Book Review: The Wealthy Barber

Many aspects of personal finance have changed in the 36 years since The Wealthy Barber classic book first appeared.  To update it, author David Chilton had to not only do an extensive rewrite, but he had to come up with new advice.  He did a great job of making The Wealthy Barber 2025 update fully relevant to Canadians today.  Chilton takes important topics that are usually dry and hard to understand and brings them alive in an entertaining story format.

But this book is much more than just a fun take on personal finances; the advice is excellent.  Chilton gives insights you won’t find elsewhere.  The book is like a course on personal finance requiring no previous knowledge, and even discussions of insurance and wills are funny and compelling enough to be page-turners.

The bulk of the book is a set of financial lessons mainly aimed at Canadians between 20 and 45.  The early chapters introduce the characters, make it clear that the lessons require no prior expertise, and that the lessons really will help with seemingly impossible problems like the high cost of housing.  These early chapters do a good job of convincing readers that they really can improve their financial lives.

Between the jokes and identifying with the characters, readers will find themselves enjoying lessons that would normally be boring.  Chilton uses dialogue to emphasize important points, to voice objections to his advice, and to clarify common misunderstandings.

I often find things I disagree with in books, but that really isn’t the case here.  Chilton had to make some tough decisions about which details to include and which to leave out, and most readers could come up with a topic or nuance they wish was covered.  One topic I think could have made the cut is that some investors think they don’t pay investment fees.  I’ve heard people recommend their advisor because he doesn’t charge any fees.  All advisors get paid out of their clients’ money in one way or another, no matter what anyone says to the contrary.

I won’t try to summarize the lessons because the result wouldn’t be useful.  Without Chilton’s explanations of the whys behind his advice, too much would be lost.  Instead, I’ll comment on several areas.

Artificial Intelligence (AI)

Chilton didn’t really discuss AI except to make a good joke that I won’t spoil.  He was asked the question “What happens if AI takes away most of our jobs and the economic system collapses?”  There are some bad things AI could do such as cyber war, monitoring all of our actions, preventing us from doing “unapproved” things, and limiting our movements.  However, I don’t see negatives in AI doing jobs for us.  If AI together with machines will eventually grow our food, make clothes and other goods, and build houses, why will we need money?  Until we get to that point, we’ll still need money and people to do jobs.

Pay yourself first

One of the book’s characters says “Save first, spend the rest, good.  Spend first, save the rest, bad.”  This core piece of advice survived from the original book, but there are some caveats now.  For example, some diligent savers “offset the growing value of their assets on their net-worth statements with matching, or near matching, debts on the liability side.  From excessive car loans to large credit-card balances to massive lines of credit, many [live] beyond their means to a scary level.”

Watching other people, I’m convinced that it’s important to set aside savings from your pay first and then spend later, but my wife and I are weirdos who never needed to do this.  Our natural tendency to spend little usually left plenty of savings at the end of each pay period.  We’re the type who had to learn to spend more as our income and savings grew.

Index investing

I thought the passage explaining why we should just buy all stocks instead of trying to pick the best ones was well done.  It included “No, we can’t just buy the winners.  No, there is no way for us to consistently pick them ahead of time.  No, the people we hire to do it for us aren’t any good at it either.”

Like most experts who are trying to help their audiences, Chilton is a fan of all-in-one asset allocation ETFs.  “Not only does the fund buy the individual stocks for you, it does so across the world,” and “These funds also do all the rebalancing for you.”  These funds handle everything so there is no need to monitor your progress.  In fact, to avoid making emotional decisions, you’re best to “pay almost no attention” to the daily or weekly changes in the value of your savings.

“One of the most important factors, if not the most important, as you choose what type of investments to make, is the associated time frame.  How long are you able to set the money aside?  How long until you need it?”  Stocks in the form of all-in-one ETFs are for the long-term.  For something like a house down payment, “unless I thought my purchase was at least five to seven years away,” I wouldn’t invest it aggressively.

Starting early

I’m a fan of advising people to start the saving habit early.  Chilton gives an example to motivate this advice where saving $1000 per month for 8 years is more valuable than saving $1000 per month for the subsequent 24 years.  I don’t mind these stories as motivational tools, but the truth is that it makes little sense to consider a fixed saving amount across 32 years of inflation and wage growth.  I discuss this in more detail in the post The Real Reason to Start Saving When You’re Young.

Containers vs. investments

“You don’t invest in an RRSP, you contribute to one.”  RRSPs, TFSAs, FHSAs and other such accounts are containers that can hold cash and various types of investments including ETFs.  I see a lot of confusion among the friends and family I help with their investments.  For example, when they see that their TFSA ETF holdings are currently worth $50,000, they think they can just withdraw $10,000.  But the TFSA has little actual cash.  They need to sell some of the ETF units first.  Then they can withdraw the resulting dollars.

There is similar confusion with the cash in an account.  People often think they can spend the accrued dividends in an RRSP as though this cash is now outside the RRSP.  It isn’t.  If they withdraw it, it becomes taxable income.  And if they buy more ETF units with it, that doesn’t count as a new RRSP contribution.  This idea that these accounts are just containers that can hold cash and various types of investments is important, and it takes people a while to properly understand it.

Tax-free growth

Chilton does a nice job of explaining clearly how TFSAs and RRSPs provide the same tax-free growth in the case where your tax rate is the same when you contributed to the RRSP as it was when you withdrew from it.  This is related to the fact that “the money in the TFSA is all mine, but [the money] in the RRSP is part owned by CRA.”  CRA essentially buys a part interest in RRSPs with the tax refunds we get for contributions.  Most of the loud complaints about RRSPs being rip-offs come from not understanding these points.

Bitcoin

Despite being down on cryptocurrencies in general, Chilton made a small exception for Bitcoin.  He allows that it may be okay to put a small percentage of savings into Bitcoin.  With enough people believing that Bitcoin “is a store of value, perception becomes reality.”  It may be that the book had to give a small opening for Bitcoin or risk having some reviewers who like cryptocurrencies reject the whole book as outdated.

Rental real estate

“I no longer think buying rental units for most people just starting out is a wise move.”  “Prices are high,” and “property taxes [and insurance and home repairs] keep rising faster than the inflation rate.”  Significant time goes into managing properties, and “few put a dollar cost on the time they give up.”  “Being a landlord is often more like running a business than making a passive investment.”  Then there are “Tenants who won’t leave when they’re not paying.”  In my experience, few people have what it takes to battle with tenants and contractors.

High house prices

Chilton obviously put a lot of effort into the chapter on how young people can deal with the high cost of housing.  He has many useful ideas for young people who may be feeling hopeless.

On the subject of why governments aren’t doing more to lower house prices, it’s important to remember that anyone who already owns a home “doesn’t really want housing prices to come down.”  “And that large group votes.”  One group who own homes but want housing prices to drop are “Parents of young adults looking to buy.”  I’m in this group.

The book goes through a number of “levers,” which are “Things you can do, tools you can use to try to move the challenges of homeownership just enough to get you in the front door.”  Collectively, these levers bring some hope for aspiring home buyers.  The book goes through several such levers.

On mortgages, Chilton goes against common advice: “I want you first-time buyers to choose a 30-year amortization over the more common 25-year.”  The idea is to make it easier to qualify for a mortgage, reduce the financial pressure on new buyers, and hopefully make higher returns on savings than the currently low mortgage rates.

New challenges facing young people today

The book lists a number of problems that young people face today that didn’t exist decades ago.  High housing costs are an obvious example, but another problem is the “sophistication of everyone trying to get us to part with our money.”  “Credit is so widely available now.  So aggressively and persuasively marketed.  It’s downright scary.”  Governments like strong economies, so they lower interest rates “to get us to borrow and spend even more.”

Spending summary

Chilton sees big benefits with doing a spending summary, which is not a budget.  It’s “When people chronicle all their spending, in fine detail, over, say, a three-month period.”  “Every single person I’ve had do a spending summary — every single one — reports back that they found several areas where they are shocked by how much they spend.”

One of the characters was blown away by the amount of money spent on “discretionary items under $20,” such as “muffins, coffees, a bucket of balls, magazines,” etc.  I suspect many people would be surprised at their total spending in this category.

Cars

“Cars are savings killers.”  I’m constantly amazed that people will take on $1000 per month payments for a vehicle.  “I recognize young generations are unfairly up against it on the housing front and a lot of it is out of your control.  But, to a large extent, you can control what you spend on cars.”

RESP funding

“Get some RESP brochures and say to your parents, ‘Here’s that material you asked for.’  When they look confused, follow up with ‘Oh, sorry, that was the in-laws.’”  That would definitely work on me.  There’s no way I would let the in-laws get ahead of me on helping out my kids.

A personal story

Years ago, I reviewed Dave’s previous book The Wealthy Barber Returns.  Dave contacted me to ask for my phone number for a call.  My review was very positive, but I thought maybe I had said something he didn’t like.  Maybe this rich, powerful guy would sick his lawyers on me!  I was nervous.  Dave had to carry the conversation for the first few minutes with me giving one-word answers before I finally relaxed.  I now know that Dave is super friendly and calls a lot of people.

Conclusion

I highly recommend this updated version of the Wealthy Barber for any knowledge level.  It’s an entertaining and convincing tutorial that addresses the main concerns and questions young people have.  By connecting financial advice to the lives of the book’s characters, otherwise dry material comes to life for the reader.  Even experts will learn great ways to approach teaching others about Canadian personal finance.