I remember the first time I heard about the 3-book rule.
While I was sharing notes with my flatmate, Cornelius, in our dorm room, he highlighted a quote that stuck with me. “To become knowledgeable in any field, you should read at least three books in that field.”
My appreciation of this quote remains decades later, but with an evolved perspective. While knowledge comes from reading, expertise comes from its application. Although expert-recommended books shorten the time to discover and acquire knowledge, most adults find it challenging to invest time in reading and utilising the knowledge gained to improve their financial situation.
In 2022, I took on the challenge of reading five New York Times best-selling books on Personal Finance and Investment to develop new ideas and strategies. From stock market strategies to budgeting tips, these books taught me money lessons, which have radically transformed how I make decisions. In the spirit of sharing, I have summed up what I learned in 5 points.
1. Embrace Self-Control and Alternative Thinking – The Intelligent Investor by Benjamin Graham
I start with this book taking inspiration from Warren Buffet, who acclaimed it to be ‘the best book on investing ever written.’ Graham begins with a profound definition of an ‘intelligent’ investor, described as patient, disciplined, eager to learn, and an independent thinker. He explains that intelligence is more a trait of character than of the brain. This book taught me that the stock market is like a rollercoaster with less cotton candy (hopefully more gains). It’s crucial to invest with a long-term mindset and diversify your portfolio, just like you wouldn’t want to eat the same thing at a buffet every day.
But investing isn’t about beating others at their game. It’s about controlling yourself at your own game.
Benjamin Graham
2. Stay Curious and Think Positive – Rich Dad, Poor Dad by Robert Kiyosaki
This book reminds me that building wealth is more than saving and investing in stocks and bonds. It’s about financial education and adopting simple good money habits. Kiyosaki credits his fortune to continuous learning. Whether reading books, meeting industry experts, or attending seminars, the key is to stay curious.
Kiyosaki told a story about how, during a hiking trip in Pennsylvania, he and his wife came across a rundown cabin with 15 acres of land for sale for $43,000. The realtor cited a faulty well’s water supply as the reason no one wanted to buy it. However, Kiyosaki tried to dig deeper and found that the well produced enough water and was a seasonal problem. Then he offered $24,000 to the desperate owner and installed a 3000-gallon holding tank for $5000 on the property. After a month, they sold the cabin for $66,000, making an epic profit of $37,000 due to their mindset, patience, and creative thinking – Problems can be opportunities.
3. Practise Long-term consistency over short-term intensity – The Total Money Makeover by Dave Ramsey.
This book taught me that made me realise that budgeting is like a game of Tetris, where you have to fit your expenses into suitable spaces to make everything work. It also taught me that saving money is like working out a muscle. The more you do it, the stronger it gets.
Dave Ramsey establishes that a crucial step in guaranteeing financial security is to practise a step-by-step plan rather than trying to ‘eat an elephant at once‘. He recommends setting up a starter emergency fund, then growing this fund to cover one’s expenses for a three to six-month period. Finally, he highlights the importance of having fun in your Total Money Makeover journey. Reminding the reader that financial fitness doesn’t imply living like a Scrooge and encouraging us to “learn to spend money on what we can afford, forget the rest, and when the right opportunity presents itself, be comfortable with giving money away”. You will agree that money lessons are invaluable!
4. Stay simple in an ever-complex world – The Simple Path to Wealth by JL Collins
This book stresses the importance of living a simple life. Simple is good, easier, and more profitable. I learned that investing is like dating responsibly, it is essential to research before committing. It is important to keep things simple and avoid get-rich-quick schemes. Interestingly, Collins reveals he wrote this book to serve as a simple guide on building wealth for his daughter, who is not interested in spending her time on investment strategies. He emphasises the importance of a mindset shift to building wealth successfully and leaves the reader inspired.
He says “stop thinking about what your money can buy, start thinking about what your money can earn. And then think about what the money it earns can earn. Once you begin to do this, you’ll start to see that when you spend money, not only is that money gone forever, but the money it might have earned is also gone.”
Like Kiyosaki’s Rich Dad, Poor Dad, Collins encourages the reader to be comfortable understanding money. He stressed that Money is a powerful tool we’ve created to navigate this complex world. If you choose to master it, it will become your servant. If you don’t, it will surely master you.
5. Adopt practical habits and automate them – The Automatic Millionaire by David Bach.
This book reminds me of the power of automation and consistency in saving and investing. Setting up automatic contributions and following a plan makes it possible to achieve financial goals without much effort. My key takeaway from this book: If you want to build a stress-free financial future, you should adopt a simple habit of paying yourself first! And whether it is creating a retirement plan, setting up an emergency fund, or paying off your debt, it is essential to do it automatically. Finally, set aside time to thoroughly assess your financial situation and understand how much assets you own vs. expenses/debts, to improve your finances.
In conclusion, money lessons from these five books have transformed my daily life and enhanced my investment decisions and money habits. I hope they can do the same for you. It’s all about taking small steps and making intelligent decisions. And, if all else fails, just remember the wise words of a Jay Z, American Billionaire:
We on our own, stop sittin’ around waitin’ for folks to throw you a bone; if you can’t buy the building at least stock the shelf, then keep on stackin’ ’til you stockin’ for yourself.
