For years, I wanted to write a book on personal finance and financial literacy. I finally found the time and wrote my take on what people need to understand in order to be effective with money. I have gone back and forth about whether to publish the manuscript through traditional means, self publish, etc. I have ultimately decided to give digital copies away for free. It is hard to imagine how most people navigate the financial world, given that most adults have had no formal education in personal finance, and financial illiteracy is certainly part of what is fueling the frightening increases in inequality. There are no end of pitfalls for those without some guidance. I am very concerned about the lack of financial literacy and this book is my best take at summarizing what people need to understand.
The good news is that a fairly modest body of knowledge empowers people to be effective with money, which I define as using money to accomplish goals in the most efficient way. To put this slightly differently, financial effectiveness means being highly intentional in how one earns, saves, and spends money. You don’t need to do or know anything extraordinary to be effective with money. The Financial Independence / Retire Early movement (FIRE) has helped enormously in getting people to reconsider how they deal with money. I am not, however, a FIRE evangelist. My aim is simply to help people understand how to use financial means to achieve what they want.
The book has two main sections: How Money Works and The Psychology of Money. How Money Works introduces the practical knowledge that people need. The Psychology of Money explores the the complex psycho-social issues surrounding wealth and consumption. As Will Rogers famously quipped: “Too many people spend money they haven’t earned, to buy things they don’t want, to impress people that they don’t like”. Why do so many people get caught up in financial scams that seem obvious after the fact? Why does it seem that that so few people are ever happy with what they have? Behavioral finance provides insight into why people so often seem predisposed to make poor financial decisions. The key to financial effectiveness is understanding both the practical information and the underlying psychology.
There are many good books on personal finance and I have included a list of my favorites at the end of the book. I do not claim any unique insight. I wrote this manuscript with the hope that it will be both interesting and useful, and that my particular take on things might be helpful to people who have not yet found a book on these topics that they can connect to. Over the course of writing this, I have provided review copies to a range of people and quite a few of these were college students or those recently out of college. I have also had many discussions on personal finance. Comments on the manuscript and related topics reinforced the need for more financial education. Perhaps part of the problem is that people are simply overwhelmed by the volume of information today. I don’t understand how we, as a society, can allow people to complete their educations without having a solid foundation in how they relate to money and the practical ins and outs of finance. This book is my attempt to help.
I wrote this book with high school and college students in mind as the primary audience. From my many discussions with a wide range of people, however, I believe that even many financially literate adults will find something here that is of value.