If somebody can become wealthy on a barber's salary, then they're obviously doing something right. That's the premise of David Chilton's financial self-help book "The Wealthy Barber". He offers a commonsense guide to becoming financially independent. In the spirit of efficiency, we have summarized his five key tips.
1. Pay Yourself First
We've heard this one before, right? Mr. Automatic Millionaire stands by this principle too. It's the idea that every paycheck, you should be dedicating a given percentage to your own financial goals before paying outgoings. And it's a great idea!
It's meant to short-circuit our loose-pocket habits and ensure that we're always improving our financial situation.
2. Establish An Emergency Fund
There are some frightening statistics when it comes to financial emergency preparations. 26% of American adults have no emergency savings. Chilton believes that emergency funds are of utmost importance. So much so that he would suggest establishing a line of credit on equities if saving an emergency fund from income is not attainable.
Having an emergency fund on hand can often save you from having to take on credit card debt in your most vulnerable times. So, even if it's just a small fund, it's a good idea to have something.
3. Learn How To Save
It's interesting how often we're reminded that saving is important, yet never offered opportunities to improve our saving habits. Taking a course on saving and learning how to save is one of the best investments an individual can make towards their longterm financial prosperity.
If you're stuck in the rut of not saving, then consider taking five to learn how to save.
4. Think Twice With Home Loans
Chilton makes an interesting observation on the American spending habits: "...over the past fifty years borrowing has gone from a shameful vice to the national pastime." And he's right.
He believes that "stretching yourself to your financial limit in order to buy a house is almost always a financial mistake." In some instances, he actually suggests renting over owning a house (so long as you commit to investing the difference).
Just be smart about your home loan and don't borrow more than you can afford. A home loan is fine, but you don't want to be stuck with payments for the rest of your life and have to sacrifice your lifestyle because you bought a house beyond your means.
OCSB TIP: Our staff can help you establish a great financial position when heading towards home ownership. Whether that be through savings plans or loans advice, we're always happy to help.
5. Save Early and Regularly For Retirement
You've heard this tip before, yet it's essential that you hear it again. Save save save for retirement. Setting up a retirement plan should be one of your first priorities when preparing for long-term financial freedom. Even more, as Chilton says, having a sustainable retirement savings plan can let you "build for the future without killing the present."