The Wealthy Barber

by David Chilton

©1991 Prima Publishing

$19.95

Concepts covered in the book:

Be an owner not a loaner. You need to invest in equities (stocks) and not bonds, CD's or savings accounts.

Diversify. Use a mutual fund instead of individual stocks. You will need to pay taxes every year on capital gains the fund makes but mutual funds "have a low PITA factor." "'What's a PITA factor?' 'Pain in the Ass factor . . . a highly technical term.' Roy chuckled."

Dollar cost averaging. Buy more shares when the price is down and fewer when the price is up. In other words, buy at the bargain prices when everyone else wants to leave the market. Do this by putting in the same dollar amount at regular intervals even in a "bad" market. Your cost per share will always be lower than the average price. (The story form of the book doesn't lend itself too well to showing this. A spreadsheet "picture" would have been easier than the thousand words.)

Wills, Life Insurance and Responsibility chapter deals with a whole grab bag of stuff including the importance of knowing your state's laws, the time value of money, life value figured on future earnings, needs analysis, tax liabilities, and "buy term and invest the difference" versus "cash value insurance" arguments.

Tax deferred savings gives your money a chance to grow faster. (Check out new tax laws since this item is different than when the book was written and it can change again tomorrow.)

Home, Sweet Home goes over the basics on own versus rent, tax advantages to mortgage holders and how paying off your mortgage early balances "may not be your best investment alternative."

Saving Savvy: "The reason I advocated, and still advocate, keeping a detailed 'household financial summary' is that it can be very informative. If you don't believe me, try it. Keep a detailed summary of all this month's expenditures."

Income Tax: Do your own, itemize and study about what could be done to save money on your taxes. "Filling out your own return is one of the best ways, if not the best, to find out what areas of your record keeping need improvement." "A dollar saved is two dollars earned." (maybe more like a $1.75 but what the heck) "Tax evasion is illegal and is not recommended." But Tax Avoidance is recommended and done by the wealthy.

Graduation chapter deals with the graduation of Dave; his sister, Cathy and his friend, Tom from the seven month course at barber Roy's shop. It seems the last lesson has to do with saving for a child's education.

The book's claim is that it gives "the basics of developing a sound financial plan." "The comprehensive plan's strength lies in its simplicity. Anyone can understand and apply the principles that we've discussed."

This could be a book for you. I checked this out of the library because I liked the title. My sanguine daughter would key into the different personalities of the characters and the different points of view presented. A melancholy such as me would do better with numbers, graphs and spreadsheets. Some of the data is dated by newer tax laws. The ideas are sound and presented in an understandable manner. It has been worth the five or six hours I invested. I would not consider keeping a personal copy for reference.

Richard