In 1989 I was 28 years old, and – to put it mildly – was rather “Footloose and Fancy Free”, something that (besides being a Rod Stewart album) is actually 80’s code for “Wayward and Irresponsible”! Yep, it seems that after a brief marriage in my early 20’s, my approach to life was “Live hard and fast”, which meant that despite always planning to make financial plans for the future, I never got around to doing so; subsequently, I was flat broke all the time. My meagre pay checks were consistently gobbled up by never-ending visa bills, each becoming more bloated than the previous ones, mostly due to excessive charges from bars and restaurants where I would recklessly eat, drink and party with friends, living the so-called “High Life”, and all on credit; a lifestyle not unlike that which we see so many young people living today. So with no plan in place my financial future looked pretty frickin’ bleak and dismal.
Oh sure, I knew one day I’d get my act together; but I also wondered when, and more importantly how? Who would guide me? Who would show me the ways around the financial maze and point me in the right direction? I must have put out some pretty good karma, because that same year a book called “The Wealthy Barber” by Canadian David Chilton (Seen these days on “Dragons Den”) was published, and recommended to me by my brand new financial advisor. I picked it up, read it and 25 years later have never looked back from the basic – yet incredibly solid – lessons it taught me about financial planning. I credit this book for putting me on the road to financial independence, and strongly recommend it (and the sequel) to anyone who is looking for a place to start in their own financial journey.
The Wealthy Barber is an easy read; it’s basically a parable of 3 main characters: Dave, an expectant father with little financial knowledge; his sister Cathy, who is wealthy but cautious; and Roy, the barber they visit each month (where Dave gets his hair cut and Cathy just hangs out to learn from Roy) who dispenses financial tips – one per month – with the disclaimer that no new advice will be forthcoming unless the previous months advice has been put into practice. As I remember, the key lessons I learned from the book are:
- Pay Yourself First – Before ANYTHING else gets paid – mortgage, bills, rent, etc. you need to put a minimum 10% of your money away for long term investment growth, preferably by auto-debit. And whereas many people say “I can’t afford to do that” the truth is they can’t afford not to; and with a little practice, this method becomes a habit, the money isn’t missed, and creates a forced savings plan. Proof that this works is that over the past 15 years* I’ve contributed and have amassed a small fortune in my account, and still have 13 years to contribute; slow and steady wins the race…
- Invest in RRSP’s – Take that 10% and invest it in a tax-deferred account where it grows tax-free; best of all (for me at least) is that contributions are tax deductible, which means I get a much bigger return each year… Mexico, here we come!
- Get (Term) Life Insurance – A key point many people ignore; I bought a term policy (the least expensive kind of insurance) to ensure that if anything happened to me, my debts would be paid and my family taken care of – especially my young son. What I really bought was peace of mind…
- Have a Will in Place – Another key point people tend to put off which is crazy! If something does happen to us, what happens to our money? Our assets? Our family? It’s easy to know if it’s written in a will; but without one, who knows what will happen or who will get what… Let’s face it, we’re all going to die one day, so I say spend the $100 and get it over with!
- Be Aware of All Spending – As obvious as this point seems, the book really hits home that it’s not all about how much we make, but how much we save – hence “The Wealthy Barber”. Roy may not earn a whole bunch cutting hair, but with careful savings and investing he’s been able to amass quite a fortune. This point is also hit home in another one of my favourite financial books “The Millionaire Next Door” by Thomas Stanley. Both books follow the same premise of how you manage your money will make you far richer than what you earn as an income.
If you choose to read “The Wealthy Barber”, you will most likely be surprised by how simple it is written; but whatever you do, don’t dismiss it’s simplicity as lame or elementary content, for it’s anything but. It’s written in a way as to be approachable for everyone, regardless of their background; the key is to actually READ it, but more importantly DO what it recommends. And this is why I like the fictional barber’s (Roy) condition to Dave and Cathy: No further lessons will come forth until they have proof of actions being taken on the previous one. This approach is basically saying that it takes more than information to make a change, it takes action.
By following the characters leads of taking action on the steps outlined above, readers will quickly find themselves developing some solid fiscal habits, and over time, also grow their personal net worth substantially.
So to sum it all up, I guess what I want to say is this: There have been many, many books written in the 25 years since this one was first published, but few have explained the concept of personal finance so well, or made it so palatable to the average reader. I’m fully aware many people don’t agree with many of the concepts, or believe some of them to be outdated, etc. and that’s fine with me; all I am saying is that if you are looking for a place to begin your own financial journey and (like I was all those years ago) are unsure where to start, I recommend you give The Wealthy Barber a whirl and make up your own mind; I did, and believe it’s one of the key reasons we’ll retire comfortably, and with little or no financial stress. Besides, what’s the worst that could happen if you do read it? Or even better, what’s the BEST that could happen? Who knows, you may even wind up wealthy yourself! But you actually have to read the book to find out.
To finish here’s a quick video of the man himself, David Chilton.
Readers, have you ever read The Wealthy Barber? If so, did you get anything out of it; and if not, does it seem like it’s practical advice would be of help for you?
*NOTE: I say over 15 years (as opposed to 25) as I had some financial setbacks and had to start over again; however the lessons from the book were not lost.