The Wealthy Barber Returns

February 23rd, 2012 by Potato

I just finished Dave Chilton’s The Wealthy Barber Returns (and a big thanks to Nelson of Financial Uproar infamy for not only giving me a free copy of the book, but also eventually shipping it, too! [And a further aside: he gave me some free slurpees to make up for the delay in the thing he was giving me for free anyway, which shows that deep down inside, he’s really a super nice guy] ;)

I really enjoyed it. It’s a short read, just over 200 pages with block-formatted paragraphs and many blank filler pages to make it fly by even faster. He writes with a very casual, humourous, down-to-earth tone and conveys the simple yet important financial lessons we all need. The book is broken up into many short chapters of just a few pages each; in fact the whole thing reads a little like a well-put-together blog printed out and bound. It reads like my blog, or at least, what I imagine my writing voice reads like outside of my head (though that may go over about as well as how I imagined my speaking voice sounded outside my head before I had a tape recorder).

There are no complex calculations, just common sense (or uncommon sense) and some rules-of-thumb. I’m going to find this a very easy book to recommend and pass along.

About the first half of the book is spent on the basics: living within your means, controlling debt, paying yourself first. He does a good job of covering the psychological tips that can help people set and meet goals, and candidly discusses some strategies that have and have not worked for people he’s met with over the years. The second half is more on investing, and covers index investing, the importance of fees, reasonable rates of return (and how important the rate of return can be to final outcomes), and so much more. He very nicely hits the main points on the eternal RRSP vs TFSA debate, including two important behavioural ones that don’t fit into the math: what if you spend the tax return from your RRSP so you aren’t really contributing pre-tax dollars, or are tempted to raid your TFSA for non-emergency spending?

Other random take-aways: he calls the Vancouver and Toronto housing markets crazy. It was just one paragraph, but I was glad to see it — the bubbles really do impact the financial planning in the rest of your life. He didn’t have a definitive position on emergency funds or LoCs either: EFs are great, but entice people to over-spend. But so does having a LoC at the ready. He’s got a very sensible answer for the eternal question of paying down the mortgage or investing (yes, and right away!). Mentioned at several points, living within your means and saving for the future actually leads to people being less stressed and happier, even though they don’t have as much stuff to enjoy right now. Stuff isn’t that awesome, anyway.

All-in-all, good points.

Now if I may be permitted to wander off into unnecessary criticism land (where I spend enough time to be a dual citizen), the lack of math and scary details cuts both ways. It’s a very easy read as it is, and not at all intimidating, which makes it easy to recommend to the financial novice in your life or the financial expert who will just enjoy it as a breezy bedtime read. But the lack of details mean people are going to have to fend for themselves or go off and do some further reading before they get into the tricky business of actually following through on creating a financial plan and investing. That extra step may slow them up, and some details, tucked safely away in a protective appendix where no one could accidentally hurt themselves, might have helped with the get-up-and-start-now aspect. Or it might have doubled the length of the book for no good reason.

Anyway, that leads me out of unnecessary criticism land and into the kingdom of self-promotion (whose customs I find strange and foreign). As you may recall, I wrote a book called Potato’s Short Guide to DIY Investing (one I now have to update, if only to include The Wealthy Barber Returns in my reading list for what you should have read before reading my book to get the basics of having money saved and ready to invest down). It is a short book, written by me, about do-it-yourself (DIY) investing, and it was written by me! Wait, I’m doing this self-promotion thing all wrong.

What I was thinking as I was finishing off this book is how well my book complements it. David’s book does a good job of telling you that it is important to invest for your future, explaining the ways you can invest, and most importantly, prefacing all that with a lot of good advice about how to budget and save enough so that you’ll actually have money left over to invest. He tells you about the importance of fees (though I have a graph), and does a better job than I do about explaining why indexing is the way to go. From there, my book picks up and tells you how to do that: what a few examples of low-MER index-following investments are and where to find them. Step-by-step instructions on how to open an account and actually buy or sell the bloody things. A bit about basic asset allocation (though admittedly, that could use a bit of spit-polish in v1.1). What you need to write down as you go along so that you have a head start on panicking at tax time. Basically all the stuff that’s not in the other personal finance books.

I wrote my book intending for it to be so short, so easy to read, and so practical that it could be the first book you read on investing, and use it to get started so you could get the power of compounding working for you as soon as possible while you continued to educate yourself. I was clearly wrong on at least one point: it should be the second book you read.

One Response to “The Wealthy Barber Returns”

  1. Saturday Morning Dump: Hitting On Waitresses » Financial Uproar Says:

    […] Holy Potato finally got around to reviewing that copy of The Wealthy Barber Returns that I finally got around to sending him. And then he takes the opportunity to pimp his short guide to investing, which is actually quite good. […]