Today I will share my favorite personal finance books with you! This blog is mostly about programming and technology, so why do I write a personal finance post? Many people have this opinion that they have learned a craft, so why should they learn about finance? That is the mindset of being stuck in the rat race (9-5 job, consumer debt, continuously working harder and harder for a salary, never affording all the things you want). We all have extra things or experiences we want in life, whether it be big weddings, vacations, mainframe computers (yes, I want one in the future), expensive software licenses or something else. If we just work and save our money in a bank account, that money looses value over time due to inflation. What if I told you that you could use your money to buy assets that generate more money? Then you aren't stuck with working harder and harder for less and less money (after a while your salary growth will stagnate), but working less and less for MORE AND MORE money. Even people like Bill Gates, Larry Page and more are investing to keep building their wealth (but you do NOT need their amount of money to get started). Intrigued? Then continue reading, and do your own research.
Still not convinced? Here are a few more reasons a programmer (or anyone else) might want to learn about personal finance:
- Making your already high salary as a programmer grow, which makes it easier to afford all the things you might want. Which also relates to our next bullet point…
- Freedom to do what you want to do in your life. Want to work less? Work more on Open Source projects instead of your job? Don't have to worry about financials if you lose your job?
- You don't want to have to work 9-5 for the rest of your life
- Safe-guarding your retirement and more flexibility around it.
- Creating your own workplace. Maybe you want to use your time for Open Source projects? Programming games for obscure older computers or game consoles? If you learn personal finance well, this might be your reality faster than you think!
- Personal finance is another system you can hack! yes, it is true. Finding the hidden tips and tricks that many people don't use is possible! One of my favorites is leverage, both of mind and money (debt).
- You should always learn new things, why not learn ways to improve your life as well as the technology-stuff you are usually reading? (I hope. Met a lot of programmers who only do this at your workplace… Computers and programming is a lifestyle in my view). Learning a bit about everything can be a good idea. We are after all mostly developing software to solve real world problems, aren't we? In that case, knowing more about other topics than math and computers can help immensely.
- Work because you WANT to, not because you HAVE to. Your employer will NEED you, but you WANT them (i.e, not need them to be able to live your life). You can work in exciting projects and employers to learn instead of working their to be able to live.
Many people will now be curious on my status on becoming wealthy… While I have yet to retire (many people will say that it is 38 years away, but f**k them!) or anything like that, the steady flow of passive income (dividends and others) makes my wealth grow much faster than it used to. I work on my goals every day, and these books have helped me grow and improve. Just doing what everyone else was doing (getting a loan for a car, buying makeup and clothes, tons of video games etc.) would just have made my spending grow, and my salary would have to grow to keep up with it. Same with a big house like many software developers does. I live quite cheaply and invest most of what I have, including using leverage where I can. There are off course many things I want, but I wait for most of those untill my assets pay for them.
Moderation is key. I still buy a lot of things, but most give me either knowledge (books, courses etc.) or cashflow (assets like stocks and crypto currency using various schemes). I still think you should buy things you really want once in a while. Whether it's that new video game, an older computer (like I do sometimes, I want more Amigas!), or just having a beer with friends. Life is meant to be enjoyed, but don't waste money. Some sacrifices have to be made, at least untill you have assets that generate massive amounts of cash flow.
If you need some more inspiration to improve yourself, I think the works of Ayn Rand is a great place to find it. It may not be everyones cup of tea though, but I find great motivation from it.
NB! Amazon affiliate links below (headings + images)! This means I earn from qualifying purchases.
Rich Dad Poor Dad by Robert Kiyosaki
Rich Dad Poor Dad is a classic when it comes to personal finance, and for good reason! The book contains many key concepts that are essential to accumulating wealth. Everyone who thinks that there should be another way than just working a job for a salary should read this book! Some key take-aways you will learn more about:
- Assets vs liabilities. An asset put money in your pocket, while a liability take money out of your pocket. Your house, car, consumer credit card debt etc. are all LIABILITIES! Real estate you rent out, bonds stocks, online businesses you own etc. are all assets. Assets can be bought, and they can be built (I like to believe that this website might one day take the step from hobby/passion project rambling to asset). Everyone will have some amount of liabilities, but we should try to minimize them.
- Poor vs rich is a lot about mindset. Poor people often think things like "I can't afford that", "I don't have time for that", "That is too expensive", while rich people often think the opposite: "How can I afford that?". Questions open your mind, simple stupid answers closes your mind.
- Always continue to learn. Grades isn't really what matters, it's how you apply your knowledge. Learn about finance, and what I said earlier, a bit of everything. Even if you take a job, can you take it to learn anything you can use later? Maybe you think sales are scary? It can probably be a good idea to challenge yourself and take the job to improve your skills. Work to learn - don't work for money!
- Dont be afraid to just start! Is investing or starting a business really that risky compared to job security in a 9-5 job? In a 9-5 job, your skills can become obsolete. In a business or investing, you force yourself to learn new things. Learning new things pushes you forward. If you fail, you often learn way more from it than if you succeed.
Later books in the Rich Dad series also talks about the topic of good debt vs bad debt. This is a pretty easy concept to grasp; good debt puts money in your pocket, while bad debt takes money out of your pocket. I use leverage in the stock market myself, which works great if you know what you're doing (and horribly if you haven't done your homework!).
The Millionaire Next Door by William Danko and Thomas Stanley
Some people think that the rich are rich because they exploit workers or whatever. These people should especially read The Millionaire Next Door! The book busts a lot of myths many people have about millionaires. In the book you will learn that:
- Most millionaires are self-made (especially in the US). In other words: they have not inherited their wealth! Many heirs waste their money within shorter amounts of time, as they do not have the money management skills their parents had. You still have to learn to manage money if you want to keep it. Allocating time to setting up and maintaining your financial plan is very important.
- Abundant life-styles? The people with the rich looking things like sports cars and big houses are often not wealthy. The average millionaire is often way more frugal. Investing in assets and your business makes for a greater reward than just flashy things. Many are small business owners who want to expand their business after all.
- Income vs wealth. Having a high income does not necessarily make you wealthy. What if you lose your job? If your spending is high, I can bet you that things will turn to sh*t. If you have wealth, that is accumulated assets (that produce cash flow), you are better off as you are not as tied down to your job. Like mentioned earlier, this include rental real estate, stocks, bonds, royalties etc.
The 4 Hour Workweek by Timothy Ferriss
The 4 Hour Workweek presents different ways of living than the standard life we have all been sold. Timothy Ferriss travels a lot, and does new things all the time, and so can you! Key take aways:
- The dream life you want, can be achieved. You can do several smaller adjustments to your finances, the way you live etc. to live your dream life. This is part planning, part financial literacy, and part attitude. In the information age, there are a ton of ways we can work remote, sell digital products, make youtube videos, freelance etc.
- Automate as much as possible. Businesses can be run without much interaction from you if set up right. After some initial work off course. (just look at t-shirt businesses on sites like Teespring and Redbubble).
- Outsource tasks. You can outsource menial tasks to save your time for things you want to do. Maybe you will even make more money because of it? Online businesses might have support mails, some manual ordering work (e.g, dropshipping) or similar you can outsource to assistants in for example India.
- Flexible work times and remote work. Use the flexible work times and remote working possibilities to your advantage, or negotiate to get at least remote working possible. Maybe you can work when you want as long as you get your work done? Or maybe there are only specific hours you need to be available? Then there are no reason you should not be able to work anywhere in the world.
- Be flexible, learn and have fun. If you are creative with your planning and money-management, there are amazing ways you can live your life with lots of travel and fun.
- Mini-retirements are possible. Travel to a new place and live there for a longer period of time. Many countries are cheaper to live in than the European countries or the US. There are also many ways of getting the travel costs down, and cutting other costs that can help you.
EDIT: Ali Abdaal summarizes some key concepts in this awesome video.
