/Read These Two Personal Finance Classics

Read These Two Personal Finance Classics

The best way to learn about personal finance is to read about it. Once you’re exposed to new spending and saving techniques, financial terms, and other worthwhile information, you can internalize and apply it to your daily routine.

With that in mind, Canadian MoneySense reporter Matt Matheson shares two timeless reads:

Nudge (2008)

Written in part by the 2017 Nobel Prize winner in Economics, Richard Thaler, this read looks at how our decisions are impacted by “choice architecture.” The way in which questions are framed, and options are presented, can have MASSIVE impacts on outcomes. Questions or options can be crafted in such a ways so as to “nudge” an individual towards making wiser decisions.

One example from the book is how people’s natural tendency towards laziness, described as inertia, can be used to ensure that they make wise decisions with their money. Currently, most companies have an opt-in for automatic retirement savings to be taken off of employees’ paychecks. Many employees, due to inertia, never fill out the paperwork to opt-in. Nudge suggests, for example, that the default option be the opt-in to take advantage of people’s natural laziness.

Personal finance connection: Use your laziness to your advantage. Automate your bill payments, savings, and investing to prosper from inertia. Your natural tendency is to rarely touch, change, or even pay attention to the finer details of your money.

Mindset (2006)

The book that set off the revolution in growth mindset thinking, author and Stanford psychologist Carol Dweck lays out a compelling view of why we should look differently at failure and learning. The teachings in this book have impacted me deeply, even to the point where I find myself talking differently to my children.

In the past, I may have tried to encourage my kids by saying things like, “You’re so smart,” or “You’re very artistic.” Not anymore. Those phrases subtly communicate a fixed mindset; you’re either born with a talent, ability or aptitude, or you’re not. Now, instead of speaking the language of a fixed mindset, I tell my munchkins, “You are such a great learner!” and “I love how creative you’re being.” Small changes, but very important.

Personal Finance Connection: A person with a fixed mindset views financial failure as an endpoint. They’re bad with money. They’re a failure. These individuals may blame others around them for their plight, and develop deep-seated bitterness and resentment towards those who are succeeding with money.