I wrote about the total cost of owning a dog a few weeks ago and a couple of you chimed in about including pet health insurance. Even one of my friends, Nick, IM’d me to say that I should really consider getting pet insurance (he recently got a dog and had some medical issues to contend with) because it’s worth the peace of mind. I’ve never had a pet outside of some fish so I didn’t even think about getting insurance but it makes some sense.

For those, like me, who aren’t familiar with pet insurance, it’s just like your medical insurance. You pay monthly premiums and the pet insurance covers certain medical procedures and checkups. The more comprehensive the insurance, the more it covers and the more it costs. The big difference between the two is that with regular medical insurance today, the doctor usually interfaces directly with the insurance company. With pet insurance, you typically pay out of pocket and then request a reimbursement from the insurance company. I prefer the first way because then the doctor is often compelled to accept the price negotiated between the company and the doctor, which is often lower than the standard fee. By paying out of pocket first, you have to do the negotiating. (this may just have been the case with the insurance plans I saw)

Nick sent me a link to Veterinary Pet Insurance, the company he has his dog’s insurance with, and in reviewing the documents it seems pretty straightforward. VPI covers 90% of the scheduled allowance after a $50 per-incident deductible. If the procedure costs $1000, their benefit schedule covers $900 for that procedure, then they will pay out $765 ($900 - $50 x 90%) for the incident. Much like your standard medical insurance, they have a benefit schedule. Unlike your standard medical insurance, they don’t negotiate with the practitioner, you have to negotiate with them. I don’t know how flexible vets are about pricing but as I mentioned earlier, it’s easier if its the insurance company doing the negotiating (especially if you’re feeling the pressure because you know your pet needs the procedure!).

I entered in a quote for a two and a half year old Scottish Terrier and the comprehensive plan, with a $14k annual benefit allowance, cost $20.92 a month ($251/yr). The standard plan, with a $9k benefit allowance, was $11.33 a month ($136/yr). How does $251 a year stack up against the typical procedures a two and a half year old dog will face? I don’t know. I imagine though that, given it’s insurance, $251 is probably a bit above average (that’s how insurance companies work!).

Will we get pet insurance? Not sure yet, I think we will have to decide once we’ve adopted a dog and have a better idea of the types of medical expenses the breed will likely face in their lifetime. Another option would be to cover them when they are young and then once again when they are older. This opens up the potential for uncovered issues in the middle but depending on the price, it might be worth it. I don’t want to make an emotional decision but I also don’t want to be taken to the cleaners either way.

Anyone have experience with any other pet insurance companies or with pet insurance in general?

(Photo: klash)

Last week, we signed up for Netflix.

Yep, even with such posts as “Why do people sign up for Netflix?” peppering the archives, we at the BFP household signed up for the $8.99 a month plan that lets us borrow one movie at a time, unlimited movies a month, plus unlimited streaming video on demand.

Online Video: So-So

Part of me wishes we read reviews of the video online portion of the service first because that was one of the driving factors in signing up for Netflix. It turns out that the selection consists of television shows and older movies. It doesn’t include many recent films, which was a real let down, but it does include current television shows so that is a mitigating factor. The reason why the online video was so appealing was because it was now more closely integrated with our XBox 360 in the winter update and the XBox is our main media player in the basement.

However, despite the limited selection, we’re sticking with the subscription past the two week trial just to see how often we use it. We might even analyze our Netflix usage in a few months to see if it’s money well spent.

Setting Up XBox for Netflix

The setup was remarkably simple, simply navigate to the Video Marketplace menu and slide over to the Netflix box (mine was the second one). From there, download and install the Netflix application. It’ll kick you back to the menu after you’re done, just go back to the box and select it. Then you’ll be asked whether you have an account already or whether you want to activate a free trial (2 weeks), I selected that I already had an account. The Xbox will display a super secret code that you then enter on this activation page. It thinks about it for a few minutes (”Activating”) and then you’re ready to go.

You can watch any movie available for your PC on your XBox. Unfortunately, this only includes older titles. You won’t be able to watch any newer movies instantly, which was originally our intent. It was a little unreasonable for us to expect that but we didn’t know, but the selection of movies available via the web is still pretty good. They tend to be older movies but by signing up, we’ve essentially made Netflix our database for movies at only $8.99 a month.

We’ll give it a shot and see how it goes! First DVD, The Dark Knight (my wife hasn’t seen it yet), comes in the mail today.

(Photo by brymo)

We don’t use Netflix because we don’t watch a lot of movies but a lot of our friends do. One of the things I notice quite a bit, and something that my friends freely admit, is that my friends don’t watch a lot of movies either and they will have the same movies for weeks at a time.

I recognize that Netflix isn’t about watching as many movies as you can. Part of Netflix’s appeal is in their extensive library of movies, movies you would never be able to find in a Blockbuster store like indies and foreign films. However, if you’re one of the Netflix subscribers who is really into the cost benefit analysis game, there’s a website called FeedFlix that will do all that for you without any additional help. You don’t have to sign up or anything, you just have to paste in one of your RSS feeds into their box and a wealth of personalized usage information appears.

I don’t have a Netflix account so couldn’t run myself but I asked my friend Jeremy at GenXFinance.com for one of his feeds and he obliged, here’s his usage:

According to Feedflix, Jeremy holds DVDs for about 5-6 days and each rental costs about $3.96, which puts him in the 67th percentile. Since the data only seems to find December, there isn’t much historical data to play with but if you’ve had it for quite some time then you might be able to see some trends. You might even want to pause Netflix during those slower periods.

Some caveats about Feedflix:

• It seems to be a bit inaccurate, Jeremy said that his wife easily returns more than 1 DVD a week and that they’ve had service for longer than December, which is the only month that appears.
• It doesn’t take into account movies you watch streaming across the web, which is how Jeremy watches most of his movies. (through his XBox 360).

Give it a whirl, let me know what you think!

Do you have an accomplishment journal?

I don’t know if you’ve seen my Wall of Fame & Fortune & Awesomeness but it’s a list of all the awesome publications and websites I’ve have the pleasure of being in, on, or near. It’s essentially a list of my accomplishments as a result of this blog and it’s something I feel very fortunate to have been able to do. I was in the local paper once when I was in 6th grade for reading to kindergartners in my school, the New York Times was a little bigger than that.

The point of showing that post both here and at the top of every page isn’t to brag or show the world how awesome I am. It’s there because it gives me the motivation to keep doing what I’m doing every day, day in and day out. Life can be a grind, whether its in an office, a restaurant, a factory floor, a job site, or a retail store. Unless you make a record of the highlights, you can often get lost in the grind and find yourself on the flip side without a clue of what happened.

There are a few other reasons why I think an accomplishment journal is crucial.

What Is An Accomplishment Journal

An accomplishment journal is simply a place you can write down and celebrate all of your accomplishments. You define what success is and you define what you consider an accomplishment. The door is wide open and anything you want to put down is fair game. What an office manager considers a success is different than what a stay at home mom or dad considers a success. A student has different goals, and thus different accomplishments to note, than an executive. However, for any one of those people, an accomplishment journal is something that can provide value for years to come.

Why Keep One?

If you ever kept a journal as a child (I didn’t but my wife did and I love reading her cute notes), you know how much fun reading your own thoughts can be. Who and what bothered you, who you liked and disliked, what your concerns were at the time, etc. Now, an accomplishment journal is similar in that you can relive your successes. It makes it much easier to remember the past and offers a glimpse into your own development. That’s the emotional sappy reason, there are also many logical reasons to keep a journal.

It helps you keep your resume up to date. I recommend revisiting and updating your resume every three months, even if you aren’t looking for a job. It’s important to update your resume when the accomplishments and responsibilities are still fresh in your mind. Can you accurately remember the work you did five years ago? If you were put under the gun, like after being laid off, would you be able to remember the work you did last year with sufficient clarity? If you are able to recall exactly what you did, maybe you don’t need to update it every three months. I only know that I can’t, which is why I update it every three months.

It motivates you. One of the biggest things I learned from my wife when she was looking for a job several years ago was the importance of progress when there appeared to be none. One of the tips I offered in my post about Three Morale-Boosting Tips for Job Seekers was to track your progress. Tracking your progress in a job hunt is like tracking your accomplishments. It may seem silly or minor to you but when you send out ten resumes or go out on an interview, those are accomplishments. When you look back after a week of searching, it’s much better to see “I sent out 85 resumes.” than to remember “I spent all week sending resumes.”

It lets you define how success is measured. Mark at Soul Shelter recently wrote about his struggles with the idea of success. Mark is a writer, a midlist writer (where the books aren’t a bestseller but sell enough to justify publication), and struggles each year around the holidays to describe his vocation. While his struggle was with the external barometers of success for his field, bestseller lists and book sales, he does talk about how “we ought to try to recognize and value others’ achievements, big and small, vocational and personal. And most importantly, if we want to be happy and self-confident and continue wholeheartedly doing the work we love—however underpaid or undervalued—we must learn to rely on the measures of success that mean the most to us personally, and strive not to lose sight of them.”

Having your own journal of accomplishments can help further that goal, if only for yourself. Rather than look towards income or other external measures, your accomplishments are whatever you want them to be and when you write them down, they can give you the motivation to work harder. You decide what you want to write down and only you will be reading it, so feel free to write down things that are important to you that may not be important to anyone else.

Do you keep a journal of your achievements and accomplishments? If so, what was your latest accomplishment? It’s ok to share!

(Photo: shuttercat7)

Being that it’s now January again, I thought we should take a look at something known as the January Effect - when stocks see increases in January for a variety of reasons. If you were to buy into the smallest 10% of U.S. stocks on the last day of December each year and then sold a month later, you would earn an average return of 11.3% (in that one month!) going all the way back to 1926. You read that right, the January effect, at least empirically, is very real and very lucrative. So, why doesn’t everyone do it? It’s because the smallest 10% are utter crap and it’s a case of statistics being twisted to show what people, financial people, want them to show. The best example from a two-year old article is of a software company called OCG Technology that spiked 2400% in January of 1992 (incidentally, it’s not around anymore under that same name).

There are other reasons why the January Effect doesn’t really work such as commissions and the fact that some of these companies have such low trade volume that any action would severely mess up the numbers. The article states that even if you were to pay only 12.5 cents a share, it would drop your return from 11.3% to a mere 2.4%.

Now that you know it’s really a bunch of statistical hocus pocus, I thought I’d go into the biggest theory as to why the January Effect may be legitimate. It has to do with the whole tax wash rule where you can use your losses to offset your gains. The theory is that there will be some investors out there who are selling, thus suppressing the price of the stock, and then re-buying one month later. Now extrapolate that to the bigger fish, such as mutual funds, and you can start to see why people start believing in the January Effect.

So, can you take advantage of the January Effect? Doesn’t look like it…

It’s the first roundup of the new year and I think many have dubbed this the Year of Frugality. If they haven’t, then I just did because we’re going to have a lot of economic and financial challenges this year and the best way to combat them is to tighten up the purse strings so you have some spare cash to handle any emergencies. The wiggle room in a lot of budgets has gotten a lot smaller. To help with that, Ive decided to make this a frugal roundup, pointing to some posts that I think can help you save a few dollars this year.

First, Lazy Man shares a few tips on how to save money on television, movies, music, and books, the four basic food groups in your media consumption hierarchy.

It’s a little cold to be changing car oil right now but my friend Fred doesn’t seem to mind. He recently changed the motor oil in his Dodge Caravan and gives both instructions and a cost benefit analysis. I change the oil on my own car myself mostly because it’s faster than going to a place like Wal-Mart (who, according to some reports, uses sub-par oil anyway). I don’t want to be spending $60 on a quick lube place either. The only change I’d make to his list is the oil drum, just take it to a mechanic and they will let you dispose of it there (they are required to by law).

Saving money is one thing but here are a few ideas from Nickel for earning extra money. Of the thirty-three he lists, I’m sure you can find something in there you can do to earn a little more money.

And to end it all, I felt it appropriate to mention a post I wrote that listed 100 money saving tips. Originally focused on the holiday, how to save money so you can afford the gifts you want to get others, it’s just as appropriate any other time of the year.

(Photo: billywarhol)

Obama offered some more details on the economic recovery plan he plans to put forward to Congress after the inauguration in his weekly radio address today, a program he called the American Recovery and Reinvestment Plan.

Some of the salient details were that he wanted to plan to create three million new jobs, up from 2.5 million, and to :

• double renewable energy production and make public buildings more energy efficient;
• rebuild crumbling roads, bridges and schools; computerize the health care system; modernize classrooms, labs and libraries;
• and provide tax breaks to American workers.

His advisers have estimated that the cost of the plan could be anywhere from $675 billion to $775 billion, while others expect it to be closer to $1 trillion. With how the government has been printing money lately, an extra $1 trillion, especially invested into programs that will help Americans stay employed and improve our infrastructure (rather than prop up banks and their epic failures), is better than the alternative. The question remains, will there be more pork stuffed in there or will this truly be a focused bill? We will have to see.

You can watch the address yourself (four minutes long):

Full transcript available here.

Depending on when you read this, it’ll either be New Year’s Eve or New Year’s day (or some random day during the year!), but I wanted to wish you and yours a happy and prosperous new year. We’ve had a pretty rough 2008 but hopefully things can turn around in 2009!

If nothing else, be thankful you weren’t involved in the Madoff ponzi scheme!

We will be returning to your regularly scheduled programming on Monday, January 5th.

(Photo by Mr. Magoo ICU)

Last weekend, I reviewed The Shortest Investment Book Ever by Jim O’Donnell and today I have the opportunity to interview him. I thought that Jim’s extensive financial experience and his love to educate was something I should take advantage of and he willing subjected himself to my hard hitting investigative journalism.

Good morning Professor O’Donnell, I thought The Shortest Investment Book Ever lived up to its billing, being both short and informative in a way that is not intimidating in the least. Often times investing related books assault the reader with a mountain of data, but not so with your book. What led you to write The Shortest Investment Book Ever?

There is no shortage of investment and budgeting books out there already. But they don’t address the 401(k) and the 403(b), which is the chief retirement savings tool for about 62 million Americans. My book targets those many, many “savers” who are often overwhelmed by investment choices at work and may, therefore, do nothing or do the wrong thing.

I also don’t want people paying additional money (they may not have) to get “help” which often times is, even from honest brokers, a sales pitch. But my book is also intended for those who don’t have a 401(k) or a 403(b). It will help lots of people better understand Medicare, Social Security, and IRAs, which are also important aspects of retirement savings.

Were there any chapters that were cut from the book that you would have liked included?

Actually, no. In putting the I book together, my editors and I had some tussles over content. But I wanted LESS, while they wanted MORE, and kept suggesting more chapters that I might develop as briefly as I did the ones we have. Some of the chapters in the book, on, for instance, socially-responsible investing, were not my idea. I think they are good topics. But I didn’t think they belonged in the SHORTEST investment book ever.

What led you to leave Wall Street and begin teaching? In your book, I get the feeling that it’s a mentor speaking to a mentee; it works quite well in welcoming the novice to the world of retirement and investing.

I was a school teacher for seven years after college. In many ways, I loved it. All my life, I have wanted to have a life-long, and I hope positive, impact on others. I left teaching junior and senior high school, discouraged after our upstate New York community voted down the budget a couple of years in a row. I also seemed to think that my students were more capable of excellence than my administrators thought. I was then - and still am today - a demanding teacher. I’m not in the classroom to serve time and accrue retirement credit. That led to tension and some soul searching with my administrators.

So I went off to Columbia U. in New York City and got an MBA in finance and accounting with the hope of helping people in a new way. I continued to try to do that with clients and staff as I rose in the mutual fund world for a couple of decades. Then, a powerful, reorienting, religious experience in the mid-80s caused me, in time, to leave the business world and invest in the education of the next generation. In a sense, I went back to the classroom, sort of like “back to the future.”

With all the talk of a recession, what do you think most people should do to prepare for it and, should we be so lucky, what should we do to benefit from when we exit the recession?

To prepare for the recession that is upon us: We need to examine our own houses. We need to spend less, save more - sometimes LOTS LESS. We need to discipline our sometimes crazy natures to understand the difference between WANTS and NEEDS. I’m convinced that contented people - which should be our goal - don’t necessarily get what they want but they learn to live with and maybe like what they get.

For those near retirement, the recent market drubbing is, of course, more challenging. We may need to defer some dreams, keep working a bit longer, and rework our budgets and plans. We may need to learn to live on less and reinvigorate such easily overlooked joys as time with family and friends, being or becoming involved in community or church work, even enjoying simple, cheap pleasures, like a movie at home with friends or family.

We’ve got to challenge the cockamamy notion that, if I don’t spend a lot of money, we can’t enjoy life or that we’re not a “success”. Nonsense! For those of us - even if we’re near retirement - and still saving for retirement, check your asset allocations. Get them back in line. Don’t let the numbness of the disaster knock us silly or punchy.

Don’t chase the “hot” asset of today - cash or Treasuries - as if that will save you. (It won’t.) What you can save in your retirement plan today is being accumulated at bargain basement prices. This is especially helpful the farther we may be from retirement, but it can help “oldsters”, too. Young people are going to be great beneficiaries of this meltdown, if only they have the courage and discipline to save and accumulate quality, low-priced funds at these once-in-a-lifetime prices.

To benefit when we exit this recession: (And we will!) Read the above comments on preparing fro the recession.

I read a brief biography about you and saw that you had an extensive history of working with wealthy investors during your time at investment powerhouses such as Fidelity. What sorts of things have the wealthy done “right” with their investments that everyone can incorporate into their strategy?

The wealthy also can spend foolishly. But the smart ones are not extravagant. They know that capital is hard to make and still harder to accumulate. Many live very modestly, dressing and driving, for instance, NOT to stand out. Many have strong families and good marriages. A family breakup is a powerful stimulus to poverty, whatever we had before the blowup.

So, stability is something that the wealthy seem oftentimes to have. Many wealthy people I worked with are far less risk-oriented than one might expect. They almost sense that they have been lucky and don’t want to test fate. Much of their risk taking may be confined to a business, say, not to their investments. They - the smart ones - don’t put too many eggs in one basket, even if the baskets can be very large.

What do they do wrong that we should try to avoid?

Hard to generalize there. But it wasn’t investment stuff that marked “what they did wrong.” After all, they were paying me for advice. What the most foolish of the wealthy I met or worked with did was to let their pride or arrogance or the certainty that money can fix or buy anything go to their heads. Some feel that money is the standard by which all - including everyone around them - is to be measured. While most wealthy people I worked with were good folks, some were certifiable jerks - just like some of us who have no money. I worked with lottery winners, sports, movie, and TV stars that were princes and princesses and with others in the same fields who seemed to think everyone was a bellhop or a porter, fortunate to be in their presence and to take their abuse.

One question I’ve often asked myself is, knowing what I know about life in general, what advice would I give to myself ten years ago. Given your experiences and knowledge, what advice would you have liked to give yourself many years ago? (financial, or otherwise!)

What an interesting question, Jim.

First, I’d say that the important stuff is the relational stuff, not the money stuff. The money stuff is just a “funding vehicle” to enhance the relational. In the end, PEOPLE matter, not stuff or things. On the other hand, we have to be good stewards of much of the stuff and things we have been given. I’m a person of faith, so I put my trust in unseen things. I know others of great faith who seem to despise “stuff and things” and seem to value only what is eternal and invisible.

Here, I beg to differ with them. While we are in this world, we must not treasure our “stuff,” but neither should we neglect or misuse important, helpful things -even money - we have. They can helpfully serve us and others and, when cared for, can last, making us able to spend more on others or other NEEDED things. I’m uncomfortable with both those who think money is the measure of all things AND, too, with those who think it is the measure of nothing, that it is meaningless. The latter folks practice irresponsibility and think it is faithfulness or praiseworthy selflessness.

Lastly, I would say we all need to do the best we can with the gifts and talents we have been given. I think I used to believe that life would get easier as I grew older. It has not. It’s hard. There’s trial. There’s suffering. There’s reversal. There’s loss. (See my first book at www.lettersforlizzie.com.) But there’s lots of joy and lots of beauty. too. We have to manage through it all, not just through the good or the easy. We have to avoid fantasizing, too — a real, real problem in a world of endless pop culture and celebrities.

We need - all of us, young and old - to finally grow up into mature people who can make this broken world a better place for us and others.

None of these books are new, they’ve been around for years and they’ve been considered by many to be the best personal finance books out there. The topics they cover will vary and their approaches will be sometimes very different, but each has value and as a student of personal finance they all have something to offer to a reader. Many of these books will sound familiar and I challenge you to make an argument that one of these books shouldn’t be on a list like this.

General Personal Finance

You can’t describe this category without listing the book I consider to be the defining book in this cateogry - The Richest Man in Babylon by George Clason. This book was written in the 1920’s and is a fiction story that teaches simple personal finance lessons. It’s a tiny little book that you could probably read in less than two hours and the lessons it teaches are simple. There are several other books that are like this, teaching basic personal finance concepts, such as The Wealthy Barber by David Chilton, but this one was the first and most celebrated.

Another ground-breaking book that deals with general personal finance was The Millionaire Next Door by Thomas Stanley and William Danko, first published in the 90’s. The reason it was ground-breaking was because they showed how many millionaires actually lived. So many of us see the flashy lifestyles of celebrities and sports figures, thinking that’s how millionaires live. Stanley and Danko interviewed millionaires and discovered that most do it by spending less than they earn and by being smart with their money. When this book was released, it really surprised some people and I think it was exactly the type of wake-up call people needed (and still need today!).

Finally, the last cornerstone book in general personal finance has to be Your Money or Your Life by Joe Dominguez and Vicki Robin. This book is lauded by many a personal finance blogger and it’s very popular because it helps you re-examine your priorities. Instead of living to work, they help you re-prioritize so that you’re working to live. If you do feel like you’re trapped in the constant struggle between working, bills, and expenses, this book can certainly help you sort everything out.

Bonus book: A book that I haven’t read yet but is also well recommended is Napolean Hill’s Think and Grow Rich, which also happens to be free and in the public domain. I haven’t read it yet, doing so now, but it was written during the Great Depression so it might be helpful during our economic malaise.

Managing Debt

I haven’t read it but so many people have told me about Dave Ramsey’s The Total Money Makeover. I’ve been very fortunate never to have fallen into the credit card debt hole but after I wrote my post about how Dave Ramsey’s Snowball Debt payoff method was brilliant, I’ve gotten several emails from readers telling me it has worked for them when other methods failed. If you are in debt, check out Dave’s book (at the library!) because it goes into much more than debt repayment, it’s an entire overhaul of your financial life.

If Dave Ramsey hugs you, then Larry Winget slaps you in the face. Depending on which type of motivation you respond you, Larry Winget’s You’re Broke Because You Want to Be: How to Stop Getting By and Start Getting Ahead is either perfect or will make you feel depressed. While I haven’t read Ramsey’s book, I have reviewed You’re Broke Because You Want to Be and I thought that it was a good book but might be a little too tough. It has a lot of very useful information and it has an answer for any excuse you could possible have about debt.

Investing

No list of investing books would have any credibility if it didn’t include these two most important texts: Burton Malkiel’s A Random Walk Down Wall Street and Benjamin Graham’s The Intelligent Investor. The basic gist of A Random Walk is that a blindfolded monkey can select stocks as well as a professional. The random walk refers to the actions individual stocks prices can take in the short term and Malkiel recommends index funds the entire way. Benjamin Graham’s The Intelligent Investor, on the other hand, is the seminal text of value investing, where you buy stocks in down and out companies with a long view in mind. If it’s any comfort, Warren Buffett was Benjamin Graham’s protégé at Columbia University.

I also have to recommend The Little Book series which include several books on investing. They each cover a different part of investing and different scenarios, but they’re all written by very accomplished authors and written very well. My favorites are The Little Book of Common Sense Investing by Vanguard’s John Bogle, The Little Book That Makes You Rich by quantitative investment expert Louis Navellier, and The Little Book of Bull Moves in Bear Markets by Peter Schiff (in part because we are in a roaring bear market).

Finally, I have to give a nod to David Bach’s The Automatic Millionaire because it teaches one very important lesson - set it and forget it is one of the most powerful lessons in retirement investment planning. Save in your 401(k) and IRAs by making automatic regular deposits and you’ll be happy in retirement.

Frugality

The Complete Tightwad Gazette by Amy Dacyczyn is the book on frugality. If you were to ask any frugal blogger for their list of the top three books on saving money and frugality, this book would be in that list with no exceptions. This is also one of the most actionable books on this entire life. When you read a book like the Wealthiest Man in Babylon or the Automatic Millionaire, you come away with solid personal finance information but nothing you can actually do. The Tightwad Gazette is the polar opposite, you can make it through a handful of pages without getting an idea of what you can do to trim. Want a hint of what’s inside? Money Saving Mom listed ten painless ways to save $100, pulled from the book.

One of the easiest ways to be more frugal is to simplify your life. One of the easiest ways to simplify your life is to get a book that has over a thousand ways to simplify all aspects of your life - The Joy of Simple Living by Jeff Davidson. This is another one of those extremely actionable books where he goes through room by room by room, giving suggestions on how things could be simpler.

Behavioral Economics

This category isn’t one that is often discussed when looking at personal finance books but I think behavioral economics is something we should all be familiar with. Behavioral economics refers to “research on human and social, cognitive and emotional factors to better understand economic decisions by, say, consumers, borrowers, investors, and how they affect market prices, returns and the allocation of resources.” The book that introduced me to this type of economics was Freakonomics by Steven D. Levitt and Stephen J. Dubner. I don’t really know how to describe Freakonomics other than to say that the authors took a bunch of interesting economics stories that applied to everyday life and tied it together into a book. You’ll read about cheating teachers and cheating Sumo wrestlers, you’ll read about impact abortion has had on crime, and a dozen other interesting stories that will do nothing but pique your interest for more.

From there, you can’t miss two other books that I’ve read and enjoyed - Predictably Irrational by Dan Ariely and The Undercover Economist by Tim Harford.

Predictable Irrational seeks to explain why we, as supposedly rational people, make such irrational decisions. The best example is how customers often behave economically irrationally whenever free is introduced to an equation, people often go after the “freebie” or “add-on” when it doesn’t make rational sense to do so.

The Undercover Economist is slightly different, it explains, among other things, how you can glean information from situations where you don’t think information can be gleaned. The best example I can remember is one where Starbucks began offering fair trade coffee at a higher price. Starbucks charged a higher premium for that coffee than what it agreed to pay for fair trade coffee. In other words, Starbucks was profiting from fair trade (it wasn’t simply higher by the net increase in fair trade versus non-fair trade coffee). The information it provided was invaluable in that it identified how likely Starbucks customers were willing to pay more for their coffee - it showed how elastic the price truly was.

Those are the books that I think would make a fantastic library for the personal finance enthusiast. I’m absolutely certain I missed some great books out there, so if you have a favorite that I didn’t list, please leave a comment so I can be sure to check it out!