Wealthy Barber is a classic Canadian

personal finance book first published in

1989 that has sold over 2 million copies

in Canada. The author Dave Chilton has

come out with a fully updated 2025

edition of the book full of top-notch

personal finance advice on investing,

spending, estate planning, and

insurance. I have read the book twice

now, and in this video I'm going to go

through the points that I think everyone

needs to know. I'm not affiliated with

Dave or his company. I may be a little

biased because this channel is mentioned

in the book and my testimonial is on the

back cover. I know that was a bit of a

humble brag, but come on, it's it's

pretty cool. I meant what I wrote there

on the back of the book. This is the

best and most approachable introduction

to personal finance that I have ever

read. I think this book is a great read

for anyone and an excellent gift for

someone you want to share good financial

planning principles with. Or, you know,

you could just send them this video. No,

but also buy the book. Sorry, Dave. I'm

Ben Felix, chief investment officer at

PWL Capital, and I'm going to tell you

why The Wealthy Barber is a book worth

reading.

The Wealthy Barber is written as a story

with character development, unique

personalities, and lots of dry humor. It

starts with a Canadian couple, Matt and

Maddie, who decide they want to learn

about personal finance. They ask Matt's

parents for help and they get referred

by them to their local barber, Roy, who

we find out is himself financially

successful despite not having an

abnormally high income or having

received a big inheritance. He is the

wealthy barber. Roy is also an excellent

personal finance teacher, having helped

many people over the years, including

Matt's parents. The book follows Matt

and Mattiey's visits with Roy as they

learn about personal finance. They're

joined by Matt's overspending but

successful entrepreneur sister, Jess,

his best friend Kyle Sorav, a newcomer

to Canada who lives in Royy's apartment

building, and some of Royy's regular

customers who hang out in the barber

shop, and they all contribute to the

discussions. This writing style,

conversational with lots of back and

forth on questions that readers likely

have, makes the information approachable

for anyone. All right, as much as I do

like the writing, I'm not just here to

praise the book. I want to give you its

main lessons. Again, I'm sorry, Dave. I

do hope people still read the book. The

first lesson imparted by Roy is you can

do this. There's absolutely nothing

we're going to cover that you're not

capable of fully understanding and

implementing successfully. You can start

managing your own money very well quite

soon. For many people, that is a huge

lesson. Finance and numbers more

generally can be intimidating, but

becoming good at managing your finances

is not a mathematical endeavor. As Roy

says in that first conversation, none of

the important financial planning

concepts are complex. This is such an

important point. Roy is absolutely

correct that smart investing and

financial planning are easy to

understand. They're not always easy to

execute due to human psychology, but

they should be easy to understand. If

you can't understand an investment

product or financial planning strategy,

there's a good chance you should avoid

it altogether. In their next

conversation, Roy introduces his golden

rule. Save and invest at least 10% of

your net income for the future. This

rule is powerful due to the nature of

compounding. Saving and investing

consistently over time eventually

results in the returns from your

investments far exceeding your ability

to save. Compounding is both powerful

and poorly understood. Humans are just

not wired to process exponential growth,

which is exactly what compounding

results in. Roy then explains that to be

truly useful, the first rule needs to be

paired with the second rule. And

according to Roy, the three most

important words in personal finance, pay

yourself first. Roy explains that saving

is hard. Putting money away for your

future self who feels like a bit of a

stranger is competing with spending on

your present self who's dealing with

immediate needs, a rising cost of

living, the addiction-like psychology of

spending money, and our innate desire to

keep up with the people around us. Not

to mention all the businesses doing

everything they can to influence you to

spend your money on their products and

services. Paying yourself first, putting

a portion of your money into long-term

investments or savings for some other

short or medium-term goal before you

have a chance to spend it takes away

that temptation. Roy explains that while

taking 10% or more of your income away

seems difficult to do, once you start,

you realize that a lot of your spending

was on things you didn't really need. As

Roy concludes the lesson, Sorov chimes

in to summarize, save first, spend the

rest good, spend first, save the rest

bad. Now, I do feel compelled to say

that many economists would disagree with

this advice. It could make sense to save

less early on in life and more later

when your income is higher. And

similarly, it could make sense to save

more or less in a given year depending

on your income and spending needs. That

implies spending first and saving the

rest. But as a general rule, to get

people engaged with long-term thinking,

saving, and investing, pay yourself

first at a rate of around 10% of your

net income is a solid foundation. It's

certainly better than not saving at all.

And as you adjust to having a little

less cash in your budget, it builds the

reflex to carefully consider the

difference between spending needs and

wants, which most people probably don't

do enough of. I'll come back to that

later with some useful wisdom from Roy.

The next session with Roy covers

investing. First, Roy prompts the group

to consider why investing is important.

They collectively offer several correct

reasons, including to fight off

inflation, funding your future financial

goals, and harnessing the power of

compounding. Roy offers up a nice

catchphrase to explain what he thinks

successful investing looks like. Be an

owner, not a loner. He's drawing the

distinction here between stocks and

bonds. A stock is a piece of ownership

in a business, while a bond is a loan to

a company or government. In general,

stocks are riskier and have higher

expected returns than bonds. Roy

explains that stocks must have higher

expected returns than bonds because they

are riskier to own. With stocks, you're

participating in the potential upside

and potential downside of the financial

performance of real businesses. Some

businesses do really well while many do

poorly in the long run. Bonds are much

safer because you get roughly the same

return whether the company's financial

performance is good or bad. And if it's

really bad, leading the company to shut

down, bond holders often stand to

recover some value while stockholders do

not. Government bonds are even safer.

Roy explains that in the long run,

stocks are a bet on human ingenuity.

Being an owner, a stockholder, lets you

participate in the ongoing human

innovation that our whole economic

system is based on. It is hard to

disagree with Roy here, and I have done

videos on the merits of 100% equity

portfolios, but it's also true that the

volatility of 100% equity portfolios is

too much for some people to handle.

Asset allocation decisions should be

made based on your ability, willingness,

and need to take on the volatility of

stocks to earn higher expected returns.

The group is listening intently to Roy

here, but they voiced their concern that

they don't know anything about stocks or

the stock market. Kyle, Matt's best

friend, even explains that some of his

friends lost a bunch of money picking

stocks during the COVID boom, like

Pelaton is one example that he gives,

which came crashing back down to earth.

Roy explains that you need no knowledge

to invest successfully in the stock

market. He even goes as far as saying

that for 99% of people, more financial

knowledge makes them worse, not better

at investing. I would qualify this a

little bit. Certain knowledge, like the

idea that most people can't beat the

market and that index funds are sensible

investments for most people, is

extremely useful knowledge. Knowing how

to follow the performance of individual

stocks or the direction of interest

rates is probably not useful, and I

agree with Roy here, likely to do more

harm than good. People often tend to

sabotage their own returns by

overtrading, timing the market, and

investing in stocks that grab their

attention, all of which lead to lower

returns, and those problems are

exacerbated when people who think they

have some knowledge follow the market

closely. Roy goes on to explain that

successful investing requires minimal

investment knowledge because simply

buying all of the stocks or a close

approximation of it is the most

consistently successful investment

strategy in history. It beats the vast

majority of professional investors and

the vast majority of individual stocks.

It's next to impossible to consistently

separate winning and losing stocks

before the fact. But doing so is not

necessary because all of the stocks

together, including both the winners and

the losers, have historically had more

than enough return to propel most people

successfully toward their long-term

goals. This approach works because while

lots of companies are losers in the long

run, the winners tend to win big. The

most you can lose in a stock is 100% of

your investment, but when you own a big

winner, you can gain far more than that.

We can't identify those winners and

losers before the fact, but owning all

of the stocks in the market means that

you will always hold the big winners.

This effect, which is called skewess, is

what makes owning the market so

difficult to beat. This is also part of

the explanation for why professional

money managers consistently fail to

deliver market beating returns. The

other reason is their high fees. Here in

Canada, we still have a huge portion of

our investment assets in high fee funds

that aim to beat the market. While as

expected, very few are actually

successful. Roy admits that he too at

one time had invested in actively

managed mutual funds, but he eventually

saw the light after underperforming

consistently. Between the skewess in

stock returns and the high fees charged

by the managers hoping to beat the

market, trying to beat the market is a

losing game. This again leads to the

simple conclusion requiring little

knowledge to simply buy the market. The

good news is that there are lowcost

investment vehicles called index funds

that do aim to buy all of the stocks in

a broad market index. A broad market

index is a grouping of stocks that has

been assembled to represent an entire

stock market. In Canada, we even have

asset allocation ETFs which give you a

globally diversified portfolio of index

funds. Roy suggests that those asset

allocation ETFs are a good option for

many people and I agree with them. The

group also raises the point that while

being an owner not a loner may have made

sense in the past, the future is

perilous. We have global warming, Russia

and Ukraine, and divisive politics, all

making the outlook for the global

economy look weak at best, making being

an owner, being an investor in the stock

market less compelling now than it may

have been in the past. Roy does

something here that I love. He brings up

history. Roy reads a headline that he

keeps laminated on his counter, and I'm

going to repeat it here. It is a gloomy

moment in history. Not in the lifetime

of any man who reads this paper has

there been such grave and deep

apprehension. The United States is beset

with racial, industrial, and commercial

chaos. Drifting we know not where, and

Russia hangs like a storm cloud on the

horizon. Of our troubles, no man can see

an end. The group assumes this is from a

current paper, but Roy explains that

it's from Harper's magazine in 1847. I I

learned this lesson early on in my

career. When you look around at the

state of the world, it always, always,

always feels like some un unprecedented

disaster is unfolding before our eyes,

making it feel like a particularly bad

time to invest in the market right now.

The reality is that it always feels that

way. Wars, threats of war, discouraging

economic data, natural disasters, and a

ton of uncertainty about the future are

persistent realities. That doesn't go

away. And yes, that makes investing

risky. But the very nature of that risk

is why we expect to earn positive

returns in the long run. If there were

no risk, we would expect to earn the

kind of returns that you get from a

guaranteed investment certificate, which

are much lower. With index funds and

expected returns out of the way, Roy

goes on to explain Canadian account

types, including the RRSP and TFSA. RSPS

and TFSAs are like containers that

investments can be held in. The RRSP is

a pre-tax savings account, meaning that

contributions are made with pre-tax

dollars. This is implemented in practice

with a dollar for-doll tax deduction

when you contribute to your RRSP,

reducing your taxable income by the same

amount. When you eventually withdraw

from your RRSP, the withdrawal is fully

taxable as income. The TFSA is an after

tax savings account, meaning that

contributions are made with dollars you

have already paid income tax on, and

accordingly, there is no tax on

withdrawals. That's all pretty

straightforward, but Roy offers the crew

an illustration comparing the two

account types that I think everyone

needs to understand. Say you have a 30%

tax rate and contributed $5,000 to an

RRSP. 3,500 of those dollars are your

after tax dollars and 1,500 are deferred

income tax dollars. The RRSP allows you

to invest those future tax dollars. It

allows you to defer income tax. Invest

that at 8% for 30 years and you have

just over $50,000. Then withdraw it at

the same 30% tax rate and you have just

over $35,000.

Now let's look at the TFSA. Only after

tax dollars can go into the TFSA.

Following the $5,000 pre-tax RRSP

contribution, the TFSA will get a $3,500

after tax contribution since the TFSA

does not offer tax deferral. Invest that

for 30 years at 8% and you have just

over $35,000, exactly the same as the

after tax outcome for the RRSP. This

shows something important and often

misunderstood. When your income tax rate

is held constant, your after tax dollars

in both the RRSP and TFSA grow tax-free.

Many people see the eventual tax bill on

RRSP withdrawals and think it was a bad

deal. But the RRSP and TFSA give you an

identical after tax outcome if your tax

rate stays constant. It gets even better

because it's common for people to have a

higher tax rate while they're working

and contributing to the RRSP and a lower

tax rate in retirement. In that

scenario, the RRSP offers an advantage

over the TFSA. It is true, as Kyle

points out in the book, that pulling

dollars out of your RRSP at a higher tax

rate effectively results in a penalty

for having used the RRSP rather than the

TFSA. Now, the problem, as Roy explains,

is that we do not know with certainty

what our future tax rate will be. This

does introduce some uncertainty about

the optimal account choice today, but

it's still possible to make sensible

decisions using the RRSP in years where

your income is high relative to what you

expect it to be in the future and using

the TFSA when it's low, or if possible,

just max out both. Next, Roy moves on to

home ownership. He first explains that

it's critically important to consider

the total cost of ownership when buying

a home. Not just the mortgage payment,

but the property taxes and inevitable

ongoing maintenance costs. Not to

mention the potential for the mortgage

payment to increase if interest rates

increase, an issue faced by many

Canadians in recent history. Given the

currently high property prices in

Canada, Roy describes some of the levers

that people can pull to make buying a

house more of a possibility. The first

one is to buy a cheaper home. That may

be obvious, but it's worth saying. It's

not necessary to buy a house that fits

the maximum amount the bank will lend

you, and smaller homes cost less and are

easier to maintain. There are terms to

describe spending so much on a house

that you can't enjoy the rest of your

life, including house poor and

cashration, which are both

self-escriptive as states most people

would want to avoid. The next levers

includes some good rationale for not

stressing too much about having a 20%

down payment, using the FHSA, the first

home savings account, and the RRSP home

buyers plan to increase the amount you

have available due to the income tax

deductions gained from using those

tools. taking out a mortgage with a

30-year amortization rather than the

more common 25-year amortization to

lower the payments on the loan. Finding

a partner before buying a home, living

with your parents to save up for a down

payment, paying off any outstanding

consumer debts to make you look better

to the bank when they assess your

ability to borrow, and earning more

income. I'm not going to go into detail

on all the points here, but each one of

those does have an in-depth discussion

and a thoughtful discussion in the book.

Royy's final point on housing, and where

this channel gets a shout out, is that

renting is not throwing your money away.

a renter who saves the cash flow cost

difference between renting and owning

and invests in the stock market can be

reasonably expected to match the wealth

of a homeowner. The group then shares

some stories about friends who have had

large unexpected housing expenses and

they collectively start to see Royy's

point. Owning a home comes with a

constant flow of unexpected costs. So

constant that they should not in fact be

unexpected at all. The basement leaks,

the air conditioner stops working. A

tree has to be removed. I just had to do

that at my house. The chimneys

crumbling. If renters are diligent about

saving and investing the cost difference

between their rent and the owner's

mortgage, property taxes, and all the

unexpected expected costs of owning,

they can be expected to at least match

the wealth of the owner. I have shown

this in past videos using both

reasonable assumptions for the future

and actual historical data for Canadian

cities. Roy does emphasize a point that

I agree with. Most people who rent will

not save and invest diligently. They

will undersave and invest in shitcoins,

penny stocks, and expensive financial

products. Those are my words, not Royy's

that underperform the market.

Additionally, lots of people, including

some of Royy's students in the book,

have an emotional desire to own. But Roy

suggests here that Canadian society has

conditioned us to believe that home

ownership is a desirable objective and

that it's worth reflecting on whether it

is really a desirable objective for you.

There are additionally lots of

psychological benefits to renting, like

fewer responsibilities, more predictable

costs, and general lifestyle simplicity.

There are valid points on both sides,

but Roy's point is that renting is a

viable option for housing from a

financial perspective. It is not

throwing money away, and it may be the

best path for some people to follow.

Music to my ears. Royy's next lesson on

spending is incredibly important. People

spend money for the wrong reasons,

reasons not aligned with their values

and goals. Roy explains that a lot of

spending is the result of faulty brain

wiring. People often spend money to

impress the people around them, even if

not consciously. And in addition to

that, we are not good at delaying

gratification. The point Roy wants to

hammer home is that most people would

cut back on some of their spending if

they were more aware of where their

money goes. And even small changes in

spending can be a big boost to your

savings rate. Royy's first tip here is a

tedious one to create an exhaustive

multi-month spending summary. The group

agrees that this sounds like a miserable

task, but Roy says that over his many

years of experience teaching people

about personal finance, these spending

summaries have proven vital for many

people to get on top of their personal

finances. Arguably even more importantly

and interestingly, Roy says that he is

100% sure that doing a spending summary

has positively impacted people's

happiness levels. The reason is that it

makes people realize where they are

spending on things that don't bring them

value and it helps them to make sure

they are getting value from the things

they are spending on. As Roy describes

it, you want to maximize the joy units

you're getting for each dollar of

spending. If you can find spending that

is giving you some joy units like

lunches out, but when added up over the

course of a year, those dollars could

have afforded something with a higher

joy unit impact, you might realize it

makes sense to reallocate your spending.

Small numbers make a big difference. For

example, saving only $11 per day for a

year results in over $4,000 of savings.

More if you account for any return, even

a small one earned on those dollars. Roy

brings up a famous quote from Ben

Franklin to drive the point home. Beware

of little expenses. A small leak will

sink a great ship. The next lesson is on

wills, life insurance, and

responsibility. Nobody likes thinking

about dying, but as Roy explains, if you

don't think about it, your estate will

be distributed based on your province's

intestasy laws, the laws that determine

what happens when someone dies without a

will. The problem is that those laws are

often at odds with what you would have

wanted to happen if you had taken the

time to plan for it. It's important to

consider what exactly you want your

estate to achieve and have a will

drafted accordingly. Roy suggests going

to a professional, but acknowledges that

some of the online will platforms can

also work if you have a simple

situation. Personally, I would go to a

professional, especially if you have any

complexity in either your assets or your

estate objectives. Roy emphasizes the

importance of choosing an executive. The

executive is the person responsible for

carrying out the will's instructions,

but it is not a small job and should not

be taken lightly. Royy's last point on

wills is that they should be reviewed at

least once a year. And he also mentions

that when you get your will done, you

also need to draft power of attorney

documents. Powers of attorney give legal

power to someone you have chosen to make

decisions on your behalf in the event

that you become incapacitated. There are

two main types. Power of attorney for

property, which lets someone manage your

money and other assets, and power of

attorney for personal care, which lets

someone make health and lifestyle

decisions on your behalf. It is worth

noting that these have different titles

across the different provinces in

Canada. Similar to an executive,

choosing the right person or people is

important. Finally, Roy moves on to life

insurance. He explains that while life

insurance is extremely valuable in the

right circumstances, it is always a

cost. You want to make sure that you

have an insurance need before you buy

life insurance. Life insurance provides

financial protection for your dependence

in the event of a premature death. An

insurance need means that other people

that you care about would be unable to

maintain their lifestyle in the event of

your untimely death. The most common

example would be your spouse and

children, particularly in cases where

you are the primary income source for

the household. This insurance need tends

to decrease over time as your assets

increase. Roy does walk through how to

quantify your insurance needs in the

book, but I'll let you read that in the

book. The final point that Roy makes on

insurance is one that everyone needs to

hear. Most people will only ever need

renewable and convertible term life

insurance. Term life insurance pays out

the face amount of the policy if the

insured dies. It has a level premium for

a fixed term like 10 or 20 years, and

the insurance expires or renews at a

higher premium at the end of the term.

The alternative is cash value life

insurance, which combines term insurance

and a savings component, where a portion

of the premiums you pay go toward

building up a cash value inside the

policy. That's why it's often referred

to as cash value life insurance. The

savings component means that you're

paying higher premiums overall, often a

lot higher, for the same amount of

coverage. You do also get the savings

component, but Roy explains that buying

term life insurance and investing the

difference is typically going to be a

better option for most people most of

the time. I tend to agree with Roy here.

To finish off in the insurance topic,

Roy discusses disability insurance. For

young people with little financial

assets, their biggest asset is their

ability to earn income in the future.

Life insurance protects that future

income in the event of an untimely

death. But death is not the only way

that your ability to earn income can be

disrupted. In fact, disability is much

more common. When someone becomes

disabled, they may lose the ability to

earn income and even become a liability

to their family. Matt mentions in the

book that he's covered through a group

plan at work, but Roy correctly cautions

that many group plans are insufficient.

One big point to look out for is whether

the policy covers you in the event that

you can't fulfill the duties of your own

occupation or of any occupation. Own

occupation disability coverage is the

gold standard. And you also want partial

disability coverage, cost of living

adjustments, and for the policy to be

guaranteed renewable. Typically, that

means getting additional disability

coverage, even if you do have a group

plan. This is not an area that you want

to skimp on. Okay, I left lots of good

stuff out since this was already a long

video, but I hope the summary was

useful. This is a great book. If someone

asked me for an accessible book to read

as an introduction to personal finance

in Canada, this would be at the top of

the list, even for me. While most of the

facts in the book were not new, the way

that they were communicated gave me a

lot to think about. I'll put a link to

the book in the video description. It's

not an affiliate link. I gain nothing

from you buying it. Thanks for watching.

I'm Ben Felix, chief investment officer

at PWL Capital.