If the only two things you ever read on personal finance and investing were The Total Money Makeover by Dave Ramsey and The Little Book on Common Sense Investing by John Bogle, you would be ahead of 90% of the general public in financial knowledge. More importantly, if you followed the advice in these two books you would be ahead of 90% of the general public in net worth. It really is that simple and both of these books are short and easy to understand.
Let’s start with The Total Money Makeover. It is focused on budgeting, living within your means, and erasing debt from your life. Mr. Ramsey does a good job of showing examples of how our behaviors affect us negatively and then how to do things correctly. He gives concrete examples of how much to save, how debt affects you, and personal examples from people who have followed his advice and turned their financial lives around. In my view this book tells the truth about personal finance rather than how our culture currently tries to tell us what is important. The only part of this book that I think can be done better than what Mr. Ramsey prescribes is the investing section which is why I recommend the following book.
The Little Book of Common Sense Investing is a concise book that shows simply how markets work and how you can receive the same returns as American businesses earn in aggregate by investing in low cost index mutual funds like the total stock market index. Taken a step further, Mr. Bogle lays out the evidence showing how active investing (actively managed mutual funds or advisors picking mutual funds) clearly underperforms owning a broad-based low-cost index fund. He goes on to show that market returns long-term are not speculative at all but simply reflect the earnings of business. You share in those earnings when you own the total stock market index.
Most people don’t enjoy dealing with personal finance or investing whereas I find it to be incredibly interesting. I have read hundreds of books over the years regarding these topics and although I pick up something new in almost anything that I read, it still boils down to just the core topics of these two books. I would certainly encourage you to read as much as possible on any topic that will better your life, but I also understand the reality of most people’s lives. That’s why I am suggesting just two short books. You will achieve financial abundance but more importantly many personal options within your life. Invest simply and live simply.