As part of the kickoff opening of our new downtown Toronto Café a few weeks ago, we had the pleasure of hosting David Chilton, author of the best-selling book The Wealthy Barber, for a talk about financial planning basics.
David’s had remarkable success with his bestselling book and ideas, and is set to release a revised version of his common sense guide to financial planning later in the Fall. He has a very clear, articulate way of breaking down personal finance basics; five minutes into his discussion and it was obvious why the café was standing room only.
In the 20-plus years since the release of the book’s first edition, David’s basic message has not changed: keeping debt at manageable levels is fundamental to healthy finances. Public and private debt levels in the developed world are “shocking,” he says, and according to him, different psychological and emotional reasons are a big part of why people find it tough to resist debt, and in particular lines of credit.
The simplicity and timeliness of his message is a big reason why David remains a much sought after public speaker. Canadians continue to carry significant amounts of debt, more than most of our counterparts around the world even, including Americans. The sobering facts are that more people than ever are going into retirement saddled with debt (14% of Canadians today versus 5% 20 years ago).
For most people, access to credit is abundant, even when they’re not trying to get it– a point referenced during David’s discussion on lines of credit. Financial planners will counsel a smart approach to saving, which often includes opening up personal lines of credit as financial protection. Yet when you factor in unexpected events, pressures, and desires – what most of us refer to as ‘life’ – it is clear to see how overspending and living beyond our means is an easy trap to fall into. I do not think it has to be.
While charting a financial plan can sometimes appear sophisticated and complex, it isn’t. Saving money and paying yourself first – two ING DIRECT and Wealthy Barber basics – are in my view, one of the soundest financial planning strategies there are, not to mention two of the most effective and simple.
Paying yourself first means taking some part of your income from every paycheque and putting it into savings (10 per cent of your gross income is ideal). But it also means being vigilant against taking on more debt than you need or can afford. With interest rates likely climbing in September or October, this is a strategy all Canadians ought to consider; especially now as the cost of making interest payments are set to jump.
The cornerstone to living a healthy financial lifestyle is saving. Building up savings systematically, taking on as little debt as possible and paying it back as quickly as you are able, and having a mortgage that suits your needs and your income are all things that people can do to make banking (and life) simpler and a lot less stressful.