When David Chilton came out with The Wealthy Barber decades ago, it was remarkable in that was a financial self-help book that was fun to read and easy to understand.
His follow-up book, The Wealthy Barber Returns, does not disappoint. It’s friendly, clear, and helpful, and is not mired in overcomplicated examples, tables, and worksheets. It feels more like you are benefitting from the experience of a good friend who’s bested some of the financial headwinds that have you mired down.
He begins with the “painful truth” that unless you come from money or marry into it, “you’ll have to learn to spend less than you make,” a message that “clearly hasn’t sunk in with the majority of Canadians.” Because of that, he continues, “a disturbing number of us aren’t saving enough to fund our future goals, most notably, a reasonable retirement.”
People, Chilton writes, think saving “requires sacrifices today” that somehow lessen life. “Surprisingly, it’s quite the opposite! People who live within their means tend to be happier and less stressed,” he notes.
One way to spend less is to avoid going to places where you like to spend money, or to leave credit cards at home. “Giving into temptation is only a mindless swipe away,” he warns. Currency users look in their wallets and see “a finite amount of cash – the ultimate forced discipline.” Those with credit and debit cards carry “virtually unlimited funds,” which may explain why average Canucks have $15,000 to $25,000 in credit card debt, Chilton writes.
“Credit cards allow us to act wealthier than we are, and acting wealthy now makes it tough to be wealthy later,” Chilton points out.
Another way to ramp in spending is to learn the phrase “I can’t afford it,” he notes. He cites the example of home renovations, which almost always go overboard. “More than half of the people I know who are in trouble with their lines of credit… arrived there via excessive home-renovation expenses,” he observes. If you are going all out on the house with borrowed money while neglecting your RRSP or your kids’ education, Chilton warns, “yeah, that’s an issue.” Instead of paying for heated marble floors, buy slippers, he adds.
Lines of credit “are helpful, yet insidious…. when drawing from your line of credit, always remember this incredibly basic but ultra-important fact. It’s not your money, it’s the bank’s,” he writes. Be careful at the bank with credit lines, because if you ask for a $30,000 line you may get approved for much more. “Just say no,” he writes. “You are your own credit-control board.”
You don’t want to take debt into retirement, Chilton states. “It drains cash flow, creates worry, and is subject to interest rate risks that will most assuredly follow Murphy’s Law,” he adds. He’s also leery about reverse mortgages.
In a chapter on retirement, Chilton says that most experts recommend that you put 10 to 15 per cent of your gross income away for retirement. “Don’t despair, though,” he writes. “A relatively small cutback in your spending rate can dramatically increase your savings rate.”
He concludes by reminding readers to “pay yourself first” by directing a set portion of your earnings to savings. The Wealthy Barber Returns is a great read, an insightful overview, and is non-threatening. You won’t feel like you’re a financial failure after you read it, but you will learn to recognize (and correct) your own bad habits.
If you are thinking of paying your future self first, why not set up an account with the Saskatchewan Pension Plan? The amounts you contribute will be carefully invested, will grow, and will be harvested in the form of a future lifetime pension. It’s an option worth checking out!
|Written by Martin Biefer
|Martin Biefer is Senior Pension Writer at Avery & Kerr Communications in Nepean, Ontario. A veteran reporter, editor and pension communicator, he’s now a freelancer. Interests include golf, line dancing and classic rock. He and his wife live with their Shelties, Duncan and Phoebe, and cat, Toobins. You can follow him on Twitter – his handle is @AveryKerr22|