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The Wealthy Barber Summary

I recently read this book on personal finances, The Wealthy Barber. It is a great foundational book on personal finance education, and I would compare it to Rich Dad Poor Dad by Robert Kiyosaki. The financial advice in the book is straightforward and simple. It was easy to read and was filled with great actionable advice. In this summary, I’ll share with you some of the important lessons I learned from the book.

Lesson 1: A dollar saved is two dollars earned

In other words, the check you take home at the end of the month has already deducted all sorts of taxes and Social Security fees. For every two dollars you earn, you might see only one dollar. But for every two dollars you save, you keep the entire two dollars. Savings aren't taxed! Thus, saving $200 on a TV set may be the same as getting a $400 bonus at work. The lesson here is to pay yourself first in order to save up for items you want or need.

Lesson 2: Minimize your taxes

We need to pay attention to how we can reduce our tax burden. Most of us need an accountant or tax expert to help us discover how to save the most on taxes. If you have any consumer debt like credit card debt, there is absolutely no better return than to eliminate that debt and also get some tax deduction. Remember credit card debts have usually very high interest and the debt repayment is made using after-tax dollars. Don't carry debt on credit cards. You might do well to take out a home equity loan and pay off your credit cards and car loans. The home equity loan may be at a better interest rate, plus the payment will be tax-deductible. In other words, you can deduct the payment from your income and end up paying less taxes.

Lesson 3: Plan for retirement

Don't plan on Social Security bailing you out. Although it's unlikely to be phased out completely, its benefits will continue to drop until it will be only a small portion of what you need for retirement. Take the responsibility for your retirement. Saving for retirement is in addition to the 10% he recommended saving and investing. Choose a retirement account that is right for you, like an IRA which stands for Individual Retirement Account, and invest as much as you're allowed by law each year. If you use retirement accounts, either you can make tax-deductible contributions or your money will grow tax-free. This is actually the government’s way to help you plan for retirement, don’t lose such a great opportunity.

There you have it. Some important lessons on how to take control of your financial life. We know saving 10 percent of your income isn’t really enough to become wealthy and retire early, but it’s a good place to start.

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