The Wealthy Barber

When I picked up The Wealthy Barber from the public library, I figured it must be good: the book was well-worn, the cover bent, pages dog-eared, passages highlighted, whole sections annotated in pencil and pen. Only the best personal finance books receive this sort of treatment. I'm pleased to report that The Wealthy Barber is a good read — author David Chilton offers an excellent introduction to personal finance.

The Wealthy Barber‘s gimmick is that instead of presenting information in a dry subject-by-subject manner, Chilton has written the story of Roy, a small-town barber who is also a millionaire. (Roy got rich slowly.) The reader learns about IRAs and whole life insurance and compound interest as Roy dispenses advice to a trio of customers, each of whom has different financial circumstances. (This allows Chilton to highlight different approaches to certain problems.)

The Wealthy Barber‘s financial planning guidelines include:

  • The Ten-Percent Solution: “Wealth beyond your wildest dreams is possible if you follow the golden rule: Invest ten percent of all you make for long-term growth.”
  • Wills, Life Insurance, and Responsibility: “The importance of an up-to-date will cannot be overstated.” Estate planning is simple, Chilton says, and can save much future grief. He also covers life insurance.
  • Planning for Retirement: Chilton discusses the purpose of Social Security and explains why it cannot be counted upon, especially for the wealthy. He explains individual retirement accounts and discusses the magic of compound returns. “Start investing now!” he says.
  • Home, Sweet Home: Chilton offers standard advice on buying a home, though he's more wary than most about inflated real-estate prices. (And this was written long before the recent housing bubble.) “Paying rent is no more throwing your money away than buying food or clothing is. You need shelter. It's one of the three basic necessities of life. Renting is one way to acquire that shelter and, in some cases, it's a very intelligent way.”
  • Savving Savvy: Here's a surprise: Chilton believes budgets are optional. He stresses saving through frugality. “A two-dollar raise [in wages] often translates into only a one-dollar increase in disposable income, the same increase that would result from saving a single dollar.” If you can save $200 when buying a computer, the net effect is the same as receiving a $400 bonus in pay.
  • Insights into Investment and Income Tax: The book's discussion of taxes is run-of-the-mill, though I do love his advice about spending a windfall: “There's simply no better alternative for the average American than to pay off his or her non-tax-deductible debt.” If you get a windfall, pay off your credit cards!
  • Graduation: Chilton believes a six-month emergency fund is excessive. He recommends keeping about $3,000 set aside. He also spends some time discussing college savings. And he mentions something that I've not discussed much at Get Rich Slowly: “Your biggest asset, by far, is your earning power.”

Chilton sticks to the basics. He stresses the importance of paying yourself first, encourages retirement savings, and so on. But his advice is more pragmatic than most. He says that if you take care of the Big Stuff, then you don't need to sweat the small stuff.

Our ten percent savings, retirement plan contributions, insurance premiums, and mortgage payments or rent are coming off the top, that is, not being taken from whatever is being left over at the end of the month. So, how we spend our discretionary income has astonishingly little impact on our financial future. As long as people are following the rest of our financial planning guidelines, how they handle day-to-day finances can safely be left up to them.

The only problem with The Wealthy Barber is minor for a personal finance book: it's not a particularly well-written novel. Sifting through the extra passages necessary to make this a novel can make it difficult to find just the good stuff. (I'd love to see a Good Stuff version of this book with all of the narrative removed.)

Next week, I'll share some of my favorite passages from The Wealthy Barber, which is now one of three personal finance books that I feel comfortable recommending:

  • Dave Ramsey's The Total Money Makeover is an excellent starting point for those saddled with huge debts, or for those who want financial advice from a Christian perspective.
  • Your Money or Your Life is a good choice for those who want to track every penny they spend, or for people considering an early retirement. It's also excellent for those who favor a frugal lifestyle, or are leaning toward voluntary simplicity.
  • The Wealthy Barber is the best all-around personal finance guide I've read. It's good for just about everyone. It's non-technical and provides solid advice.

These are each excellent choices and are readily available at your public library.

More about...Books, Planning

Become A Money Boss And Join 15,000 Others

Subscribe to the GRS Insider (FREE) and we’ll give you a copy of the Money Boss Manifesto (also FREE)

Yes! Sign up and get your free gift
Become A Money Boss And Join 15,000 Others
guest
11 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
Justin Thibault
Justin Thibault
14 years ago

Don’t forget “The Richest Man in Bayblon” in your list. I have a theory that all personal finance advice books use this as the original reference.

dan
dan
14 years ago

I was wondering if you’d read “The Wealthy Barber.” I read it a month ago and have raved about it ever since. In fact, I was thinking of buying one for my younger siblings because it has such good advice. I’m also planning to open a mutual fund and follow the 10% savings plan. It’s an excellent book.

Devon
Devon
6 years ago
Reply to  dan

Hey Dan, You mentioned that you were looking to invest %10 of your earnings into mutual funds. Mutual funds can be a good investment if you can beat the average (which is generally 10%), but all mutual funds charge a MER (Management Expense Ratio) of 2-3% so your return is generally less. Mutual funds charge these rates EVEN IF THEY DON’T beat the index, because of that I would lean more towards index funds to avoid all those nasty fees. Do your research and avoid actively managed funds, because 80% of fund managers are don’t be the average. Remember no… Read more »

Jason C
Jason C
14 years ago

Thanks for the review! I’ve been looking for information on investing. I’m just starting to explore my options and I’m getting a little overwhelmed. Can anyone recommend an investing 101 book or web reference?

VinTek
VinTek
14 years ago

Jason,

It depends on how old you are. If you’re young (20s), I think that “The Only Investment Guide You’ll Ever Need” by Andrew Tobias will give you a good foundation for the rest of your life. If you’re older, then “The Random Walk Guide to Investing” by Burton Malkiel is good one; it does a little more emphasis on asset allocation, which is helpful because as you get older, you’ll start shifting your strategy away from growth toward capital preservation.

J.D.
J.D.
14 years ago

I haven’t read any investment-only books yet, but I have The Only Investment Guide You’ll Ever Need by Andrew Tobias and Rule #1 by Phil Town out from the library, and hope to do reviews on them soon.

Jason C
Jason C
14 years ago

Thank you VinTek and J.D. for the replies.

I’m 31, married without children, still renting and have a decent paying job. Anyway, I suppose I’m starting a little late but, at the risk of sounding cliche, “better late then never”.

J.D.: I will keep an eye out for those reviews.

VinTek: I will take a look at both those books.

Thanks again!

Terry
Terry
14 years ago

Great review of the Wealthy Barber. I linked to it today from my article entitled “Transforming Debt Into Wealth”.

-Terry

rmark
rmark
13 years ago

“The Wealthy Barber” is the best beginners book out there. Add to it “Four Pillars of Investing” by Bernstein,and “Common sense on Mutual Funds” by Bogle, and you have a fairly complete library in only 3 books.

“Your Money or Your Life” is a philosophy book, not a personal finance book.

emmanuel ngwa
emmanuel ngwa
12 years ago

I have read Automatic Millionaire by David Bach and a book by Sueze Orman.I often advise my friends at work (those who often asked me for investment tips) to save 5 dollars a day.This translates into 150 dollars a month.If you can do this for 5 months, then I know that you are ready to take control of your finances.

Marc
Marc
11 years ago

For a Good Stuff version of this book with all the narrative removed, simply read it with a highlighter and pen in hand. Mark up the good stuff. Then it’s highly visible when you need to come back to it.

shares