You can imagine that because I am a personal finance reporter, I read stacks and stacks of personal finance books. But only two get taken out repeatedly and are dog-eared with coffee stains because they give me that proverbial kick in the butt to do something about my finances and they tell me what and how to do it. Plus, I'm here to report that their simple financial management techniques work!
"The Automatic Millionaire" by David Bach: His mantra is simple. Pay yourself first: Find money you waste every month, your "Latte Factor," and have that amount automatically deducted from your account every pay period and moved directly to savings. Make your money management automatic. Set up direct deposits for income and auto bill pay for recurring expenses. This way, you don't need a budget because all the money is automatically paid out. Whatever's left you can spend on food, gas and entertainment. The plan seems simple. And it is. This book easily changed my personal finances years ago when I first read it for the better and now I have savings. This year, I took out the book again to re-up my automatic inspiration to open some Simplified Employee Pension, or SEP, IRAs and make those deposits automatic too.
"The Total Money Makeover" by Dave Ramsey: Now you might assume a book about budgeting is unnecessary after reading a book about why you don't need a budget (above). But if you're having money problems, the simple premise of this book is to write down every dollar you spend so you actually know where your money is going (even if you think you already know). Once I wrote everything down, I realized I was spending big in two huge categories: Groceries and competitive sports for my kids.
That spurred me into couponing to save big on the food and drugstore items, which I am now an expert at (and have written many articles about). I also learned to divide yearly lump sum payments by 12 to save the monthly amount in order to be able to afford them when they are due, which lowered my stress level immensely.
Using a combination of techniques from those two books was life-altering for my family -- in the best way possible.
Upon flipping through both these books again on New Year's Day (yes, they are that easy to read!), I was able to make the decision to switch banks and to ditch cable, which I wrote about earlier this week. Incidentally, David Bach also wrote a newer book called "Fight For Your Money," and the Consumer Reports February 2012 issue's main feature is "Fight Back Against Your Bank."
So which personal finance books inspire you to save money, change your finances and fight back?