The following finance books were not written with a sabbatical in mind. But their teachings helped me confidently make financial decisions leading up to my sabbatical and going forward. If you are thinking about a gap year, a career break or a sabbatical, getting your finances in order will be on the top of your priority list.
Take a peak at these books. They motivated me to take action.
1. I Will Teach You To Be Rich by Ramit Sethi
Ramit Sethi holds nothing back. He isn’t afraid to mock us readers. There’s a lot of ego and he doesn’t hide it. But far from a turn-off, he provokes us to do the most important thing regarding our finances: to take action. He gets people. He knows how essential it is to setup deposits and contributions in an automatic, painless way. He points out our own hypocrisy in criticizing how people spend money. He blesses people who spend $2000 per year on shoes as long as they’ve setup 401K and Roth accounts in a responsible way and are not going into debt funding their Frye boot obsession.
This is the first book that made me understand the value of 401Ks, mutual funds, and compound interest. Unfortunately some of his suggestions on how to set-up smart accounts and take advantage of compound interest don’t exist anymore (what checking or savings account accrues more than 1% interest these days?). Still, his writing is entertaining, irritating, and educational all at once.
What IWTYTBR motivated me to take action on:
- Increase 401K contributions.
- Instead of using a financial planner, invested in low service fee mutual funds
My favorite words of wisdom:
“People love to argue minor points, partially because they feel it absolves them from actually having to do anything.”
“The 85 Percent Solution: Getting started is more important than becoming an expert.”
2. The Total Money Makeover by Dave Ramsey
While some of the chapters are targeted towards people struggling with debt, the tips and advice could be applied to anyone. For someone who is planning a big career adjustment, Dave Ramsey's take on principles in creating a budget, keeping spending down, saving, etc. I found refreshing and inspiring.
What Total Money Makeover motivated me to take action on:
- Helped me put a number on how much money I needed to save before making a big disruption in my life.
My favorite words of wisdom:
“A budget is telling your money where to go instead of wondering where it went.”
3. The Money Class by Suze Orman
I don’t agree with everything Suze Orman writes about. (I haven’t gone into credit card debt, so until that’s risk I’m not ripping up my credit cards like she suggests). She absolutely disagrees with my decision to leave my job without anything lined up (I’d like to think the amount of savings we have helps make our case, but I think the difference is risk tolerance and the timing of the book post-2008 market crash). But her commitment to push us to live within our means is important. Her term, the “New American Dream” is to “fashion a dream that suits you….not based on false premises and expectations of others.”
Know yourself. Don’t buy a house if you don’t want to be bothered maintaining it. If you do buy a house, do all that you can to buy a house on a 15-year mortgage. Don’t buy what you want. Buy what you can afford. Suze Orman has tips in Money Class I plan to use down the road. I was especially taken with her powerful advice on how to raise financially savvy children.
What Money Class motivated me to take action on:
- Think through significant financial decisions before and after the sabbatical year. I didn’t buy the higher end used car I thought we could afford with monthly payments. I re-evaluate what I can afford and hold out to save more to pay for things upfront.
My favorite words of wisdom:
“Things won’t make you happy. Peace of mind will make you happy. Not worrying about being able to retire will make you happy.”
4. The Elements of Investing by Burton Malkiel and Charles D. Ellis
I loved reading this book. Malkiel and Ellis offer practical and straightforward advice. The book covers how to save, index, and diversify. The authors even give specific examples of funds to invest in. The book explains complicated terms in an understandable way. The book helps people avoid the financial blunders such as panicking when the market crashes, throwing money at money managers and thinking individuals will outperform the market. Malkiel and Ellis admit there is likely the next Warren Buffet walking amount us. We just have no idea who that person will be and it’s impossible to guess who that person is (and it’s definitely not worth investing with anyone clawing to claim that role).
How the Element of Investing helped me take action: Honestly, I think this was the most educational of all the books I’ve listed in just understanding the terms and investment principles. This investment book motivated me to commit to maxing out my Roth, and rolling over my 401K from my old job, and pointed me in the direction of funds to invest in. It also gained confidence in my decision to shy away from professional money managers.
My favorite words of wisdom:
"YOU, far more than the market or the economy, are the most important factor in your long-term investment success."
5. Michael Lewis finance book
Okay, a Michael Lewis read may not have helped me manage finances for our sabbatical year. I read several of his books for entertainment. But his classic, Liar’s Poker, and of course, The Big Short, are educational reads about the finance industry. Even if you’ve seen the movie, the Big Short, the book goes into much more detail. Michael’s writing is incredible. You don’t need celebrities in bubble baths interrupting the show to keep you hooked.
How Michael Lewis helped me: I laughed. A lot. Even when the books hit a nerve (these people get away with making so much money at the expense of everyone else they screw over?!) These books motivated me to take an active interest in managing and planning my financial future (seriously, the people who make a living in investing and advising will most often not have your best interests in mind).
My favorite words of wisdom:
“But everyone wanted to be a Big Swinging Dick, even the women. Big Swinging Dickettes.”
“You want loyalty, hire a cocker spaniel.”
These are my five most influential books for managing my personal finance.
What personal finance book has had the greatest impact on your financial decision-making?