Pimp Your Finances

What sets “The Wealthy Barber” apart from other books is that it makes personal finance simple and approachable.  It’s a fictional tale, written from the point of Dave, a soon-to-be-father.  He is inspired to learn about money after realizing his wife is pregnant.

Confused about where to start, he approaches his father.  His dad sends him to a surprising mentor - their barber, Roy.  The father explains that Roy taught him everything he knows about money, and offers to call Roy and let him know that Dave is coming in for a lesson.

Dave, joined by his sister Cathy and best friend Tom, go to the barber for a financial lesson.  Roy is a small town barber who has amassed a small fortune on a small salary.  He explains that he did this by following a few simple rules, and offers to teach them to the trio on a monthly basis.

The lessons include:

1. Take 10% of your salary, and save it by paying yourself first.  This is not a retirement or emergency fund – it’s a get rich fund.  Every time you get paid, take 10% of your paycheck and invest it.  The author suggests mutual funds, but I’d be willing to bet that if I had a newer copy, he might suggest index funds too.  I’d add the caveat that you should invest 10% or your pre-tax salary if you really want to get ahead.
2. Make sure you have a will and life insurance.  You need to think of your dependents, even if you’re not around.  No dependents?  Don’t worry about life insurance
3. Save for retirement, and don’t rely on social security.  No advice on how much to save, but he explains the different types of retirement plans available, including 401K, 403B, IRA, pensions, SEP (Simplified Employee Pensions), and Keoghs (for the self-employed).
4. When deciding whether to rent or buy, do a comparison and make sure you think of the consequences.  Roy leans heavily towards buying a house due to tax advantages, increasing value, and leveragibility, but he also points out that depending on your situation, renting might be a better value.
5. Be thrifty and frugal in your day to day finances.  The barber suggests having a budget, but also says if you’re saving and planning for retirement, you can afford to be a little wasteful. 
6. Make smart investments (even if the investment is paying down debt), and learn how to minimize your taxes
7. How to handle emergency funds – only have a small one.  This one of the few areas I disagree with.  The author says that you don’t need to worry about having a significant emergency fund, as you can always use credit cards or loans in a crunch.
8. How to save for your childrens’ education
9. The importance of disability insurance.  I agree completely.  All it takes is one accident to change your way of life and ability to earn an income.  You need to protect against this if you want to protect your lifestyle.
10. The importance of staying informed of financial news.  You don’t need to check your investments continuously, but you should at least be aware of what’s going on in the economy.  An informed investor is a smart investor.

Unlike many books that make finance seem too complicated, the Wealthy Barber emphasizes that anyone can get rich.

The fictional story line makes for an entertaining read, even if the jokes are corny.  The three protagonists provide a good sample of the potential audience: a married man with a family, a single business owner, and a single worker.  The diversity shows that the lessons apply to you, regardless of your situation.

This is a great read for everyone.  It covers the basics of finance well, and also makes the principles of building wealth available to everyone, regardless of income.  It’s an enabling and encouraging point of view.

Executive Summary:

Title:  The Wealthy Barber

Book Jacket Summary:

Regardless of your income, you are probably making a salary that would have looked like a small fortune just a few years ago.  And yet, if you’re like most people, you are not on your way to financial independence.

The amazing thing is that even if your income were twice what it is today, or more, you would not necessarily be any wealthier.  Most people simply become broke at a higher level – the more they earn, the more they spend.  And if you’ve tried budgeting, you’re realized that it is as ineffective as dieting – it only makes you feel deprived.

Thankfully, with this special book, there’s a way for you to become wealthy gradually, starting today.  The Wealthy Barber has already shown hundreds of thousands of people how to improve their fortunes by taking a few simple and painless steps.  And by successfully helping so many get ona  sound financial track, it has proven that a small salary is no barrier to financial well being - as long as you follow its simple, easy, and enjoyable plan.

Author:  David Chilton

Target Audience:  Everyone

Pages:  200

Topics / Chapters:

1. The Financial Illiterate

2. A Surprising Referral

3. The Wealthy Barber

4. The Ten Percent Solution (saving and investing money to get rich)

5. Wills, Life Insurance, and Responsibility

6. Planning for Retirement

7. Home, Sweet Home

8. Saving Savvy

9. Insights into Investment and Income Tax

10. Graduation

Should I Read It?  Read it twice