). Panda Printed Paper Coffee Cup on Table. pexels.com. Quang Anh Ha Nguyen. (2018, February 19). Panda Printed Paper Coffee Cup on Table. pexels.com. Retrieved May 27, 2024, from https://www.pexels.com/photo/panda-printed-paper-coffee-cup-on-table-885021/
RDNE Stock Project. (2021, April 16). Person Reading a Book About Fundamentals of Financial Planning. pexels.com. Retrieved May 27, 2024, from https://www.pexels.com/photo/person-reading-a-book-about-fundamentals-of-financial-planning-7821487/
Robin, V., & Dominguez, J. (2008). Your money or your life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence: Fully Revised and Updated for 2018. Penguin.
Deliberating Truth 