How to Read a Personal Finance Book

I read a lot of personal finance books. I do this because I learn best by reading, and because I like to review the available literature for readers of this site. When I recommend a book, it's because I think there's something valuable there, maybe not for everybody, but for most people. Books are only valuable, though, if you are willing to do your part.

Be an active reader
You, as the reader, must be an active participant. You must question what you read. You must try to discern the author's motives, and decide how those might cloud the advice she gives. You must analyze the advice and decide how it applies to your life. Most of all, you must act upon what you read. Books are not magic bullets; they won't automatically eliminate your debt. You eliminate your debt by incorporating the lessons you learn into your own life.

It does no good to read Dave Ramsey's The Total Money Makeover, for example, if you're only going to read it. For it to have value, you must apply its principles. Not all of the principles, but those appropriate for your situation. As always, do what works for you.

Filter the unimportant
Another important reading skill is the ability to filter. Dave Ramsey's advice is excellent for everyone, Christian or atheist. His writing is filled with Biblical references, though, and if you approach his work ready to be offended by the religion, you'll deprive yourself of some great lessons. Learn to filter. If the religion bothers you, ignore it.

Conversely, if you're a staunch conservative, you'll need to employ filters when reading books from authors like Elizabeth Warren and Barbara Ehrenreich. Ehrenreich, especially, is prone to gratuitous sermonizing. It's important to draw the core ideas from each author's work, and to ignore the extraneous information. Don't let the author's viewpoint prevent you from seeing the good he has to offer.

Suspend judgment
I've found that with personal finance books, it is often crucial to suspend judgment until you've read the entire book. Earlier today I reviewed The 4-Hour Workweek. If I had been unwilling to suspend judgment, I would have set the book aside after the first twenty pages. Or when I reached the section on automation, I would have condemned the whole book for those weak chapters. Instead, I made a point to finish it, and, along the way, to look for the things that applied to me. In the end, the good outweighed the bad, and by a wide margin.

Next week I'll review Duane Elgin's Voluntary Simplicity. This is a rare book that I strongly dislike — I think it contains too much dogma and not enough actionable information. But when I began to read the book in Ireland, it amazed me. The first ten or twenty pages were great. I raved about the book to Kris. My enthusiasm died, however, as I discovered the book was less about voluntary simplicity and more about the author's political agenda. Don't judge a book until you've finished it.

Look for the good parts
It's almost always possible to get something constructive from a book you dislike. In the case of Voluntary Simplicity, the first chapter is worth reading and worth sharing with those who are interested. Also, rather than cast aside the entire simplicity movement because of one lame book, I did further research. I found additional articles on the subject, and even found an online book with lots of great tips. (You'll have to wait a week to see it, though.)

Even the best books have weaknesses. For example, many people have noted that the investment advice in Your Money or Your Life is dated, and not applicable to today's financial markets. Yet it would be a mistake to discard the book based on this single flaw. YMoYL is one of the best personal finance books I've read. It's easy enough to mentally substitute alternate investment advice to replace that which is in the book. (Also, as I mentioned last week, a little digging on the web reveals that co-author Vicki Robin has published revised advice.)

Read synoptically
As you read a personal finance book, pause to compare similar passages in other books. When you read Dave Ramsey's recommendation to build a $1,000 emergency fund, research what other authors advise. When you read Robert Kiyosaki‘s advice that the mutual funds are for losers, find out what other experts have written on the subject. Once you've compared sources, return to the book you were reading.

Don't be afraid to look things up. If you don't understand a term, hit the web. Google is your friend. Read with a pen and a piece of paper. If you own the book, make notes in the margins and underline important passages. If the book is borrowed, use sticky notes to mark places you'd like to re-read or to share with your spouse.

Know thyself
Reading can be an excellent way to broaden your understanding of personal finance, but to get the most out of a book, you must be an active participant. You know better than anyone where your financial strengths and weaknesses lie. As you read, watch for advice that will help you to achieve your goals, and don't let the other stuff distract you.

For those interested in this subject, I recommend How to Read a Book by Mortimer J. Adler and Charles Van Doren. This is a classic text for serious readers. I intend to read again shortly.

More about...Books

Become A Money Boss And Join 15,000 Others

Subscribe to the GRS Insider (FREE) and we’ll give you a copy of the Money Boss Manifesto (also FREE)

Yes! Sign up and get your free gift
Become A Money Boss And Join 15,000 Others
guest
16 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
Seth
Seth
13 years ago

I hate to pick bones, but I’m pretty sure that Ramsey would say the biblical references are important. That said, I zone it out.

Dave
Dave
13 years ago

I love the advice of Jim Rohn, who said, “Don’t let your learning lead to knowledge. Let your learning lead to action.”

Matt Wolfe
Matt Wolfe
13 years ago

Great post. I’ve had a lot of books that start off strong and I just can’t finish them. I am a pretty big fan of the 4 hour workweek as well.

PikeMike
PikeMike
13 years ago

Really? What was it that you liked about it? I just read the book and was underwhelmed by it. Unfortunately, by the time I finished the book I was fairly disgruntled with the author on a personal basis which may have colored my opinion of the book.

PikeMike
PikeMike
13 years ago

Sorry, forget my question – reading down I see there is a comment thread accompanying the next article on exactly the same issue.

Doh.

FIRE Finance
FIRE Finance
13 years ago

Nice post summarizing the way to read PF books. We have seen that if we find a certain concept from a book admirable, we go ahead and practice it in real life. Then we see if it really works or what tweaks we had to implement to make it work. In this way the learning becomes real.
Else too much reading just makes it “headucation”. Action leads to learning (in addition to reading).
Cheers,
FIRE Finance

Dave
Dave
13 years ago

Okay..if you haven’t read this book yet…”rich dad, poor dad” its a must read. Stop what you are doing and run down to your local book store or purchase online in your underwear as soon as you read this…IT will change you life. If you have read it, have you read his whole series?

plonkee
plonkee
13 years ago

I find that I absorb the ideas in books a lot by osmosis. Which is pretty good for filtering out extraneous rubbish and just leaving me with the necessities. I suppose that I’ve always been in a relatively fortunate/sensible place with my finances, so I’ve never felt the need to really treat any personal finance book like a workbook.

MoneyDork.com
MoneyDork.com
13 years ago

I can’t suspend judgement. I wish I could. If I hate a book or the ideas in it, I will just use that and get unhappy and end up putting the book away. Just last week I read freakanomics and enjoyed the first chapter or two, then got tired of the writer’s style and lack of direction. I ended the book about 5 pages before the “expanded” portions.

Miranda
Miranda
13 years ago

Great post on the personal finance books! Sometimes I find all the advice out there overwhelming, but the keys you mention should be good for skimming through information to find the gems. Then I can go back to the gems and work on understanding them more fully.

I mentioned your post on my finance blog: http://www.loanshak.com/2007/08/getting-persona.html

Thomas
Thomas
13 years ago

Don’t mean to nitpick, but since when does “Christian and atheist” encompass everyone?

J.D.
J.D.
13 years ago

Since when does “Christian and atheist” encompass everyone?

It doesn’t!

Sammy Rabbit
Sammy Rabbit
13 years ago

Great insights on reading.

How to Read a Book is still one of my favorite books and one of the best ever in my opinion on communication.

Jeff Msangi
Jeff Msangi
13 years ago

Loved.literally loved this post and I couldn’t agree more with you.I call it reading between the lines.

Roy
Roy
13 years ago

Read an entire book before deciding it’s good or garbage? Life’s too short for that. Flip through it, if it’s nice, then good, if not, not. Also public libraries are pretty handy. If it’s really good and I borrowed it a few times, then and ONLY then will I buy it.

Personal finance books are hit or miss. I’ve been around long enough and made enough mistakes to get by now on my own with my own set of principles. Besides, each author has their own hang-ups, some of which are hard to agree with.

max weismann
max weismann
11 years ago

We have recently made an exciting discovery–three years after writing the wonderfully expanded third edition of How to Read a Book, Mortimer Adler and Charles Van Doren made a series of thirteen 14-minute videos on the art of reading. The videos were produced by Encyclopaedia Britannica. For reasons unknown, sometime after their original publication, these videos were lost. When we discovered them and how intrinsically edifying they are, we negotiated an agreement with Encyclopaedia Britannica to be the exclusive worldwide agent to make them available. For those of you who teach, this is great for the classroom. I cannot over… Read more »

shares