Category Archives: Business

Review: The Wealthy Barber vs. The Wealthy Barber Returns by David Chilton

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About a year and a half ago, I realized how ignorant I was with regards to money and started to educate myself in matters of personal finance in order to resolve my ignorance. Since then, I have read a number of books and articles, significantly improved my spending, started living below my means, and started saving. As I began my journey to becoming financially literate, one book that I was always recommended was The Wealthy Barber by David Chilton (1989). The book being nearly 3 decades old, I was hesitant to read it since I know financial matters are time sensitive. What I decided to do instead, was read The Wealthy Barber Returns by David Chilton (2011) first, then go back and read Chilton’s first book.

I’ve actually read The Wealthy Barber Returns twice. The first time was in January 2016. The second time was just last month to get a refresher before starting his first book. I credit Wealthy Barber Returns with kicking my butt into gear and getting me to save at least 10% of my income, and opening up a RRSP. The illustration that caused me to do so was the following from this book: twins open up RRSPs. Each of them contributes $4,000 a year at 8% rate of return compounded annually. Hank opens up his RRSP and makes these contributions starting at age 25 for 10 years. Simon contributes starting at age 35 for 30 years. Because of the “magic” of compound interest, at 65, Hank’s RRSP is worth $629,741 and Simon’s $489,383. In spite of the fact that Hank saved for a third less time, he comes out $140k ahead by starting early. After reading this, I knew that even if could only contribute a few hundred dollars a year to start out, it was worth starting in my young 20s to get the compound interest ball rolling.

Besides a 10% fund, I also appreciated the various advice found in The Wealthy Barber Returns. Some of his advice is very simple (If shopping is your weakness and causes you to waste money, avoid the malls) while other advice is more complicated and situational, such as his banter on TFSAs vs. RRSPs and renting vs. owning. Although I agreed with the majority of what Chilton had to say, I did disagree with him on a few points-the main one that sticks out is his dislike of emergency funds (he claims that although great in theory, they don’t work out in practice). Regardless, I still believe The Wealthy Barber Returns is still a good introductory book for finance for Canadians- it certainly helped me better my finances.

Now onto Chilton’s first book- The Wealthy Barber. The first thing that surprised me when I started the book was the fact it was put in story format and didn’t discuss finances until Chapter 4. The narrative format has been praised as helpful to get the average reader engaged in a topic they otherwise wouldn’t have touched, but for me, knowing that the characters are fictional I was bored and ready to get to the heart of the book. I hate to say it, but if the useless banter between fictional characters were removed, the book would have been under 100 pages. However, I did get a refresher on things I already knew and learned a few things as well. The main point of the book is “save 10%- pay yourself first” which is an excellent reminder and cannot be emphasized enough. Chilton also talks about trying to evaluate your possible retirement needs and save in an RRSP, which is so crucial in this day of fewer pensions.

Nonetheless, I have to admit this book is dated. It started with the characters referencing VCRs several times, and more concerning, outdated financial advice. For example, when referring to RRSPs, the characters never mentioned the Home Buyers’ Plan (HBP) which allows you to withdraw up to $25,000 from your RRSPs to buy or build a home. Same with TFSAs- they came about in 2009 (20 years after the publication of this book) and they are a great way for Canadians to save, so someone starting with this publication would miss that valuable info. Also, a few weeks ago the government announced they will be doing away with the Canada Savings Bond program which was mentioned numerous times throughout this book as an option for saving. And when it comes to investing or buying a home, the characters referenced making 13% on a mutual fund annually, buying a home for $57,000 (at an 18% interest rate!), and buying a condo for $80,000. Any Canadian who gets their percentage figures from this book is going to be really surprised when s/he looks online for modern prices.

For all these reasons, I would much rather recommend The Wealthy Barber Returns over Chilton’s original publication. Finances are a time sensitive thing: prices and percentages change, new products are introduced and old products are done away with. Even though The Wealthy Barber is encouraging in some ways, it’s too out of date as a beginner’s guide to personal finance. My recommendation is to stay within the past decade for anything to do with personal finance; possibly less if it’s about a specific product.

 

Amusing Ourselves to Death: Public Discourse in the Age of Show Business by Neil Postman

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The world has changed much in 30 years: today, we have access to more information than we’ll ever need in 100 lifetimes through a device that fits in our pocket. We can communicate face to face to relatives across the world in real time through a screen. These are just a couple of the many differences found in early 21st century society, so one would think that a book written about technology in 1985 would be irrelevant to today’s technology users. Ironically, Amusing Ourselves to Death: Public Discourse in the Age of Show Business by Neil Postman is even more important today than 3 decades ago. To be certain, there are some laughable anecdotes: near the end of the last chapter, Postman claims that computers are “a vastly overrated technology” which couldn’t be farther from the truth today. Nonetheless, so much of what he says in Amusing Ourselves is spot on and even truer today.

Postman compares Orwell’s 1984 and Huxley’s Brave New World.  People are always concerned about  a real life “Big Brother”government control, censorship and spying to name a few. While these concerns have been a reality found in recent history, Postman claims North American society is much closer to Brave New World than 1984. Postman claims that there will always be opposition to totalitarian control and censorship as it is very identifiable and a clear infringement on a society’s rights. It is Huxley’s theory of an entertainment culture- one too absorbed to care about oppression- that is the greatest threat to our society. North American society has come to adore their amusing technological oppression.

Postman looks at the print society of the enlightenment years- schooling was few and far between, yet books couldn’t be printed fast enough to satisfy society’s thirst for knowledge. Postman cites the debates Abraham Lincoln had with Stephen A. Douglas: Douglas would first be given an hour to speak, Lincoln an hour and a half, then Douglas again for an hour and a half reply. These debates were shorter than what they were accustomed too, and yet common men and women would attend them as an informing, yet restful event. The attention span of today’s average Joe would not be able to handle such a long, complex activity. As a comparison, Postman especially criticizes television news for this reason: each news story is given minutes (if that) to be presented before it is quickly switched out for the following story. The viewer barely has time to think about what s/he just saw before being pummeled with more information. I recall a few months back watching television news with family (I do not have cable in my own home so this is a rarity for myself) and I was shocked to see things like murders, protests, and other devastating issues being given seconds of screen time vs. the ten minutes a feel-good story about an abstract painter was given. Viewers don’t want to end off on a sad note lest they start thinking of implications for their own lives.

Even though Postman focuses on television culture, these observations and even more true today. Distraction culture is more prominent now with smart phones: individuals can barely make it through an hour without checking their updates, replying to a text or scrolling through the web. When groups of people go out to eat or to other social activities, most of the time is now spent looking at phones instead of conversing. We are more interconnected than ever before, yet lonelier than ever because we have lost the art of meaningful conversation and appreciation for enjoying activities that don’t revolve around a screen.

If Postman were alive today, I would be very interested to hear what he’d say about today’s entertainment culture. I know for myself his book had a profound influence for me and I have begun to examine myself when I am spending excess time on social media or other wasteful forms of entertainment. I have been spending more time doing more meaningful activities that are still restful, and I have been appreciating the fruits that come from that. I recommend everyone to evaluate themselves using Amusing Ourselves, and to make positive changes in their lives.

 

 

Overdressed: The Shockingly High Cost of Cheap Fashion by Elizabeth L Cline

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Up until recently, I didn’t really think about where my clothes originated from. I usually bought $5 shirts from Wal-Mart or other similar outlets, always looking for the best deals and not considering the longevity of my clothes. In short, I was your typical consumer. In Overdressed, Elizabeth L. Cline investigates how the current age of “fast fashion”-clothing that is in one week and falls apart the next- and its origins and what that means for the economy.

Cline described herself as being a typical consumer-not knowing much about fashion. She often frequented H&M, Forever 21, and other stores commonly found in North American shopping malls. She found our current state of fast fashion so perplexing it led her to going so far as to visiting China and Bangladesh in order to see just how our duds are made. She found it is quite a shift from two generations ago- in 1950, the average American household made $4237 annually and spent $437 on clothing (and much of it was still homemade). Nowadays, it is cheaper to buy ready-made clothing than to buy the raw materials and make them ourselves-a skill long lost with the boom of fast fashion.

Besides economic impact, Cline also looks at the environmental impact our clothing has. The textile industry is cited as the second most polluting industry in the world, yet it is not one that gets the most publicity. In many cities where fabrics are produced, the water is tinted various colours due to the lack of filtration. Commonly used fabrics like polyester are manufactured from oil, and take hundreds of years to break down in landfills. With the rise of fast-fashion, second hand clothing stores have an influx of clothing that they can barely keep up with, leading many of them to discard clothing that isn’t sold within a number of weeks.

All of these issues with fast fashion pose the question of “What are we as North Americans to do?”. Cline interviews various people and businesses who all have a different answer to that question. Some individuals have decided to make nearly all of their clothing themselves. Some companies have put ethical practices, good wages and sustainable fabrics at the heart of their business model. Whatever the answer is, the fact is the current model of fast-fashion is cannot continue: something must change. Overdressed will certainly make that fact very clear and show a new perspective.

 

Shoe Dog: A Memoir by the Creator of Nike by Phil Knight

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This is the story of how Phil Knight found his purpose in life, and grew one of the world’s best-known brands around it.  In addition to being the epitome of a successful entrepreneur, Phil Knight is a skilled writer.  I have read many biographies about fascinating people who just don’t have the gift of good writing, so it is a rare treat to get both in one book.

The story starts in the late 1950s when Phil is a fresh college graduate who likes to run.  He weaves a great deal of personal and social history in to the story of his business.  Knight talks about how running wasn’t the common leisure activity it has grown into today.  When he started in the shoe business his market was college, high school and serious track athletes.  He dreamed of a time when people would wear his shoes to the grocery store, or to take their kids to school.  If you own a pair of Nikes you know that dream has come true!

Another key part of the Nike story is Knight’s work networking and working with business people in China and Japan, and how shoe factories evolved. The history of the iconic Nike swoosh is included in this book, as well as the easy to spot bright orange shoe boxes.  One aspect of Knight’s story I found interesting was how he built his core team of trusted colleagues.  His former track coach, who he both admired and feared, was his first business partner.  This man had been tinkering with track shoes his whole life, and was fascinated with the developments that were possible to make his athletes run faster.  Knight engaged others who were keen marketers, savvy negotiators and tireless innovators.

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