FOOL'S EYE VIEW
Great Personal Finance Books

By Stuart Watson (TMFTiger)
October 17, 2002

Lots of books have been written about investment. The Motley Fool has even produced a few books of its own. Although it's debatable how much you can learn about investing from a book, there is little doubt that most people would benefit a great deal from getting their basic finances in order before even attempting to become an investing superstar.

Of course, we hope our site provides you with most of what you need in that respect. But it often helps to read a good book on the subject as well, where you have the opportunity to go into a little more detail. Good books about basic money management can be hard to find though. To that end, here's a list, in no particular order, of five of the most useful books I've read on the subject.

1. Why Smart People Make Big Money Mistakes And How They Correct Them

The title is a bit of a mouthful but don't let that put you off. This book explains why we think the way we do about money and how costly that can be in the long run. The word 'smart' in the title is probably superfluous but maybe it's helped them sell a few extra copies. In a nutshell, the human brain likes to take short cuts. Some of these work very well and help us get to the right answers very quickly. But some short cuts end up in you taking the completely wrong direction. Examples are concepts like framing and focusing on recent events (this article covers these in more detail). Although this book is written for a US audience, it's easy enough to translate the concepts over to the UK.

2. Money For Life

Dear old Alvin! He's known to many through his shows on BBC2 such as Your Money or Your Life where he takes a couple under his wing and shows them how they can take sensible and practical steps to improve their finances. He specialises in helping people out of debt and his books are filled with examples, including his own experiences of battling and vanquishing those credit card demons. I haven't read the book that accompanies his latest series, so I'm going to plump for this earlier tome instead.

3. Rich Dad / Poor Dad

There is a whole series of Rich Dad / Poor Dad books highlighting what the author learnt about handling money as a young tearaway in Hawaii. The Rich Dad is actually his friend's dad, whilst the Poor Dad is hsi own father. It's a little preachy in places and the series does have its detractors. But it's very readable and good at getting you thinking about handling your money more objectively. It also highlights the importance of cash flow, which is as vital to your own finances as it is to any business.

4. Motley Fool Investment Guide

Shameless plug time! Like many people, it was the original version of this book that first led me to the Fool site. That seems like a very long time ago now. An updated version was released last year and a third version will hit the shops next month, just in time to fill those Christmas stockings. Although it dabbles in basic investment, to my mind, its real appeal lies in the explainations of debt, endowments, pensions and how you can't always believe what you're told. You can't call yourself a Fool unless you own a copy and, let's face it, any book that has Berger's mug on the cover and still manages to sell over 150,000 copies must be doing something right. (Sorry David!)

5. The Millionaire Next Door

This is another US-based book and was reviewed by TMFGrow way back in June 1999. It's an excellent illustration of how real wealth works and why the truly comfortable are often those you would least suspect. They don't own flash cars or houses but they do take an active interest in managing their money. On the flip side, it explains why those who 'Keep Up With The Joneses' may give the appearance of being wealthy, but in reality are likely to be deeper in debt than most. A truly Foolish book!

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