This week, Money360 takes a look at David Chilton’s The Wealthy Barber, a uniquely-written personal finance guide that has found its way onto people’s shelves for decades. Should it find its way onto your bookshelf? Let’s find out.
The remainder of the book mostly focuses on living purchases that we all make: buying a home, buying cars, and using credit. And just like earlier, Roy (that wealthy barber) is pretty conservative on how you should do these things.
First, he establishes that home ownership isn’t for everyone. Although it’s a solid investment, it might not be appropriate for people just starting out or people who can’t appropriately maintain their homes. In those cases, it may be better to rent. He also vaguely hints that you shouldn’t buy if the housing market looks soft… I’ll let you draw your own conclusions there.
What about the dreaded mortgage. First of all, shorter term ones are better. A fifteen year mortgage means a lot of savings. Also, it might not be smart to pay ahead on your mortgage, but it does have the advantage of being money that you can’t easily touch if you do pay ahead and it does reduce future interest payments. So why not pay ahead? You might be able to do better with other investments.
For things besides home mortgages, though, you should pretty much always pay cash. It’s substantially cheaper to do it this way (I’ve discussed this in detail before). Basically, he’s pretty hard on credit use of any kind, including credit cards; if you don’t have the money in hand to buy something, you shouldn’t buy it.
The book ends on a discussion of additional investments, but the detail here is rather thin. Mostly, if you have extra money to invest with after covering all of your bases, don’t be afraid to incur a bit of risk with that investment. Just make sure your bases are covered first.
Tomorrow, I’ll give my usual buy or don’t buy recommendation for The Wealthy Barber.
The Wealthy Barber is the eleventh of fifty-two books in Money360’s series 52 Personal Finance Books in 52 Weeks.