Best Book for Learning About Money Management?
December 10, 2019 9:46 AM   Subscribe

At the age of 40, I would like to learn the basics of what I should be doing with my money. Because I trust Metafilter more than Google: what is the best book out there for learning an overview of personal finances/investments/strategies?

For context, I have a retirement account, a tiny Roth IRA, and money sitting in a savings account, not doing anything for me other than making me feel like I have a good safety net (that feeling is important to me). Single woman, no kids, ever. My goal is to read up before I contact...whoever it is you contact about money management, because that is how I learn best.
posted by sugarbomb to Work & Money (19 answers total) 33 users marked this as a favorite
 


Before Elizabeth Warren got into politics, she wrote a money management book called All Your Worth. Very much worth reading.
posted by FencingGal at 10:18 AM on December 10, 2019 [6 favorites]


Here is a picture of the actual index card.

Start here, and anything you don't understand, find books with advice about each step.
posted by The_Vegetables at 10:41 AM on December 10, 2019 [1 favorite]


Personal Finance For Dummies was a surprisingly good primer on this for me. It explained a lot of simple little things that I didn’t know I didn’t know.
posted by Tell Me No Lies at 10:58 AM on December 10, 2019


I went through a period where I read a stack of personal finance books, and the truth is that almost all of what you need to know really does fit on that index card.

However, my favorite books were The Four Pillars of Investing by William Bernstein and The Nine Steps to Financial Freedom by Suze Orman. The first book is a little more technical, the second is more psychological, but they each had something unique to say.
posted by Clambone at 11:41 AM on December 10, 2019


My goal is to read up before I contact...whoever it is you contact about money management, because that is how I learn best

Reading first is optimal, but, given your description of your assets, I think your reading will lead you to the conclusion that you probably shouldn't be "contacting anybody about money management." All that does is invite a hustler into your life. Exception for a one-time consultation with a fee-only certified financial planner, if you want someone to take an overview of the situation for you.
posted by praemunire at 11:45 AM on December 10, 2019 [1 favorite]


I'll second FencingGal's suggestion and say that the "balanced money formula" described in All Your Worth has really given some helpful structure to my family's budgeting decisions.

Also, resist the temptation to make this financial planning harder than it should be. By your description, it doesn't seem like you are in a particularly unusual position--master the basics of spending less than you earn, put something aside for long-term savings, and don't stress too much about the rest.
posted by pingzing at 12:04 PM on December 10, 2019 [2 favorites]


For investing, I'm a huge fan of JL Collins' The Simple Path to Wealth. After you finish it, you likely will come to the conclusion that you don't really need to contact anybody about money management, because it isn't/shouldn't be complicated enough that you will need to... :)
posted by Doktor at 12:48 PM on December 10, 2019


Also, resist the temptation to make this financial planning harder than it should be. By your description, it doesn't seem like you are in a particularly unusual position--master the basics of spending less than you earn, put something aside for long-term savings, and don't stress too much about the rest.

Sure, but there's gotta be a better way to make my money work for me than having $50k sitting in a savings account accruing almost no interest. I'm interested in being as smart as possible with my money while still enjoying my life, given that I: 1. Make less as a woman than I should. 2. Am queer, so will statistically make less if I do end up partnered (vs hetero couples). 3. Won't have kids to potentially help me out later in life.

Thanks for all suggestions! Excited to dive in.
posted by sugarbomb at 1:21 PM on December 10, 2019


I don't agree with him on many things, but Scott Adams one-page book on financial planning is pretty much spot on. It really doesn't need to be any more complicated than that. The trick is sticking to it.
posted by Winnie the Proust at 1:31 PM on December 10, 2019



Sure, but there's gotta be a better way to make my money work for me than having $50k sitting in a savings account accruing almost no interest.


With this data and this goal, assess your risk (how likely are you to lose your job/get sick/etc) and pick books that will help you determine how much you can invest yearly in an IRA (a small amount, comparatively), if you want to wait and invest same amount for many years to max out your IRA or if you are feeling comfortable and can invest it in a non-tax advantaged account all at once or over a much shorter period of time.
posted by The_Vegetables at 2:40 PM on December 10, 2019


Sure, but there's gotta be a better way to make my money work for me than having $50k sitting in a savings account accruing almost no interest.

Yup, that’s point 2 and 6 on the index card linked above! If you have some money you can afford not to touch for a good, long while, and you can bear to ride out declines between now and then, stick it in a Vanguard target fund or similar (that’s point 2). And if you can do that until you’re at least 59.5, max out the allowed contribution into your IRA each year (that’s point 6), and put that in the target fund, too.

I’m an over-deliberator with everything. What I’ve found when it comes to finances is that it’s more important to just do something reasonable than to learn and learn about what the smartest possible move might be. You can get your money working a lot better for you with one phone call to Vanguard tomorrow. The remaining improvement that would result if you read and learned lots first is unpredictable and, for the vast majority of people, not worth chasing — especially if, in the mean time, your money keeps languishing in the savings account.

If you do have the interest and excitement to delve in more, you can always move into a different investment when you know what it is, and in the meantime, your money will have had the chance to start growing. Which isn’t to say it might not have fallen -- that’s possible. But over a long enough time, most people still think it’s the right kind of investment to make. Good luck!
posted by daisyace at 5:36 PM on December 10, 2019 [1 favorite]


Bogleheads is an excellent resource for passive investing, which is where you should be putting your longer-term investments. Another resource that I've found useful on occasion are some of the financial subreddits. /r/personalfinance can be a bit spotty but has an excellent flowchart that I frequently reference.
posted by photo guy at 5:43 PM on December 10, 2019 [2 favorites]


MeFi's own J D Roth has a great book called Your Money: The Missing Manual that has friendly commonsense advice.
posted by jessamyn at 6:44 PM on December 10, 2019 [3 favorites]


I always recommend beginners to the personal finance subreddit FAQ to start with. It's written in an easy-to-follow advice that is suitable for the general population. There is even a useful flowchart.

The FAQ to investing is a great place to start if you're looking for the next step for your personal finances

posted by moiraine at 1:38 AM on December 11, 2019 [1 favorite]


The Bogleheads Wiki is a great place to start.

Their (my) philosophy:

1. Develop a workable plan
2. Invest early and often
3. Never bear too much or too little risk
4. Never try to time the market
5. Use index funds when possible
6. Keep costs low
7. Diversify
8. Minimize taxes
9. Keep it simple
10. Stay the course
posted by Short Attention Sp at 5:26 AM on December 11, 2019


You definitely need to invest a healthy portion of that 50k in a mutual fund. I Will Teach You to Be Rich is simple, no-nonsense advice that walks you through the stages of financial stuff with a heavy emphasis on how if you set this up in a few minutes/hours, you will be done and automated.

I'm on my way to a good retirement and the amount of thought I have to give it is effectively 0 since I researched the best funds available and chose those. I do periodically review, but that's just because I'm a numbers nerd.

For me, my priorities/lessons are relatively short:
1. take advantage of all employer retirement match, free money (automated)
2. automate savings/bills/investments (yep, again, no thought required)
3. monitor expenses, set savings goals for things (active watching, less than 15-30 minutes a month, generally 5 mins a week checking it all over on Mint)
4. That's it, there's nothing else required.
posted by OnTheLastCastle at 8:01 AM on December 11, 2019 [1 favorite]


You definitely need to invest a healthy portion of that 50k in a mutual fund.

Well, it depends. For retirement money, the time horizon is obvious. For non-retirement money, not so much so. You have to think through your specific goals for that money, because that affects the risk you can afford to take on. (This is the most important basic point for the average investor to understand. On average, and simplifying a good bit, the higher the risk, the higher the possible return...but also the highest possibility of loss. Therefore, you need to try to take as much risk as you can consistent with your loss tolerance. The longer your time horizon, the greater the chance that you can recover from a short-term loss. That's why it's fine to be very heavily into stocks in your retirement fund when your retirement is 40 years away. Individual fluctuations between now and retirement don't really matter.) This is the trickiest and most individual part. OP has identified her desire to have a cash cushion, which is reasonable. That money should remain in a liquid and low-risk asset, because it needs to still be there in the event of emergency (nothing worse than a recession clobbering the value of your investments and then causing you to get fired). But then what else? If it's just more retirement money, then her allocation can be a copy of her retirement allocation. But if, for instance, she wants to use some of it for a down payment (a very common aspiration!) in the next few years, then she should not be investing in the same asset she's investing in for a retirement 25+ years off. The latter will be too risky and volatile. You don't want to get 5/6 of the way through the home buying process to have your downpayment evaporate in a sudden downswing. If she wants it in the next, oh, 1.5 years or so, I would hesitate to put it into anything with much risk at all.

With non-retirement funds, you also have to be aware that changing your allocation will have tax consequences--if you sell a stock to buy another stock, the gain on the first stock is taxable (plus there may be transaction fees), and as a general rule you want to delay paying taxes whenever possible. So you don't want to be jumping around willy-nilly.
posted by praemunire at 8:35 AM on December 11, 2019


That's why it's fine to be very heavily into stocks in your retirement fund when your retirement is 40 years away.

This is another good point. The OP's retirement age is not really 40 years away, as mentioned being 40 years old. About 20 years of compounded interest is really the bare minimum where the amount you put in will start to be dwarfed by 'the market', so some risky choices will need to be made, whether that is gambling on 'retiring' close to 70 or forgoing a large down payment if OP were to buy a home.

This is why 'invest early' is so often a primary piece of advice This stuff for the non-wealthy just takes a lot of time.
posted by The_Vegetables at 9:21 AM on December 11, 2019


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