“All achievement, all earned riches,
have their beginning in an idea.”
- Napoleon Hill
have their beginning in an idea.”
- Napoleon Hill
EMPOWER
A publication of www.judypowell.com
A publication of www.judypowell.com
March 2010 - Volume 1, Issue 1
Summary of the key points from:
The Wealthy Barber – The Common Sense Guide to Successful Planning
by David Chilton
My Personal Review:
Canadian best-selling author, David Chilton, provides a wealth of knowledge and
information in a conversational style which makes this book on personal finance and
investment an easy read. Unlike the typical work on money and finance, the reader isn’t
bogged down with financial terms and investment jargon. Instead, the author makes his
point through the story of a wealthy barber who shares his experience and financial
knowledge with others.
On the downside, those who like to quickly get to the soul of the matter may find Chilton’s
story-telling style a bit annoying.
But if you have the time, and prefer a stroll to a sprint, this book is for you.
KEY LESSONS:
1. Never borrow money to purchase items that do not appreciate (e.g., cars, trips,
consumer goods). On the other hand, good investments on which to take out a loan: an
asset like a house, education (e.g. to upgrade skills), business (money-making venture).
These investments increase your value and are worth borrowing on.
2. The golden secret to wealth: “Invest ten percent of all you make – for long-term
growth”. Note the power of compound interest – that is, interest on top of your principal,
then interest on top of that total. With compound interest your money multiplies at a much
faster rate.
- For example, if you save $200/ month for 30 years, your straight total = $ 72,000.
- However, at 15% compounded that same investment would yield $ 1.4 million at the
end of the same 30 years. * Key – try to save in an instrument where you won’t keep
going back to withdraw.
3. If you are not a disciplined saver this is the key – PAY YOURSELF FIRST. Have
the money taken out of your pay cheque or bank account before you have a chance to
spend it.
- Contact your bank; have them set up an automatic deduction and transfer to a
separate bank account and from there to an investment.
- Once you set this up, you will learn to live without that money and begin to survive
within your means, that is, the 90% left from your earnings.
4. When investing over the long-term, own rather than loan. For people able to leave
their money in investments for several years, go for mutual funds because they are usually
professionally managed, diversified and they are a “hands-off investment” (no ongoing
research and decision-making process is required).
- In the face of market fluctuations it is best to do dollar cost averaging (buying mutual
fund shares at regular intervals with a fixed dollar amount).
- For example, $100/month every month; when stock value falls it helps you because
that $100 buys more stocks and over the long-term the stock value will rise. In the long
run, when the value of the stocks go back up or even rise higher than before, you will end
up owning more of these valuable stocks.
5. Outside of stocks, another viable investment option is real estate. Home ownership
is the ultimate forced savings programme. Also, leveragability makes real estate the
greatest investment.
- Leveragability applies to an investment that has not only the ability to be leveraged,
that is, to be borrowed against, but also has the ability to produce an income to offset the
costs of being leveraged.
- For example, it is possible to take out a loan against your home, rent the property (or
a portion of it), and use that rental income to pay off the loan. At the end of the day, you
will have paid off the loan and still have your asset.
6. When buying a home, location is the key. Better to buy the worst house on a nice
street than a great house in a poor location (you can always fix up the worst house in the
good area, but you can ‘t move the good house from the terrible location). Ideally, seek
locations close to schools, public transportation and shopping.
7. If you have to move a lot and are not sure if it makes sense to buy a house each
time, it may be better to purchase a house in your home town (where you are likely to go
back and settle), rent ti out and use the money to cover your own rent wherever you go.
8. Although home ownership is an excellent investment it is not perfect. Home
ownership comes with greater responsibilities and costs that the home owner must be
prepared to deal with. Renting may not necessarily be a bad option if the renter uses his
lower monthly cost to his advantage – that is, he saves even more than 10% of his income
and invests the money wisely and consistently, in a disciplined manner.
9. Life insurance – only buy this if you have dependents (single people with no
dependents don’t need life insurance but people with children depending on them especially
need life insurance). Note – the premiums and the commission rates on cash value policies
are much higher, so buy term life insurance and the money you save (the difference),
invest it elsewhere.
10. Get disability insurance to protect your income. There is a one in four chance of
becoming disabled during your working life.
11. If you suddenly find yourself with excess cash (from an inheritance, a bonus, etc.)
the best use of this unexpected money is to pay off consumer debt (e.g. credit card debt).
At 9.99% - 24.99% in interest, your best investment alternative is to get rid of these high
interest debts. Few investments would pay you at these high rates. And always pay off
the loan with the highest interest rate first.
CONCLUSION: TAKE AWAY LESSON
Over 90% of the time, budgeting in order to save does not work. People have intentions to
save but something unexpected always happens so they never do. You must pay yourself
first using a forced saving technique before you even get access to your pay.
- Save 10% of your salary or wages on long-term investments (15% if you are middle-
aged and just starting to save). Leave these long-term investments for the true purpose –
long-term needs such as retirement.
- Save an additional percentage for other wants – trips, a car, furniture, etc.
If this strategy is employed and maintained, your future is guaranteed to be more secure.
***************************************************************************
EMPOWER is a publication of Judy Powell, www.judypowell.com
Judy Powell is the author of
To unsubscribe, click on the link:
(Please provide your e-mail address and type UNSUBSCRIBE in the subject line)
The Wealthy Barber – The Common Sense Guide to Successful Planning
by David Chilton
My Personal Review:
Canadian best-selling author, David Chilton, provides a wealth of knowledge and
information in a conversational style which makes this book on personal finance and
investment an easy read. Unlike the typical work on money and finance, the reader isn’t
bogged down with financial terms and investment jargon. Instead, the author makes his
point through the story of a wealthy barber who shares his experience and financial
knowledge with others.
On the downside, those who like to quickly get to the soul of the matter may find Chilton’s
story-telling style a bit annoying.
But if you have the time, and prefer a stroll to a sprint, this book is for you.
KEY LESSONS:
1. Never borrow money to purchase items that do not appreciate (e.g., cars, trips,
consumer goods). On the other hand, good investments on which to take out a loan: an
asset like a house, education (e.g. to upgrade skills), business (money-making venture).
These investments increase your value and are worth borrowing on.
2. The golden secret to wealth: “Invest ten percent of all you make – for long-term
growth”. Note the power of compound interest – that is, interest on top of your principal,
then interest on top of that total. With compound interest your money multiplies at a much
faster rate.
- For example, if you save $200/ month for 30 years, your straight total = $ 72,000.
- However, at 15% compounded that same investment would yield $ 1.4 million at the
end of the same 30 years. * Key – try to save in an instrument where you won’t keep
going back to withdraw.
3. If you are not a disciplined saver this is the key – PAY YOURSELF FIRST. Have
the money taken out of your pay cheque or bank account before you have a chance to
spend it.
- Contact your bank; have them set up an automatic deduction and transfer to a
separate bank account and from there to an investment.
- Once you set this up, you will learn to live without that money and begin to survive
within your means, that is, the 90% left from your earnings.
4. When investing over the long-term, own rather than loan. For people able to leave
their money in investments for several years, go for mutual funds because they are usually
professionally managed, diversified and they are a “hands-off investment” (no ongoing
research and decision-making process is required).
- In the face of market fluctuations it is best to do dollar cost averaging (buying mutual
fund shares at regular intervals with a fixed dollar amount).
- For example, $100/month every month; when stock value falls it helps you because
that $100 buys more stocks and over the long-term the stock value will rise. In the long
run, when the value of the stocks go back up or even rise higher than before, you will end
up owning more of these valuable stocks.
5. Outside of stocks, another viable investment option is real estate. Home ownership
is the ultimate forced savings programme. Also, leveragability makes real estate the
greatest investment.
- Leveragability applies to an investment that has not only the ability to be leveraged,
that is, to be borrowed against, but also has the ability to produce an income to offset the
costs of being leveraged.
- For example, it is possible to take out a loan against your home, rent the property (or
a portion of it), and use that rental income to pay off the loan. At the end of the day, you
will have paid off the loan and still have your asset.
6. When buying a home, location is the key. Better to buy the worst house on a nice
street than a great house in a poor location (you can always fix up the worst house in the
good area, but you can ‘t move the good house from the terrible location). Ideally, seek
locations close to schools, public transportation and shopping.
7. If you have to move a lot and are not sure if it makes sense to buy a house each
time, it may be better to purchase a house in your home town (where you are likely to go
back and settle), rent ti out and use the money to cover your own rent wherever you go.
8. Although home ownership is an excellent investment it is not perfect. Home
ownership comes with greater responsibilities and costs that the home owner must be
prepared to deal with. Renting may not necessarily be a bad option if the renter uses his
lower monthly cost to his advantage – that is, he saves even more than 10% of his income
and invests the money wisely and consistently, in a disciplined manner.
9. Life insurance – only buy this if you have dependents (single people with no
dependents don’t need life insurance but people with children depending on them especially
need life insurance). Note – the premiums and the commission rates on cash value policies
are much higher, so buy term life insurance and the money you save (the difference),
invest it elsewhere.
10. Get disability insurance to protect your income. There is a one in four chance of
becoming disabled during your working life.
11. If you suddenly find yourself with excess cash (from an inheritance, a bonus, etc.)
the best use of this unexpected money is to pay off consumer debt (e.g. credit card debt).
At 9.99% - 24.99% in interest, your best investment alternative is to get rid of these high
interest debts. Few investments would pay you at these high rates. And always pay off
the loan with the highest interest rate first.
CONCLUSION: TAKE AWAY LESSON
Over 90% of the time, budgeting in order to save does not work. People have intentions to
save but something unexpected always happens so they never do. You must pay yourself
first using a forced saving technique before you even get access to your pay.
- Save 10% of your salary or wages on long-term investments (15% if you are middle-
aged and just starting to save). Leave these long-term investments for the true purpose –
long-term needs such as retirement.
- Save an additional percentage for other wants – trips, a car, furniture, etc.
If this strategy is employed and maintained, your future is guaranteed to be more secure.
***************************************************************************
EMPOWER is a publication of Judy Powell, www.judypowell.com
Judy Powell is the author of
To unsubscribe, click on the link:
(Please provide your e-mail address and type UNSUBSCRIBE in the subject line)
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