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:

Every year I try to review the steps in Your Money or Your Life to see how we're doing. It's been about two years since my last review, but much to my delight, I found we are following most of the steps well, and I just needed to update some numbers.

Step 1: Making Peace With The Past

A: Determine your total lifetime earnings
The book was written before the Social Security Administration started sending out statements. If you have earned income all your life through regular jobs, this is extremely handy. I needed the numbers from my last review in 2004, Social Security statements, and our last tax return. The combined number for me and the Spousal Unit: $865,872.

B: Determine your net worth
So what do we have to show for all that moolah? Often, this is a depressing part of the assessment. Until recently, I came up in the negative, which is fairly common. For the last review, my net worth was a whopping $2,869. So. Add up assets: I include anything in the house that I could sell for cash, all bank accounts, current market value on the house, investments, etc. $316,183. Now for liabilities: the balance on the house, any other loans or credit card balances, and a tax debt from being a goob last year: $231,690. Net worth: $84,473. Hey! That's not entirely bad. I can tell you this: most of that increase is because we stopped throwing money away on rent and bought a house.

Just finished David Bach's Start Late, Finish Rich. At 42, I thought it would be a good intro to Bach's many treatises on personal finance. I'll come right out and say I highly recommend this book. It was full of great information, and took an optimistic, yet realistic tone. I'll try to touch on some key points.

Yes, because you started late, you are going to have to work twice as hard to put away some cash for later, but there are ways to make it less painful. Look at your every day expenditures. Is there something simple you can do without? He calls this the "Latte Factor", because so many of us spend a few bucks a day on fancy coffee. My personal Latte Factor is buying lunch and snacks, instead of bringing them from home. I can spend up to $12 a day on soda, breakfast, lunch, etc. I've cut that down to once or twice a week, and it's making a big difference. Not to mention the fact that my own meals are more healthy and delicious than anything I can buy.

Credit cards: it's the interest. Bach gives instructions on how you can call your credit card company and get them to lower yours, or how to transfer your balance to a card with a no-interest introductory offer, and make a big dent in the debt before fees and interest kick in. That last idea is a particular winner. Imagine you have $3000 credit card debt, at 18% interest. Your minimum payment is $50/month (always pay more than the minimum! But for this exercise, we'll stick to it). At the end of the year, your debt is $2940. Yes, you've just been paying interest. On the other hand, if you transfer to a card that offers no interest for a year (and don't forget to cancel that first card!), and make those same $50, at the end of the year your debt is reduced by an additional $540. Maybe it's time to take a closer look at those ubiquitous credit card offers.