A personal finance crash course for recent college grads

A wonderful set of parents recently sent their son to me for financial advice. He was a new college graduate and was about to start his first “real” job.

Prior to this session, I drew up an outline of what I wanted to share with him — and now I’m sharing it with you. It was developed with his fresh-out-of-school status in mind but could apply to a wide spectrum of adults today.

Here are the books I suggested he read, in this order:

• “The Automatic Millionaire” by David Bach. The author’s position is that your wealth is not so much determined by your income as by your spending. He suggests automating your finances as much as possible so you save money without having to even think about it.

• “The 7 Habits of Highly Effective People” by Stephen Covey. This now-classic book, which has sold more than 15 million copies, suggests increasing your effectiveness through developing your character.

• “Winning The Loser’s Game” by Charles Ellis. This is a guide to achieving long-term gains in the stock market.

• “The Bogleheads’ Guide to Investing” by Taylor Larimore and Mel Lindauer. This book outlines the investing philosophy of the so-called Bogleheads, or devotees of Vanguard Group founder John Bogle, who trumpeted the value and superior returns of low-cost index funds compared with actively managed mutual funds.

• “The White Coat Investor,” by James Dahle. The primary audience is doctors, but its advice is useful for anyone headed into a high-income profession. (Disclosure: I’m quoted in the book and provided an endorsement printed on the flyleaf.)

Here’s a website series for basic financial understanding:

• Money101

Here are two blogs to read for lessons on living within your means:

• The Simple Dollar
• WiseBread

Concepts and touchstones to understand:

• Compounding
• “Pay yourself first”
• Retirement savings: IRA, Roth IRA, 401(k), Roth 401(k)
• Medium and long-term savings: stocks, bonds, mutual funds, index funds, real estate
• “Rent vs. Buy”
• Credit unions
• Vanguard
• Warren Buffett

The concepts listed here will take some effort on part of the reader to understand. The books mentioned above cover all of these items, but they’re important enough that I wanted to pull them out for emphasis.

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