Monday, April 12, 2010

The Ten Percent Solution

In The Wealthy Barber, David Chilton suggests a solution to building our wealth. He calls it the Ten Percent Solution. The concept is actually quite simple. Invest ten percent of all you make for long-term growth and you'll wake up one day very wealthy.

Most people of course react to this with sceptism. The biggest objection, is being able to afford to put 10% away. If that money come right off our pay cheques though I'm pretty sure most of us wouldn't even notice. I remember once when I receieved a fairly nice raise of 5% and I couldn't tell you how my spending changed at all. It doesn't take long for the money to be used up. The opposite is equally as true. If we took a 10% pay cut, most of use wouldn't even notice (except for the bad attitude at work).

This isn't in lieu of your retirement planning either. He's actually suggesting this on top of any retirement planning you have. Your retirement plan is to enable you to stop working, while the ten percent fund is to enable you to have more fun while not working. Trips you wouldn't otherwise take, a boat you wouldn't otherwise buy, etc.

Seeing as I don't like talking about things I'm not doing myself, you're probably wondering how its going for me. Well, truth be told, it's not. The problem with this concept is that Chilton doesn't tell you what to do when you're in debt other than to stop using credit cards. Obviously none of us want to be in debt (or stay there very long), so it's my goal to get out of debt as quickly as possible. So to do that I've been using the ten percent solution to pay off my debts. Once my wife starts working, the debt repayment should speed up nicely. The plan is to also start putting money away for retirement once again after she starts working.

Once the debt is paid off I can continue on with the payments to build wealth. I did run into a little snag with this plan though which I'll touch on more next post.

Anyone already doing this? Any success or failure stories? Do you think Chilton and I are crazy?


  1. Hey there,
    Have you read anything by Mary Hunt? Her book, Debt Proof your Marriage, is the one that got us back on track. Anyhoo, you're right about how it's so much easier to skim off the top to put money away (ie the 10% get rich fund). Our budget is so tight we've always lived fist to mouth (and incurred a huge to us debt). So now we started putting a set amount away towards our debt every month. But then we did something completely crazy...we put the same amount towards a contingency account. It's not very much as far as dollars go, but it's amazing how quickly it's adding up. I think the key is just to stop making excuses and start following a plan. It's hard, but it is possible.


  2. I haven't read it, but I'll add it to the list. Good for you for building the contingency account. I totally agree about the excuses as well.

  3. You know what? I'd be using that 10% for debt repayment too! I may have to implement this. :)
    @Ramblin'andie...I thought it was interesting that you mentioned Mary Hunt. She is coming next month for a seminar that my church is sponsoring. I had never heard of her, but reading your comment has got me thinking... I may have to get that ticket! :)

    I had actually read somewhere that you should automatically be paying Yourself 10% each paycheque first. That money is used for you and whatever you want. The next 10% is for tithe, or for donations, etc, goodwill. The last 80% is used to pay off bills, debt. I haven't put this into motion yet, but I would like to!

  4. Hmn...I'd be interested in hearing Mary Hunt in person. Her book is available through the FVRL if you're interested in having a look. We read it several times over about a five year period before we finally had success with it...but that's our fault not hers!!

  5. Mary Hunt event "debt proof living" is at the Langley Events Centre on May 5 from 7-9pm. You can check out more info here:

    I tried doing Larry Burkett's budget, but it just didn't make sense or work for me. I'll take a look at Mary Hunt's method. I think it takes a lot of work and consistency to learn something and make it stick!