Updated on 02.23.07

The Wealthy Barber: The Ten Percent Solution

Trent Hamm

This week, The Simple Dollar takes a look at David Chilton’s The Wealthy Barber, a uniquely-written personal finance guide that has found its way onto people’s shelves for decades. Should it find its way onto your bookshelf? Let’s find out.

The first lesson that the group learns from the wealthy barber is the centerpiece of the book; Chilton refers to it as the ten percent solution. Simply put, the barber posits that he got rich by socking away 10% of his income each year. That’s pretty much the whole chapter in a nutshell.

This premise seems so simple and you hear it repeated so often if you look into personal finance advice that most people just sort of blow it off, but the reason it keeps getting repeated over and over again is that it simply works. There is no better way for a lower or middle income person to end up quite rich than to simply save a certain percentage of their income – and 10% is a nice round number. Obviously, more is better and less is worse, but 10% will leave you very well off in your later years.

Roy (the titular wealthy barber) goes through a number of investment options, but mostly sticks with fairly conservative vehicles for investing. The book recommends using mutual funds, particularly low-cost index funds. Within a few pages of that, the book strongly discourages investing in individual stocks, which runs in interesting contrast to how many people view an investment portfolio, as many finance books encourage a bit of investing in individual stocks as a “speculation” element to a portfolio.

The book also touches on real estate investment, not deriding it but not jumping up and down and recommending it, either. One of the characters does invest in real estate, but it’s not based on a strong recommendation from the wealthy barber.

Tomorrow, we’ll continue looking at the advice offered by Roy, the wealthy barber.

You can jump to the other parts of this review of The Wealthy Barber by using the following links:
The Ten Percent Solution
Planning For The Future
Financially Savvy Living
Buy or Don’t Buy?

The Wealthy Barber is the eleventh of fifty-two books in The Simple Dollar’s series 52 Personal Finance Books in 52 Weeks.

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  1. Again, this is the book that introduced the rule “Pay Yourself First” to me. So far so good!


  2. efipo.com says:

    I liked this book, but it was very simplistic. I think it’s weird that some books educate you to save, but not how to invest correctly. You can pick pick 10 companies that will probably never go away (eg. Microsoft, Mac, Bank of America, American Express and so on) and you will do much better than a index fund or mutual fund.

    Just my thought on it though.

  3. Debbie says:

    I just read this book, partly because of your recommendation. Do you understand what this money is for? It’s not for retiring because you have to save retirement money in addition to this. It’s just supposed to make you be able to live more comfortably. But if you use it to buy boats or whatever, the money won’t be there to build up into a big pile of money. How long before you get to spend this? I really don’t get this part.

  4. partgypsy says:

    I also found this confusing. I just read finished reading this book. When I read this, I asssumed the 10% was for retirement. Then in another chapter they discuss saving for retirement. What is this money used for, when do you spend it and for what (investments, fun money)? If you don’t actually tap it until retirement, why don’t you just increase the percentage of your retirement contributions rather than keeping it in 2 different places?

  5. Marc says:

    Same question here. I’ve read the book 2-3 times and don’t understand when you get to spend the 10%. Say you’re still young, and you want a new bunch of furniture, say $5K worth. Is that the sort of thing you can use the 10% money for, or should it sit untouched (for what then?) and you have to save the money over some paychecks before you can buy the furniture?

  6. Lev says:

    Chilton is not telling you when to or when not to spend your money. The gist of his message is this, put awa the 10%, and allow it to continuously gather compount interest and grow until it is needed. Ideally, the longer you contribute to it and allow it to grow, the more you will have (retirement), but he uses it to propose a vehicle in which you can be fiscally responsible and save money at an alarmingly high rate.

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