AgriSuccess
The Wealthy Barber speaks to producers
By Lorne McClinton
It’s been 20 years since Dave Chilton, then a young and unknown author, published The Wealthy Barber, a book that offers common sense ways to build personal wealth. Much to Chilton’s surprise, the book went on to sell nearly three million copies, becoming the best selling Canadian book of all time. In this legendary investment tale, a fictional Sarnia, Ont., barber named Roy teaches three young investors basic saving and investment concepts.
The book’s two main principles are still valid today: pay yourself first by saving 10 per cent of your paycheque and invest regularly.
Chilton will be speaking at FCC Forums across the country this winter. AgriSuccess Journal caught up with Chilton for a preview.
Why has The Wealthy Barber been such a consistent seller since you first published it in 1989?
Chilton – I think that any time you have a success like that, there’s a lot of luck involved, number one. And number two, you must have good timing. Both came together with The Wealthy Barber.
One of the concepts that sticks with people is the idea of paying yourself first.
I think it was a key theme. Other books have pushed it over the years, but it was The Wealthy Barber’s fundamental teaching. You have to save. You have to spend less than you make. And here’s the most effective way to do it: pay yourself first. I repackaged a lot of old-fashioned, common sense advice and made it more accessible.
In broad strokes, The Wealthy Barber’s message is to pay yourself first, spend less than you make, and try to build up an RRSP. We also look at wills and insurance.
Another theme in the book is how important it is to plan.
If you don’t have a plan, you’re never going to make it anywhere. The ad hoc approach to managing your money has proven to be very unsuccessful and the interesting thing is putting a plan down tends to again almost lead to a self-fulfilling success. It crystallizes in your mind where you’re trying to go. It makes it much more likely that you’ll be disciplined. So a plan is key. The other thing is keeping it simple. A fundamental message of The Wealthy Barber is, you don’t have to become an expert on the stock market or forecasting interest rates or understanding GDP growth in Tanzania. You really just have to do four or five common sense basics on an ongoing basis.
How do the principles of your book apply to the agriculture industry?
A lot of financial planning advice comes from farming. Even common expressions – like putting something away for a rainy day – come from agriculture. It’s interesting that one of the primary teachings young farmers have to grasp is that the good times don’t roll on forever in any industry, whether it’s farming or book publishing. You have to learn to live within your means and set money aside for the future.
Farmers are always looking for efficiency. It’s such a hyper-competitive industry that people are always looking for more efficient ways to do things. The industry has come a long way on that front.
Many farmers put all their money back into the farm instead of diversifying with some off-farm investments. Is there a risk of putting too many eggs in one basket?
When I told people I was speaking at FCC Forums, they said that was one of the things I should talk about. It’s not always possible and it’s not always easy to diversify, because we are looking to build efficiencies and invest back into ourselves and our businesses. But many farmers have done this exclusively and have their entire financial future riding on the farm.
Realistically, the farmers that have talked to me aren’t going to start trying to become wealthy by investing in stocks or opening a franchise. They love farming, but they aren’t going to pour every cent back into the farm either. Their financial plan was to be properly insured, have a will, run the farm to the best of their abilities, live within their means, try to max an RRSP and slowly pay off their debt. This is not a bad way to go, and it avoids having everything tied up in your farm. Having all your eggs in one basket is also a liquidity problem; you can’t easily monetize without selling the farm.
You’ve mentioned several times the importance of starting young. The average farmer in Canada is in their 50s. Is it ever too late?
No it’s not, but you can’t be naive. The mathematics don’t care about your age. When you are starting to save at an advanced age, whether you are a farmer or a teacher or anybody else, you have to set aside a significant percentage of your income. Flipping a switch and becoming a super saver at age 50, when your habits have already set in, is very difficult. It’s not impossible. That’s why I don’t preach, “Start young.” I preach,
“Start now.” I don’t care how old you are. Get your savings going, and start making the proper adjustments to your lifestyle to set aside something for the future.
So from what you’re saying, financial planning really seems to be about common sense?
It really is about common sense, self-discipline and trying to harness the power of your greatest ally, time. That’s why I tell parents not to worry about teaching their children about RRSPs and insurance, but make sure you teach them to save. Building the saving habit and building the planning habit at a young age are absolutely vital. I don’t care if it’s their allowance money or gift money from Grandma or work money from delivering newspapers. Build the habit of setting aside 10 or 15 or 20 per cent of that money, because that habit will carry them through adulthood.
Check out www.fcc.ca/en/LearningCentre/forums_e.asp for upcoming FCC Forums featuring David Chilton.
Subscribe now to get your free AgriSuccess delivered to your mailbox every two months.
