The Wealthy Barber
Just under a decade ago I picked up my old, dusty copy of David Chilton’s ‘The Wealthy Barber‘ from a garage sale for $2 dollars.
The book sat on my shelf for about a year before I ventured beyond the table of contents and today I can honestly say I’ve never got such a return on a $2 investment before!
The Wealthy Barber isn’t an advanced guide to stockpicking and it sure as hell isn’t a dull and dry old textbook on investing.”
The Wealthy Barber is a fun and easy to read book combining a story and a series of personal finance principles that every man should know to ensure he sets himself up for success.
Some individuals are determined to become millionaires, they value money greatly.
Others couldn’t really care less…
But once the link to money and freedom have been made EVERYONE grasps the importance.
Money is freedom.
Without a solid financial plan you’re left working ridiculous hours in a job you hate in order to pay off your bills and loans… when your finances are in order you can work when and where you want and have the peace of mind of security.
See? Money is freedom.
The Key Concepts From The Wealthy Barber
Below are the key lessons and investing principles I found within The Wealthy Barber…
Invest 10% Of Your income For The Long Term
“The magic of compound interest – interest on principle and interest, not just simple interest on principle. The eighth wonder of the world.”
Compound interest works wonders, the power of a regular investment and time build many, many fortunes.
For example, $100 invested each week for 20 years with a 8% return will leave you with $256,999.19.
This technique is always overlooked because it’s not flashy, it doesn’t involve picking a lucrative penny stock and taking a roll of the dice, hoping you get 10x back on your investment. Investing 10% is simple and it works long term.
Pick Funds, Not Stocks
Picking an individual stock is like trying to pick the needle in a haystack.
Investing in a fund, particularly an index fund is the equivalent of owning the haystack.
Make A Will
Regardless of whether you’re single or married you must keep an up to date will.
Without a will your estate will be given to your parents, whether this is your wish or not.
Without an up to date will statement listing what you own and what you owe accounts can go missing and be forgotten about!
Understand Life Insurance (And Whether You Need It)
We don’t all need life insurance, understanding whether you need it before taking action is key.
You only buy life insurance when there’s a definite need to protect your dependants and assist in winding down your financial affairs.
If you’re free of debt there’s no need.
Put Money Away Today For Tomorrow (Retirement Fund)
Your retirement fund reaps the benefits of compound interest that we discussed earlier.
If possible, it’s highly recommend to make additional contributions to your retirement fund as many employers will match your contribution to a certain percentage or offer tax benefits.
Remember, a few dollars invested today is worth thousands in the future!
There’s No Simple Answer To Home Ownership
Should you own your own home? You may be surprised to hear that there’s no 100% definitive answer to that question…
Many individuals will say that their house is the best investment they’ve made… all too often their home is the only investment they’ve ever made!
Home ownership results in a large portion of money tied up in one asset, if you’re able to get a better return be it through an index fund or your own business then by all means consider renting and using your liquid cash for these ventures.
Look At The Big Picture, Don’t Penny Pinch
When it comes to budgeting the difference between your needs and your wants can often be hard to define, this is why David Chilton does not recommend following a strict budget. Instead don’t sweat the small stuff.
There’s no need to cut out all wants and find yourself living in misery today just so you can have some cash in the bank in a number of years time…
If you want a coffee each morning, go for it as long as your long term strategies are in place – e.g. investing 10%.
My Highlighted Quotes
“Time is your greatest ally.”
“For too many people, a want becomes a need.”
“The magic of compound interest – interest on principal and interest, not just simple interest on principal. The eighth wonder of the world.”
“If you want to learn to do something right, watch someone who does it successfully.”
“Hell, we’re raising generation after generation of financial illiterates.”