Financial advisors take courses and earn certifications so they can provide financial advice to their clients, but they also often learn important lessons from great books on the topic and pass on that financial literacy to their clients.
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Unfortunately, financial literacy remains a weak spot for many Americans: More than one-third of Americans, 36%, are not financially literate, according to the GOBankingRates 2024 Financial Literacy Survey.
To enrich your financial education, these experts share some books they think will help you build wealth and why.
The Millionaire Next Door by Thomas J. Stanley and William D. Danko
“The Millionaire Next Door” demystifies wealth, said Chad Gammon, a financial planner at Arnold & Mort Wealth Management. “You'll see that a lot of millionaires don't do flashy things, but they have good financial habits,” he said.
He says the book also offers practical advice and actionable tips that anyone can apply to build and maintain wealth: “One of the core messages is to spend less than you earn, which will enable you to save and invest consistently, which is crucial to building wealth over the long term.”
Additionally, Gammon said the book emphasizes the importance of investing in areas you know and understand, rather than chasing the latest trends or “hot” investments.
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The Total Money Makeover by Dave Ramsey
Joseph Carpenito, a financial planner with Materecki Financial Group, a “SmartVester Pro” and financial advisor recommended by the Dave Ramsey organization to prospective clients seeking a relationship with a new financial advisor, admitted that his answer was a bit biased, but true.
“The reason I always recommend this book is because it helps readers develop a foundational understanding of wealth creation,” he explained. “Dave emphasizes fundamental practices in the many areas that encompass sound financial planning, so you can expect to leave with an overall baseline of financial literacy after reading this book.”
The most important lesson, he says, was Dave's approach to paying off debt using something called the debt snowball method: “This approach focuses more on the psychological aspects of paying off debt, rather than pure mathematics, and builds up small mental victories along the way.”
“I think anyone who struggles with basic financial planning concepts should read this book,” Carpenito said.
The Simple Path to Wealth by JL Collins
Alec Kelsey, CPA, IRS Extension Online, recommended The Simple Path to Wealth because:[It] It takes the complexity out of personal financial advice.”
“Collins advocates a straightforward approach of living within your means, minimizing fees that eat into your returns and capitalizing on the enormous wealth-building power that comes from consistently investing in low-cost index funds over decades,” he said.
Collins' philosophy boils down to eschewing get-rich-quick schemes and embracing a simple calculation of wealth, he feels.
Other important points include:
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Thanks to compound interest, small adjustments to your savings rate can have a big impact on your long-term wealth accumulation.
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It is important to avoid actively managed funds and instead use total stock market index funds, which are characterized by their simplicity and low cost, to avoid the temptation of poor performance and achieve steady asset growth.
The Intelligent Investor by Benjamin Graham
Justin Godour, CEO and founder of Capital Max, recommended the classic book “The Intelligent Investor,” citing it not only as shaping his own financial strategy but also as fundamental advice to his clients.
“What makes The Intelligent Investor different is its focus on value investing, an approach that emphasizes buying undervalued stocks relative to their intrinsic value,” he said.
Here are his two tips:
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The fable of “Mr. Market” represents the volatility of the stock market. This led him and his clients to see market fluctuations as an opportunity rather than a threat. For example, when the market is falling, it may be a good time to buy blue chip stocks at a discount instead of panic selling.
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Margin of safety is another principle he found useful, and it involves making sure there is a large difference between the purchase price of a stock and its estimated true value. This buffer protects the stock from unexpected market declines or irregularities.
“Rich Dad Poor Dad” by Robert Kiyosaki
Ben Klesinger, founder and CEO of Reliant Insurance Group and Helping Hand Financial, enjoys the popular book, which continues to sell decades after it was first published.
“The book emphasizes the importance of financial literacy and investing in assets that generate passive income,” he said. “One valuable strategy I took away from the book is acquiring income-producing real estate, a concept deeply intertwined with my real estate and finance background. Implementing this strategy has been transformative for my clients who are looking to create a steady stream of passive income.”
Whether you read these books or find others on your own, improving your financial literacy can go a long way in helping you build wealth.
Survey Methodology: GOBankingRates surveyed 1,008 Americans aged 18 and older nationwide between March 26 and April 1, 2024, asking 20 different questions. (1) Have you ever struggled with money due to a lack of financial literacy? (2) What current hot topic about money do you find most confusing? (3) Who is the most trusted financial expert to teach you the basics of money? (4) Do you think you have become smarter about money since the pandemic began in 2020? (5) What bad money habits did you learn as a child? (Select all that apply) (6) What bad money habits did you pick up in your early adulthood? (Select all that apply) (7) What bad money habits have affected your marriage or partnership? (Select all that apply) (8) What bad money habits are you worried you will pass on to your children? (Select all that apply) (9) What do you find most difficult/confusing about buying a car? (10) What do you find most difficult/confusing about buying a home? (11) What do you find most difficult/confusing about paying off debt? (12) What are you most worried about about planning for retirement? (13) What best describes your feelings about investing? (14) How much money have you saved in the past year? (15) How much debt have you incurred in the past year, excluding your mortgage? (16) Do you currently have enough income to cover your bills? (17) How concerned are you about your financial situation? (18) What best describes your feelings about managing your money? (19) What is your monthly car payment? (20) How much income do you think a middle-class family needs to live comfortably? GOBankingRates conducted the survey using PureSpectrum's research platform.
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This article originally appeared on GOBankingRates.com: 5 Books Financial Advisors Recommend to Help You Build Your Wealth
