The SImple Path to Wealth - by JL Collins

I liked the book, The Simple Path to Wealth, by JL Collins. The book is slim, with less than 170 pages. That is because the message it gives is a simple one. Its basic theme is:

• Avoid debt.
• Save maximum.
• Invest what you don’t spend.

While I would not hesitate to recommend this book to anyone interested in improving their financial life (who isn’t?), I did find many of the details are aimed at North American readers and would be irrelevant to India. But the underlying concept is universal.

Some of the ideas from the book:

• Treat money as your tool to use in creating the life you want.
• Treat money as your servant.
• Don’t be so obsessed with money that it becomes your master.

• Aim to become financially independent.
• If you live salary to salary, you will not be financially free.
• Avoid getting into debt.
• If you already have debts, first do everything to pay off those.
• Build up a reserve fund for emergencies.
• The reserve fund should be at least equal to 6 months’ earnings.
• Limit your spending to increase savings.
• Deploy the savings to increase your investments.
• Prefer index funds over stocks or mutual funds, for your investments.
• Index funds are simpler and more effective at creating long term wealth.
• A portion of your investments can go into top grade bonds.
• Bonds are less volatile and makes your total portfolio grow smoothly.
• As you get older and older, reduce investments in index funds and increase in bonds.
• (We in India can also go for Govt's savings schemes and FDs in banks or in PSUs, in place of bonds.)
• Stay away from stocks and complex financial products.
• Plan your finances in such a way that you can withdraw 4 to 7% annually for your post-retirement life.
• When you plan your finances in a simple, least complicated way, you can focus more on enriching your life.
  
  In short, to have a financially independent life:
  Avoid debts, spend less than you earn, and invest the difference.
  
  That’s it. Simple and straight-forward. Very practical and sane advice.

Habits

“Your habits will determine your future.” – Jack Canfield

Habits shape our character and our character shapes our future. To have a better future, we should have more good habits.

Why good habits are important? How they affect us? What are the benefits?

Here are the five best books on habits that answer the above questions with practical advice and useful tips.

The Power of Habit by Charles Duhigg

Charles Duhigg examines why certain routines become habits faster. He details the answer as a) cue b) routine c) reward. Morning bath (cue) and immediately after the bath you sit quietly for 10 minutes of meditation (routine) and feel calm and relaxed (reward). We also learn how habits are formed and how bad habits can be replaced by good habits.

Tiny Habits by BJ Fogg

Brian Jeffrey Fogg is an authority on the topic of habit formation. His book, “Tiny Habits” says anyone can easily form a good habit by adopting MAP method. MAP stands for Motivation, Ability and Prompt.

Motivation: You want to improve your health and decide to take up walking every morning. Your determination for better health is strong and you are motivated to a high degree to achieve the goal.

Ability: How much effort, time, and energy – in other words, your ability and capacity – can you give? You are more likely to be successful if you start with very small steps and increase the effort gradually over time.

Prompt: Because you may forget to take even that tiny action you scheduled, you use a daily activity as a trigger or a cue. When it occurs, you start your action. For example, after your morning chai, you will begin the exercise.

Atomic Habits by James Clear

Changes that seem small and unimportant at first will compound into remarkable results if you’re willing to stick with them for years.

So, break up the change you want into smallest possible actions that are easy to do and need very little will power.

And make those small actions into regular habits. Increase or enlarge them gradually. The magic of compounding will work to provide you with amazing results.

High Performance Habits by Brendon Burchard

I found this book different from the others mentioned here. It lists the desirable character traits as the habits you should develop to be a successful human being. The habits are:

 

1. Seek Clarity
2. Generate Energy
3. Raise Necessity
4. Increase Productivity
5. Develop Influence
6. Demonstrate Courage

However, the book does offer practical suggestions to succeed at what you want. With consistency and discipline, we can incorporate these six habits into our daily routines.

Better Than Before by Gretchen Rubin

The author says any action we perform regularly and frequently becomes automatic and such automatic actions are habits that require no conscious decisions. Knowing your inner self, your tendency that characterises you will make it easier for you to break bad habits and develop good habits. The four tendencies listed by the author are: Upholders, Questioners, Obligers, and Rebels.

My recommendation

While there are many more books on the topic of habits, I liked these five books as they are less academic or theoretical and more practical. However, if you want to select only one or two books, I recommend ‘Atomic Habits’ and ‘Tiny Habits’