Wealth Today

This wraps up the last of the lessons from The Wealthy Barber, a book by David Chilton.

• When it comes to an emergency fund, pick one that’s appropriate, but you don’t have to exaggerate the amount. If your liabilities are greater or if your income is unpredictable, a larger one may be necessary. Consider current protection such as insurance when building your emergency fund.
• Saving for a child’s education can be tricky as there’s many different options and opinions vary on responsibility. Some parents leave the burden to the children. However, the cost of college is becoming increasingly more expensive, and often cant be funded solely by money earned during summer jobs. If a parent chooses to be willing and able to assist with college savings, there are many tax credits and tax deduction benefits. Consider a benevolent family member who could help. Another option, prepaid tution plans, may have restrict the choice of schools. There’s also education savings accounts and bacculaureate bonds. However, David Chilton suggests a different investment practice for college savings. He advises to use a well-selected equity mutual fund. This benefits in the usual ways of mutual funds, by having dollar-cost averaging, long-term ownership, and forced savings.
• Disability insurance is frequently disregarded, yet usually one of the most critical insurance needs. A staggering fact is that one of four individuals will be disabled for at least a one year period in their lifetime. When someone passes away, they need life insurance because they are no longer an asset to their dependants and the cash flow stops. The sad truth is that a disabled person becomes a liability, causing negative cash flow, which could be financially devastating. If you think you’re covered through an employer or an existing plan, double check the policy and make sure that it provides enough support to take care of your family. If you don’t have it, get it now.
• The last topic covered is staying informed. Money laws change frequently and new benefits and investment vehicles are constantly created. By making a plan using the practices suggested in the book, the plan should be successful in creating a wealthy and satisfying financial future, however events may occur prompting re-evaluation of a chosen strategy. Chilton’s suggested readings include Forbes, Kiplinger’s, Fortune, SmartMoney, and the Wall Street Journal. I advise to watch some TV shows, like Suze Orman and Jim Kramer’s Mad Money. Listen to some NPR and Talk Radio that cover money advice. I also suggest subscribing to related RSS feeds and reading relevant blogs such as this one to stay current for a wealth of information.

This lesson in The Wealthy Barber covers investing and taxes. The author and his siblings are told by Roy, the barber, that to make good decisions regarding investments other than real-estate suck as stocks and bonds, takes knowledge, math skills, self-discipline, and intuition. He suggests seeking professional advice if you choose to do this. This may not be the best advice for some of the more savvy readers, but if you’re not sure or committed, then he provides another suggestion I like. If you happen upon a large lump sum of money, increase your regular contribution to your tax-advantaged savings until the lump sum is exhausted. Doing this puts dollar-cost averaging on our side, and we still have the found fortune.

The second part of this lesson is taxes. Again, the author suggests seeking professional assistance if you have special circumstances, such as being self-employed or owning a home, because of the complicated laws that allow for some helpful deductions.

The basic concept related to both of these lessons is “A dollar saved is two dollars earned.”