Everyone's Commonsense Guide to Becoming Financially Independent
I found out about this book in the many forums I subscribe to. Everyone seems to have good reviews about this book. It's similar to The Richest Man in Babylon. Its financial planning book comes in a story form and also is not a get rich quick book.
The Wealthy Barber:
The Common Sense Guide to Successful Financial Planning
Chapter 1. The Financial Illiterate
The story starts with the writer telling about his life and wife who is five months pregnant. He and his wife are from the same town. They often go back there to visit their parents. This time he goes back to visit his father to ask how he can be financial literate. So the story begins on his journey to be financial free.
Chapter 2. A Surprising Referral
One Friday night the author and his father discuss on the topic of financial literates. As a family they have never discussed about money. As the author wanted to buy a house and a baby was on the way, he felt that it was about time to be financial free. His dad told him that he too didn't know about personal financing until six years ago. He then tells how he found an unlikely financial guru. The town's barber. After his father explains how his barber taught him about personal financing, the author tells his sister about it. Both of them agree to visit their dad's barber to learn how to be financial free.
Chapter 3. The Wealthy Barber
As with their usual routine, the author and his friend Tom visit Roy their barber for haircuts. But this time its different, other than a haircut, they also came for some financial advice. He brought along his sister Cathy. Roy the Wealthy Barber agreed to teach and said he will teach them in different parts. So in seven months onwards they can be financial free. He tells them that it is really easy to be financial free.
Chapter 4. The Ten Percent Solution
Despite the storm Dave, Tom and Cathy visits Roy the Barber for their first lesson. Roy starts by telling them how he seeks the advice of Old Man White, one of the town's wealthiest men on ways to build financial wealth. Mr. White advised him to save ten percent of his salary to invest later. Even
Robert Kiyosaki said this technique is useful. So as you have savings t invests when an investment opportunity comes along. Later throughout the conversation Roy teaches what to invest in, how to choose and what to avoid.
Chapter 5. Wills, Life Insurance and Responsibility
This month Roy discusses a subject of what some people feels it's boring and thinks it's not important. Setting up a will and buying insurance, preparing your loved ones when you are not around. He starts by teaching his three protégé how to chose a lawyer to draw up a will, to map out what should go in the will and why is it important to have a will. The wealthy barber then goes on to teach them about insurance, how to choose one that suit them.
Chapter 6. Planning for Retirement
This month The Wealthy Barber teaches his three protégé how to plan for retirement. What plan that suits them. As for me after reading Rich Dad Poor Dad and Cashflow Quadrant and doing some research. I found that my contributions to the Malaysian version of the 401K is not sufficient when I reach retirement age. This is due to the ever increasing inflation. So now I am looking in other venues for my money like mutual funds.
Chapter 7. Home, Sweet Home
As Dave was planning to purchase a house for him and his family, Roy the Wealthy Barber changes the lesson plan to the topic of purchasing or renting a house. Roy says both is not wrong, you need to see your requirement. Everyone needs shelter same as they need food and drinks. But if it cheaper to rent than why burden yourself with buying. Roy then teaches his protégé how to evaluate whether they should buy or rent their shelter. He then teaches Dave some tips on buying a house. The tips are to buy a house that suits your needs and wants and should also fill the requirement of a good investment.
Chapter 8. Saving Savvy
This month Roy teaches them about savings. Not the monthly 10% but saving for things like a new hi fi, holidays. People nowadays enjoys those things by maxing out their credit card by buying the things. I am guilty of that. I have living for years without a credit card and managed to enjoy myself. Then a credit card came in the mail and I was tempted to go on holidays every three months. My reasoning was that I worked very hard and needed a break. Eventually I maxed my card. Now I am slowly clearing my debts, lock my cards in a safe box and forcedly save a portion each month for my holidays. I also look around for great deals or discounts. I am living below my means.
Chapter 9. Insights into Investment and Income Tax
In this chapter Roy starts by explaining that the rule of thumb to investing is to "Buy Low, Sell High". But many people fail at investing because they don't have the discipline and courage to follow this rule. He then teaches them how to identify what to invest in. Roy then advises his protégé that it's best they clear the high interest debts first. Then he goes onto talk about income tax. He teaches his protégé to take a deductible loan to pay off a non deductible loan. Therefore this loan will reduce the contribution to income tax. The wealthy barber also suggests to get professional help when doing income tax.
Chapter 10. Graduation
This last chapter is the end to The Wealthy Barber's lessons. This chapter he talks in detail about emergency funds, saving for a rainy day. Most financial gurus give a set amount to save but what Roy says is what's the use of having large amount of savings and a high interest consumer debt. He suggest to keep little money for a rainy day and use the rest to pay up the debts. He also suggest to look for the best Savings Bond to save for the children's education.
This book is a little technical, so I would suggest to read
Richest Man in Babylon first. But the points highlighted is relevant to people who wants to be financial free.
