The Wealthy Barber’s David Chilton is back with advice for millennials and Gen Z: ‘You can do this.’ | Canada Voices

It’s tough out there. Many people’s incomes haven’t kept up with living costs – let alone home prices. The temptation to spend and borrow is everywhere. Even making good decisions is more complicated, with more financial products than ever making it harder to know what to prioritize.

The Wealthy Barber has noticed. Some 36 years after publishing his seminal personal finance bestseller, David Chilton is back with a new edition full of fresh advice and a hopeful outlook for a new generation of Canadians.

The narrative device is the same one that captivated millions of readers when the original edition of the book first came out in 1989: A fictional barber, Roy Miller, teaches the basics of personal finance to those gathered in his shop. The core principles are also the same, such as the concept of paying yourself first by setting aside 10 per cent of your paycheque as soon as it lands in your bank account.

But the reality in which those fundamentals apply is different. And Chilton, who is also widely known to Canadians from his Dragons’ Den chops, is offering a fully updated suite of strategies to help people build long-term wealth despite today’s challenges.

Among the takeaways: Budgeting doesn’t work for most people; watch your investment fees; renting isn’t a waste of money; and, if your parents can help you buy a home, let them.

As he did with the first version, Chilton thoroughly workshopped the book as he was writing, testing various parts of it with his target audience and incorporating the feedback. Only this time, the process was much longer, he said, because there are many more financial products, possibilities and hurdles to discuss. Instead of six months, as planned, it took him nearly a year and a half to finish the book, he told me in an interview last week.

But the meticulous rewriting and editing pays off. On any given topic, the book encapsulates and addresses the full gamut of common questions, doubts and what-abouts that I’ve heard from readers in nearly a decade of covering personal finance.

The result is a personal finance tour de force that is at once comprehensive and in depth – yet never gets too into the weeds. The book is as breezy and colloquial as it is packed with insights and concrete tips, the kind you can read at bedtime but will also likely fill with sticky notes so you can come back to it over and over.

It is also deeply empathetic. “Hopefully, a book like The Wealthy Barber, told in that format, can bring some clarity and some optimism” to Canadians in their 20s and 30s, Chilton told me. “I don’t know if you’ve noticed, but the first chapter was [Roy, the barber] saying ‘you can do this’.”

Here’s an edited excerpt of our conversation:

David, what prompted you to write this latest edition of The Wealthy Barber?

I had so many friends’ kids and so many friends of my kids asking me financial questions that you could see there was a thirst for information. I thought that if I went back to that formula of using the conversation, making it more accessible, trying to take the dryness out and wrap some humour around it, that it could really resonate.

Early in the book, Roy talks about how budgeting didn’t work for him. But later on, he talks about the power of “spending summaries.” What’s the difference?

A spending summary is a look backward. You’re summarizing, at the end of, say, a two or three-month period, everything you’ve spent and then you’ve categorized. I started pushing a lot of people to do it as I put together book two [The Wealthy Barber Returns, 2011] and continued to do it over the last 15 years.

To this day, I’m blown away by how everybody who does these comes back and says to me, “Amazing. We saw where we were wasting some money, so we’re saving more effectively.”

“Pay yourself first” works well when you have a regular paycheque and steady employment. Is it still doable for people with fluctuating incomes or someone who doesn’t know whether their, say, six-month contract will be renewed?

When you don’t have steady income, you have to make an adjustment. That’s unfortunate, and it’s the reality. Now, on the fluctuating income, at least most people have a minimum they’ll earn every month.

We still want them to pay themselves first and set up some savings, based on that minimum. The alternative is to say, “because I have a fluctuating income, I’m not going to do that. I’m going to rely on budgeting or whatever else during the better months.” That doesn’t work.

There’s no question about it: It works for a teacher much more effectively than it works for someone whose income goes up and down with freelance work, but I’d still say it’s better than the alternative of not doing it.

Your chapter on housing is so expansive that it’s hard to summarize in a few sentences. But can you give us a sampling of the takeaways?

Realistically, you’re probably gonna have to live with your parents as you build the down payment fund. I talked in the book about how, especially when home prices are rising fast (though we don’t have that right now) a smaller down payment – going in when you have the five or 10 per cent instead of trying to get to the 20 per cent – actually makes a lot of sense.

One of the things that the chapter pushed twice is trying to earn some extra income. Some people are pretty darn amazing at turning these little hobby-type businesses into $500, $1,500 or $2,100 a month. If you’re paying 30 per cent in tax, and all of a sudden you’re making $1,500 more, well, great, that’s $1,050 extra a month. Think of what that does for your mortgage.

You also tell people it’s okay to accept family help, especially to buy a house.

The reality is, these are very tough times. Some parents are lending probably more than they should based on their own retirement situation. But a lot of parents are realizing, if they have the money, what a great way to enjoy it: If you have more than you need, and you give it to [your kids] now, you get to see them benefit from it.

Chart of the day

New products that caught my eye

You can now send money internationally from your Wealthsimple account through the Wise platform, which will avoid the typically steep exchange rate markups of most other financial institutions.

Another big bank challenger that has partnered with Wise? EQ Bank.