I’ve been reading a lot of personal finance books lately. It all started when I read The Millionaire Next Door because it was on sale in the Kindle store ($2!).
Later, I attended a seminar on graduate school personal finance put on by Emily Roberts of gradstudentfinances.org.
One of the things she said was that when your budget aligns with your values then budgeting stops being an unpleasant chore, it helps you save for things you want. This idea resonated with me and I wanted to read more about it, being a good former graduate student, Roberts included a great bibliography for her presentation. What I found in my own subsequent survey of 5 personal finance books was that all offered similar advice about getting your budget into alignment but that each one had a different way of determining what your values were. I found each one helpful in its own right.
Smart Women Finish Rich, David Bach
One of the books Roberts suggested to help you figure out your values was
Smart Women Finish Rich, by David Bach. I quickly found a cheap copy, devoured the book and began setting up his 7 step plan to get rich. The way Bach suggests determining your values is based on an analogy of a ladder. You brainstorm ideas until you come up with a value you have about money and then you get to the next value (or rung on the ladder) by assuming that you already have that covered. For example, if the #1 reason you value money is to have Peace of Mind, the next step is to assume that you have enough money to have Peace of Mind and then think of what you would want next. In this way you come up with 5 core values. Mine turned out to be:
Peace of Mind
Health/Spirituality(mental health and physical health),
Justice/Charity(paying back the people and institutions that helped me get to where I am),
Joy, Mirth and Great Renown (A line from the Agincourt Song, a song we used to sing at my high school Sing assemblies).
Another thing Bach suggests is talking to rich people you know about how they set up their own finances, so I sent out an email to 10 or so of my parents wealthier friends. In researching some of the books they suggested I came across this stellar roundup of 52 top finance books by Trent Hamm at The Simple Dollar. After reading through this great list, I came up with my own short-list of books that seemed the most relevant to me.
The Money Book for the Young, Fabulous, and Broke, Suze Orman
This book, and the one below I found in a Little Free Library while walking around the neighborhood. It was on my list so I picked it up along with Stanny’s (they had both been read and heavily annotated by their previous reader). Suze Orman’s advice didn’t differ wildly from David Bach’s but I appreciated the structure of the book and the frank style (also, the classic 90s cover!). The book doesn’t really get into how to set up your values, but rather assumes that everyone reading it is in their twenties or thirties and offers great, if generic, advice to those in that demographic. I’ve left it on my kitchen table, and my housemates have taken to browsing it over meals (we all independently acquired the David Bach book).
Overcoming Underearning, Barbara Stanny
This book is the only one that was not recommended to me and I found problematic, however, I also found it very helpful. Rather than focusing on financial tips like Orman, Stanny focuses on the psychological relationship that people have with money. I’d describe it as a mix between ‘Smart Women Finish Rich’ and ‘The Secret.’ The book is full of Stanny’s trademarked phrases, affirmations, and handouts from workshops she’s led. In order to determine your values about money Stanny shows a list of 100 or so values and has you chose 10, and then narrow them down to 5. Mine were:
After determining these values you are to keep them in mind whenever making any decision in order to make your life (and money) align with your values. I found this and other exercises very helpful in my own personal exploration of my money values.
What Color is Your Parachute, Dick Bolles
This book is a classic for a reason. And when Trent Hamm sang the praises of the flower exercises on his list I quickly added it to my list (as well as my boyfriend’s). In addition to helping to kickstart my job search (which I’ll be doing in the next couple years) the flower exercise helps people determine their values as their relate to jobs and money. The way Bolles helps you find your values is to list 9 and use his prioritizing grid to get to the one value/purpose/life-goal/mission our most identify with. Of the 9 values:
I most identified with Conscience/Will because of its focus on morality, justice, righteousness and honesty. I’ll definitely be coming back to this book as I get further along in my job search.
Your Money or Your Life
In a way, I saved the best for last. Robin’s book is the only one I am excited to pay full price for after initially borrowing it from the public library. I suspect I will return to it often (and I want to support the author’s charitable mission). Although another 9-Step plan for financial independence was sounding pretty trite by this point, it was so highly recommended by Hamm that I decided add this book to my ‘Must Read’ list. I’m really glad I did. The book briefly mentions money types, of the 4 (guardian, rationalist, idealist and artisan) I most identified with the idealist http://money.cnn.com/popups/2005/specials/money_type/frameset.exclude.html
In order to figure out your money values the authors have you take a thorough inventory of the things you own now, all the money you’ve ever received and your current job in order to calculate a ‘real hourly wage’ which they use as a measure of ‘life energy’. Rather than using abstract words and concepts to align your budget with, the authors have you use your own budget and your current real hourly wage to calculate your budget’s alignment with your values. It’s a little hard to explain (though not complicated), it’s well summarized here:
One of the things i really appreciated is that this book is the only one that isn’t focused on getting rich. As such, it doesn’t rely on risky stock market investments to plan your finances.