3 Personal Finance Books to Build Your Net Worth

personal finance book list

If you’re looking at getting out of debt, building a buffer between your income and expenses, and investing for the long term (perhaps for early retirement), then here are 3 personal finance books that will help you reach your goals. The best part? You don’t have to read the entire books (though I highly recommend it).

personal finance book list

 Your Money or Your Life by by Joe Dominguez and Vicki Robin

This book has been positively reviewed many times and rightly so. Dominguez and Robin not only explore how to manage your finances in detail, they also examine why people spend money and what that can mean for a person’s quality of life.

If you read and absorb the entire book, you’ll learn:

  • exactly how to get out of debt and develop savings
  • how live well for less and set up priorities for how your spend your time and energy
  • how to save money with your day to day routine
  • to develop and learn new skills to aid you in becoming more self-sufficient

I Will Teach You to Be Rich by Ramit Sethi

Ramit is a master of creating systems for your finances – bill payments, investing for retirement, negotiating with your credit cards. He’s creating script and specific tactics to help people reach their financial goals without spending a ton of time each month.

What I appreciate was his system to automate  finances to take care of important goals while including money to spend on the thing you enjoy. It’s not a cure all, but he has a great way of framing budget creation to get you on board.

If you read the entire book, you’ll learn:

  • how to pick the best credit card for your needs
  • how to avoid banks’ marketing pitches and instead get high, interest no fee accounts
  • how to open a 401(k) & IRA (and how to invest with them)
  • howto create a spending plan that helps you reach long term goals while having fun now

You can read my full review here.

The Bogleheads’ Guide to Investing by Taylor Larimore, Mel Lindauer and Michael LeBoeuf

This is a fantastic resource if yo want to understand investing and the long term view.This is a greta book to grab after you have your other financial goals set in place.

Some highlights from the book include:

  • what investing principals you can use for your portfolio
  • how to buy bonds and mutual funds
  • finding the right asset allocation for you
  • how to reduce taxes on your investments
  • how to manage a windfall

Thoughts on the Best Personal Finance Guides

There are ceratinly some other great resources out there, but if you’re pressed for time and you don’t want to read a ton of books, those 3 I mentioned can get you on started to financial freedom.

I shared my top picks on which books I think will help you get your finances in the best shaped. I’d like to hear what you think. What books do you recommend to help someone go from A-Z with their money?

Photo Credit: Ian Wilson

Avoid Using Payday Loans

payday loan alternatives

I’ve seen more payday loan advertised on the television and online and thought it would a good opportunity to discuss alternatives to payday loans and how you can build savings for future emergencies.

I think in this economy more and more people are realizing that they need to watch their budget closely. For some families they are working hard to keep their spending under their income. They’re surviving paycheck to paycheck. A portion of them are able to save just a bit after paying all of their expenses, but suddenly an emergency expense comes up and throws their delicate finances in for a loop.

Payday Loan Alternatives

They don’t want to ask their friends for a loan and they have no money in their credit card to use as a quick fix. Payday loans become a real option to people at such times. However, you may not have considered some cheaper options available to you already.

payday loan alternatives
Avoid payday loans if possible.

Tap into Your Local Credit Union or Bank

You may surprised to learn that some credit unions and local banks off small loans to members and customers. For example, here in North Carolina, the State Employees’ Credit Union offers a salary advance loan. As the name suggests, if an emergency comes up and you need a loan (up to $500) to tide you over until your next paycheck you can use it. It’s a lower rate than many payday loans out there. More importantly it’s part of a system designed to keep you away from the cycle of debt and into savings.

I did check around and other local banks offer something similar. They may call it a personal loan and the amount is usually capped around $1,000 or less.

Ask for Payments

You may not believe this, but sometimes you can work out a payment plan with some business owners. My mother’s car need some repairs and it was more what she had saved. Since the mechanic shop was locally owed, he was willing to work with her on a payment plan of 1/2 up front, 1/2 when she got paid again.

Don’t think this was a special instance, with some owners getting less foot traffic, they may be more willing to work with you. You don’t lose anything by asking and you may get an option that helps you avoid debt.

Craigslist/Yard Sale

It can be hard to find extra money, but if you have a lot of stuff at your place, you may want to sell it to get some of the money you spent back.

Where can you sell your stuff? Have you tried considered these places?

  • Yard Sale
  • Pawn Shop
  • Craigslist
  • Ebay (and other auction sites)

Sell where you feel most comfortable. Some people prefer working with someone face to face and while others just want it sold online. If you’re looking at selling your stuff online, but you don’t know where to start I suggest using Baker’s guide on selling your junk. The guy is a master – his family sold their junk and spent some time exploring the Pacific.

How to Create a Doable Emergency Fund

Having a financial cushion is a goal of many families as they are building their finances.

If you’re looking for something more tailored to your family’s needs, then there are several factors to consider when determining your emergency fund.

  • Family Size – If you’re a dual income couple with no kids or other family obligations, then you’ll probably won’t need as a big of en emergency fund as a family of 5.
  • Family Expenses – Your family’s lifestyle has a big effect on the size of your emergency fund. If you have high monthly expenses, then logically, you’ll need more money to save. If your expenses are due to unnecessary spending, then you may want to discuss ways you can lower it. If it’s due to circumstances (i.e. medical bills), you’ll have less room to work with. It’s still possible though to explore options to lower your bills.
  • Income Streams – If you have 2 or more income streams coming in, that can decrease the size of your emergency fund. You should still have one though, as unexpected events can happen.

If you’re still stumped than shoot for 3 months worth of expenses.

Where Should You Save Your Money?

The next decision you two should make is where you need to deposit your money. With an emergency fund you need to focus on 3 things:

  • Easy access to it in case of emergency – It does you no good to have a high interest rate if you can’t get to it quickly when it’s most needed.
  • Safe place to store you money – Whatever you choose, make sure it’s either covered by the FDIC (banks) or NCUA (credit unions).
  • A place where it can grow – If you can earn a decent interest rate for your savings while meeting the two previous criteria, then go for it.

If you follow these guidelines, you’ll have a better chance reaching your financial goals.

Thoughts on Avoiding Payday Loans

Have you ever had to use a payday loan?

Photo Credit: rinkjustice

Betterment: Investing Made Easy

betterment investing stocks and bonds

This week I’m reviewing Betterment. I’ve been looking at different investment options for ourselves and Couple Money readers and after hearing about Betterment.

While getting this review up, I had the pleasure of talking with Betterment VP Alan Cohen on the phone to get some questions answered and points clarified. Not sure if Betterment is the right option for you? Hopefully my review will help you make the decision.

Betterment – Background Info

For their clean cut approach to investing, Betterment received recognition as “Best in Show” at Finovate 2010.

Since this is a fairly new company, you’re probably wondering if it’s safe to put your money in their accounts. Rest assured that Betterment is registered with the Securities and Exchange Commission.  As they explain on their site:

Securities in your account are protected up to $500,000 by the Securities Investor Protection Corporation (SIPC). SIPC helps people whose money, stocks and other securities are stolen or put at risk if a brokerage fails.

The focus of the company is to help people invest their money in a system that is as easy as depositing money into a savings account. It’s to encourage more people to start investing and reduce some for the hassle associated with the process. How do they do it?

Investment Options at Betterment

The method for investing is fairly straight forward. The company uses exchange-traded funds (ETFs) for their portfolios and users choose how much of their portfolios they want invested in stocks and portfolios. ETFs track a particular index (like a index fund), but they’re traded like stocks.

Stocksbetterment investing stocks and bonds

Here are Betterment.com’s stock ETFs:

  • 20% Vanguard Total Stock Market (VTI)
  • 20% iShares S&P 500 Value Index (IVE)
  • 20% iShares S&P 1000 Value Index (IWD)
  • 15% iShares Russell 2000 Value Index (IWN)
  • 15% iShares Russell Midcap Value Index (IWS)
  • 10% DIAMONDS Trust Series 1 (DIA)

Bonds

There are only two ETFs for bonds:

  • 50% iShares Barclays TIPS Bond Fund (TIP)
  • 50% iShares Barclays 1-3 Year Treasury Bond Fund (SHY)

Investing Made Simple

Investing with Betterment does have a huge advantage in that it’s simple to use and track. Keeping investment options simple also helps to keep their fees low. There’s a small annual fee based on your account’s balance.

Betterment’s fee is a straightforward 0.3% to 0.9%, depending on your balance. For balances under $25,000 the fee is just 0.9% annually. The portion of balances over $25,000 will be charged 0.7% annually, the portion of balances over $100,000 will be charged just 0.5% annually, and the portion of balances over $500,000 will be charged at 0.3% annually.

Portion of Balance Fee charged
$0 – $25,000 0.9%
$25,000 – $100,000 0.7%
$100,000 – $500,000 0.5%
$500,000+ 0.3%

Source: Betterment

What they don’t have is also impressive:

  • No Transaction Fees
  • No Deposit/Withdrawal  Fees
  • No Rebalance Fees

Sometimes what you don’t charge is a big plus for customers. Less fees means you can keep more of your money.

Automatic Rebalancing

Why is it important to keep your asset allocation in check? Asset allocation is about maximizing your portfolio’s return while minimizing your risk. While maximizing returns seems fairly clear and measurable, risk is subjective and differs person to person. Betterment will make sure that your portfolio stays within your guidelines. That’s one less thing to stress about and a helpful way to help you maintain your personal investing goals.

Who Betterment is For

If you believe in passive investing, this could be the model for you. If you’re an investor looking for a simple, no hassle option, then I think Betterment could be a good for for you.

One concern for new and would be investors is how risky it seems. They see the news and wonder if putting their money into the stock market is the right move for them.  How can tell when they should buy low and sell high? What metrics can they use to find out how to time the market?

There are definitely people who find it easier and more successful to work with index funds. Schultheis, author of  The New Coffeehouse Investor, provides plenty of data on the historical returns of the stock market from 1926-2008. persuasively argues that by comparing different investment vehicles, long term investing is not as risky as some imagine.

If you’re interested, you can sign up for a new account at Betterment here.

Who Betterment is Not For

Betterment is not designed for those interested in active investing. Active investing is focused on trying to beat the market. If you also want to add individual stocks into your portfolio, you’ll have to use someone else.

You also need to consider your timetable before you decide to invest. If you need your money in the next couple of years, then investing is probably not the best bet for you. Instead you should focus on other options, like savings accounts or CDs.

  • Easy access to it in case of emergency – It does you no good to have a high interest rate if you can’t get to it quickly when it’s most needed.
  • Safe place to store you money – Whatever you choose, make sure it’s either covered by the FDIC (banks) or NCUA (credit unions).

My personal suggestion is ING Direct – we’ve been very happy with their service and their rates are better than the local banks and credit unions here.

Thoughts on Investing and Betterment

If you’re handling your own investments, I’d love to hear your thoughts on the topic. How did you determine your asset allocation? What resources do you recommend on learning more? Are there any hurdles people should look out for when investing? How many of you have signed up for Betterment? What are your goals for your accounts?