This week, Money360 takes a look at David Chilton’s , 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 first lesson that the group learns from the wealthy barber is the centerpiece of the book; Chilton refers to it as the ten percent solution. Simply put, the barber posits that he got rich by socking away 10% of his income each year. That’s pretty much the whole chapter in a nutshell.
This premise seems so simple and you hear it repeated so often if you look into personal finance advice that most people just sort of blow it off, but the reason it keeps getting repeated over and over again is that it simply works. There is no better way for a lower or middle income person to end up quite rich than to simply save a certain percentage of their income – and 10% is a nice round number. Obviously, more is better and less is worse, but 10% will leave you very well off in your later years.
Roy (the titular wealthy barber) goes through a number of investment options, but mostly sticks with fairly conservative vehicles for investing. The book recommends using mutual funds, particularly low-cost index funds. Within a few pages of that, the book strongly discourages investing in individual stocks, which runs in interesting contrast to how many people view an investment portfolio, as many finance books encourage a bit of investing in individual stocks as a “speculation” element to a portfolio.
The book also touches on real estate investment, not deriding it but not jumping up and down and recommending it, either. One of the characters does invest in real estate, but it’s not based on a strong recommendation from the wealthy barber.
Tomorrow, we’ll continue looking at the advice offered by Roy, the wealthy barber.
The Wealthy Barber is the eleventh of fifty-two books in Money360’s series 52 Personal Finance Books in 52 Weeks.