Summary: There are thousands of books, magazines, blogs, videos and other learning resources on personal finance. 95% are not worth reading as they offer inaccurate, narrow or biased guidance that outweighs any worthwhile information - which can be found on the better resources (such as this blog) anyway in more relevant, up-to-date and implementable format.

In this blog post, I will collate brief recommendations on personal finance resources as I get through them. I will not be detailing all of the major issues with resources I don't recommend, but they are obvious by contrasting their advice on a topic (property investment, leverage, superannuation, insurance, etc) with the advice given on this blog.

Details:

1. Recommended books

The Millionaire Next Door; Thomas J. Stanley, William D. Danko
- You don't need to actually read it as the key takeaway is that the "truly affluent in America have seven standout characteristics common to all of them." You can find them listed here.


Your Money or Your Life: Transforming Your Relationship with Money and Achieving Financial Independence; Joe Dominguez, Vicki Robin
- A 9 step program to financial independence. "The purpose of Your Money or Your Life is to transform your relationship with money. That relationship encompasses more than just your earning, spending, debts and savings; it also includes the time these functions take in your life. In addition, your relationship with money is reflected in the sense of satisfaction and fulfillment that you can get from your connection to your family, your community and the planet." The book is worthwhile reading for those who would benefit from doing all 9 steps intensively, but most can get by with this detailed summary.


A Banquet of Consequences; Satyajit Das
- Satyajit Das is one of the top thinkers on the big picture issues in finance in economics. The writing style is a bit dry but the aim is to cover a lot of ground very clearly and succinctly. Issues of financialisation, debt levels, ageing populations, lower growth from productivity and innovation, natural resource and energy constraints, trade/currency wars and inequality are difficult and politically unpopular to tackle in the best ways which include less consumption and a refocus on quality of life. You can quickly glean the long-term trajectory for the global and Australian economy is stagnation. A key takeaway message is simply that long-run high investment returns for any asset class are a thing of the past. Meanwhile systemic risks continue to pile up and individuals will need to protect themselves when they unwind. Governments will inevitably need to increase taxes and cut payments and services. I try to avoid writing anything about macroeconomics as it's all explained in this book.


2. Books not recommended

Rich Dad, Poor Dad; Robert Kiyosaki

Kiyosaki often jokes he is a best-selling author not a best-writing one. And this really is the most purchased personal finance book of all time (over 38 million copies sold and counting). But it's not a best-working one. Less than 1 in 1,000 readers become rich by following its advice. Far more become much poorer by paying for seminars, courses, mentoring and other services. And a significant proportion lose everything from starting risky enterprises or dabbling in investing. Kiyosaki has been a chief founder of an entire scam industry that preys on the gullible and less educated. Because this book is so well-known it makes for an excellent litmus test as to anyone's understanding and perspective on personal finance. Just ask them whether they recommend it or not. (E.g. Scott Pape calls Kiyosaki a snake oil salesman and contrasts the Kiyosaki/Trump get rich quick fantasy with his own.  A more detailed review of the book can be found here. Details of Kiyosaki being a scam are here.


I Will Teach You To Be Rich; Ramit Sethi

Ramit Sethi is known as the American millennial generation's go-to guy for straight-talking, simple advice on sorting out their finances. The first chapter of his book is about getting a better credit score so you can do things like get a cheaper car loan. Yet, debt should be avoided wherever possible, and certainly never used for cars, weddings, vacations and $7,000 baby cribs. Yes, Sethi really suggests all of these are valid credit purchases, indicating how damaging his advice can be. Sethi claims his secret financial sauce is all about automating systems that will make you rich over time by overriding human laziness and psychological weakness. But the first step of his 6 step program is to encourage people to use multiple credit cards with ever-increasing credit limits for purchases that should only be made with savings instead, simply to build a better credit score. Apparently, his deep research into finding systems that really work didn't reveal that virtually all credit card users are unnecessary victims of fees, interest and impulsive overspending. Sethi even recommends the most expensive type of credit cards so you can get benefits like concierge services - the classic lipstick on a pig that he can't see through because of his infatuation with the trappings of the rich and famous.

Then, just because his Indian dad wasted his and everyone else's time trying to verbally bargain for the best possible deal, he makes pointless negotiation a key pillar of better managing your finances. In reality, you will almost never obtain the best possible deal by lazily calling up your current provider and asking for their best offer. The best deals can only be found on the most comprehensive, independent comparison websites, and you'll have to spend time and effort mastering how to use them effectively. But, instead of never paying credit card or bank fees, Sethi's elegant "system" is to painfully record dozens of phone conversations with companies and try and use your amazing note-taking skills to argue your way out of their fees for things like late payments. Not only doesn't this work but it's the opposite of his promise to automate your way to riches.

When it comes to investing, Sethi relentlessly disparages "rate chasing" - getting 1-2% extra interest on bank accounts. Instead, he claims you can make an extra few percent a year via following his smarter asset allocation which turns out to be investing in bonds as well as stocks (he doesn't suggest any other asset class is needed). His book quotes average returns of 5.2% for bonds and suggests they reliably perform better when stocks falls - advice which is outdated and inaccurate. Given that advice on asset allocation that is actually accurate, up-to-date and comprehensive is freely available online including through roboinvesting tools and blogs (like Stockspot), I'd rate Sethi's amateurish asset allocation advice as a net negative.

The rest of the book contains commonplace advice on avoiding bank fees, using tax-advantaged retirement accounts, conscious spending, automating account transfers and payments, and passive investing. But there are two constant problems. The first problem is every aspect of Sethi's advice is a long way from optimal: fees are still paid on a middling account recommended years ago when his book was written but you are told to try and negotiate your way out of them; retirement and investment accounts are used but only to the extent allowed by a mediocre savings rate (~15%); his "conscious spending" still involves a lot of wasteful spending on things like expensive weddings and blowing 50% of any unexpected windfalls; Sethi's version of account automation doesn't maximise interest or savings, and his naive assertions that passive stock investing will continut to deliver 8-11% annual returns are nonsense. The second problem is the inefficient and piecemeal implementation: for example, instead of using the best comparison websites, Sethi insists on phone call negotations; and instead of diligently working through all savings opportunities, Sethi scorns those who do more than pick off a few "big wins".


Get A Financial Grip - A simple plan for financial freedom; Pete Wargent

While Pete Wargent is a pretty smart guy this book generally constitutes poor advice for most people. It primarily recommends direct investment in leveraged residential property and individual Australian shares which is exactly what most Australians shouldn't be doing. The advice on superannuation (switching to a SMSF to invest in more leveraged residential property and personally-selected shares) is especially terrible and inaccurate. And the advice to pay 0% income tax long-term via negative-gearing deductions on property indicates unenlightened personal ethics.


3. Other books

Motivated Money - Sound financial advice for the post-GFC world; Peter Thornhill

Peter Thornhill recommends long-term investing in income-generating assets with shares being the top class of such assets (property and providing money to be lent out being the other two major classes). His book shows that when you measure the long-term returns of ASX-listed industrial firms the total returns from 1979 to 2014 have surpassed property and term deposits by a considerable margin.

Thornhill rejects the growth vs income asset dichotomy and advises that all investments should be measured against both dimensions and in the medium to long run (the short run volatility should be ignored). On this long-term basis, he argues that dividend producing shares are superior at all stages of life. A useful insight into yield comparisons is that while shares may have lower yields at a point in time this is misleading because income-generating firm's shares also increase in price over time.

Thornhill does overextend his position though. Firstly, he asserts term deposits are never useful investments regardless of their real interest rate or relative value compared to the stock market. This is false. And his presumption that future stock market returns will reflect the last few decades is also baseless (See Das' book: A Banquet of Consequences reviewed above). Thornhill is so convinced that shares will continue to perform highly over the long term that he recommends borrowing to invest in shares - something I strongly recommend against.


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