The Wealthy Barber was lent to me by a friend who wasn’t very keen on financial planning (her boyfriend gave it to her)- she hadn’t finished yet. So I borrowed it.
It’s an easy read. It’s an older book (published 1995) but it’s very relevant… timeless! It’s kind of a page turner in a way- you want to find out what Roy says next, or what happens next to the characters in the book… I guess it’s like the Harry Potter or Twilight of financial planning. Somehow the author manages to pack in everything you need to know about finances (wills, RRSPs, insurance etc) into this neat storyline.
You follow the events of people who are in their mid to late 20’s in search of answers to their financial questions from the small town barber. His name’s Roy and even though he doesn’t look it, he’s wealthy.
He shares some common sense tips on personal finance and financial planning with the visitors from the city.
- Pay yourself 10% of each paycheck first
I think I read this book before The Automatic Millionaire but I guess great minds think alike. Paying yourself first before you pay everyone else (before you even think about spending it away), and whatever is left over is yours to play around with. It’s a tried and true way of making sure you save money and grow it. I started doing preauthorized withdrawals from my BMO account to the Manulife Bank high interest savings account every pay check. It’s much easier this way
- Get insurance
Basically the book says that if you have dependents (hmm in the future? When someday we will be financially ready for children?) you should get life insurance.
- Write up a will
This is important especially if you have dependents or children. Otherwise, the government will take your money or it will be held up. I guess you don’t want to leave that kind of a legacy!
Darn, The Wealthy Barber says that 10% that you’re saving each paycheck isn’t for your RRSP? Oh well, I guess you get some money back from the government. I know it’s hard to think about retirement, but just think about “home buyer’s plan.. home buyer’s plan..” instead!
- Get a mortgage for a place. And pay it off quick.
He says that renting is for losers. But what? Buy a place and get a 15 year amortization period??? Pay it off weekly? I guess there WILL be less interest paid. There goes my “fun fund”. Maybe this only works in places where the price of a closet(450 sq) isn’t $400,000. Maybe it doesn’t work in Vancouver. I think I need to work on the “downpayment” part first, let alone paying something off weekly and within 15 years!
- Be cheap
He emphasizes the fact that if you save a looney it’s really a tooney! (because it’s after tax dollars that we are saving). So it really does pay to save that extra $10 if you price match your new Mp3 player at Best Buy. The Wealthy Barber does say that it’s okay to not be that cheap, because if you save the 10% and max your RRSP’s, you should still come out ahead of the game.
- Minimizes the taxes you pay
David says that it’s better to pay off your mortgage before you start the 10% savings (if you don’t have enough for both, that is) because you are using your AFTER tax dollars to pay off your mortgage. I’m not sure if I agree with this 100%. Then again, I don’t have a mortgage yet!
The book says that you should also put some money away for your kids (if you have any) because the RESP is a good tool from the government to encourage us to save.
In summary, I rate this book 10/10. Easy and entertaining read. Good common sense. Practical. One of the first financial books I have read and it gives a good simple yet comprehensive summary of what you need to do to have a good financial plan to be financially secure in the future.
Have you read The Wealthy Barber? What do you think? They probably need to do a new edition with the new TFSA option out.