Book Review - The Wealthy Barber by David Chilton
I have heard of the book The Wealthy Barber frequently over the years, but something prompted me recently to finally read it. The tag line on the book is Everyone's Common-Sense Guide to Becoming Financially Independent. After reading the book, written by David Chilton, I have to agree. The ideas are very good, if people can rearrange their budget to accommodate them.
You always hear that we should be saving 10% of our income. I have heard mixed things about where that savings should go and what it should be used for. Personally I don't consider it true savings if the money is already earmarked for something like an annual insurance payment. I have always thought that true savings is savings that isn't designated for anything. Chilton must agree. He is one of the few people I have ever heard of talk about saving 10% of your income and also cover all the other miscellaneous expenses that come up all the time without dipping into that 10% fund.
Most people seem to want a quick fix to their problems and to get rich quickly. The Wealthy Barber has a plan that will eventually get you everything you want, but it will be a slow and steady course. If you are willing to wait you could be wealthy too, in fact the longer you have the better. It is all about steady investing, over a long period of time and compound interest. Sounds easy enough right? Are you willing to save 10% of your income for the rest of your life? Can you save 10% of your income? That would be the question for us. Even with no debt other than our mortgage we are not able to save 10% of our income.
I am a very frugal person, but there are so many other things we have to save money for right now (roof and minivan are at the top of the list at the moment) that I just keep thinking someday. You see the 10% savings Chilton is talking about is above and beyond what you should be saving for retirement. By the time you take out retirement savings (assuming you are putting 10% aside for that) and the 10% fund, you are suddenly required to live on only 80% of your take home pay.
Seeing as most people, especially in the United States, have been living beyond their means for the past few years and have only recently stepped up their savings I don't see many people able to do this. Oh I am sure everyone wants to be rich in the end (who doesn't right?), but are they able to make the sacrifices now to reach that goal? Are they willing to? Am I willing to? Believe me, since reading The Wealthy Barber I have been thinking about this and trying to figure out a way.
That is one of the things I loved about this book. It made me think and it made me want to change the way I have been doing things, for my long term benefit. The Wealthy Barber is written as a story (fictional) of a man and his two friends that get financial planning help from their barber each month. It is very well written and entertaining. Learning the ins and outs of personal finance is surprisingly easy when reading this book.
One point that really stood out to me was when on page 156 Roy (the wealthy barber) announced that "First, a dollar saved is two dollars earned." He clarifies this point by talking about how if you got a two dollar raise at work, after taxes, health care costs and other deductions, the average person would really only take home one dollar. This is where frugality comes into the book. By saving money on items that you purchase you are saving yourself a lot of work. So by saving a dollar on something, you are saving yourself two dollars worth of work. A very good point! This has made me watch my pennies a bit closer.
The Wealthy Barber is an excellent book and I think it would be an especially easy financial book for beginners to read. It is very easy to understand. Less than 200 pages, it is a fairly quick read, although I liked to stop and think about each chapter before heading on to the next. I tried to read a chapter a night and it worked very well. I would highly recommend The Wealthy Barber.