The Barefoot Investor – by Scott Pape

The Barefoot Investor is all about helping you with your personal finances so that you too can look in the mirror and say ‘I’ve got this’. The book takes us through different stages of life: Plant, Grow and Harvest. There are specific actions littered throughout the book and tasks you should complete if you want to truly control your own finances. It’s well worth reading and putting into practice. The ‘bucket’ strategy of managing your money without budgeting is amazing!

‘The only money guide you’ll ever need’

A bushfire raged through Scott Pape’s town and took everything from his family – their home, their farm, their sheep, and everything they owned. Their life’s possessions now amounted to a charred pile of rubble. And just as everything seemed to be falling apart, Scott looked in the mirror and said ‘I’ve got this’.

 The Barefoot Investor Summary

“When it comes to professional opportunities, this is the best time to be alive in the history of humankind.”

You don’t plant an apple tree on Saturday night and come back on Sunday and stand with your hands on your hips and scowl – “where are my freaking apples”. You don’t pull the sappling a week later and plant it on the other side where it’s sunnier. You don’t normally watch the nightly news and think to yourself – ‘GEES there is no rain in the next 5 day forecast!’. You don’t get desperate and google ‘how to grow a 1000 apples a day’. No you don’t – you just plant the tree – and then wait. A year or so later it bears some apples, mostly hard and sour. Its branches are still young… you basically forget about it and get on with your life. After a few years you notice its getting taller… after 30 its thick and tall, when you’re long gone your grandkids can play under the tree. Nature has an easy to understand pattern – plant, grow, harvest. It’s the same with your money

• Plant the seeds of wealth
• Watch them grow
• And enjoy the harvest

Plant 

Schedule a monthly Barefoot Date Night: When you take action on Scott’s steps, you may as well order the best thing on the meu and have a nice glass of wine. With 30 mins work your going to save yourself $1000’s over the next year – and hundreds of thousands over the next decades.

Banishing bank fees forever: Banks are like giant corporate octopuses with tentacles that wrap around you and try to squeeze as much money as they can. How else can four businesses make $30 billion a year in profits in a country of just 24 million people. There are plenty of banks that will charge zero ATM fees and offer a higher interest rate on savings.  

Utilise the greatest tax dodge (Super Aus , 401K USA, ISA UK, KiwiSaver NZ): The average worker can legally use super to cut their tax. The top rate is 47%, for Super it is just 15%. You can retire with 1.6 million in super and won’t pay a cent for tax, and your super is protected if you go bankrupt. Research shows those who start in their 20 can accumulate up to $663,000 of Super, but also pay $174,000 in fees. Choosing a low cost fund is thte easiest way to win the game that everyone loses. Let’s say someone on $50,000 a year pays $5000 per year over 30 years at a return of 8%. The difference between 1% and 0.02% in investment fees, is a whopping $226,484. Low fees are the way to win at this game.

Set up your buckets: Scott Recommends the serviette strategy to take control of your expenses and have a steady stream of income for your investments and paying down your debts.  Scott Recommends: Daily expenses 60%. Splurge 10%. Smile 10% (long-term savings, eg: overseas holidays and experiences)Fire extinguisher 20% (credit card debt, mortgage)  

Domino your debts: Scott has a secret in which you can live like a multimillionaire right now. Think about this – what did you buy 5 years ago that gives you genuine happiness today?  Truth is for the millions of dollars most people spend over their lifetime, and can count the truly meaningful things they’ve bought on one hand.   

How much is enough? A survey of 50,000 Aussies, found that 53% of people earning $200,000 a year felt either angry or frustrated at their cost of living. The average wage in Australia is $81k, if you plug that into global rich list.com, you will find that you’re in the top 0.27% of the richest people in the world. The trick is consciously spend on the things that will genuinely make your life better, meaningful or more comfortable, and spend more extravagantly on and then ruthlessly cut out the waste.

If you’ve fallen into the debt trap, the strategy is to domino your debts. Debt is slavery and eats away at your self-esteem.

Grow  

Double your income: This is a U-turn from most finance books. Most of them say things like ‘if you cut out your daily latte and invest that money, in 30 years you’ll have $165,000. There is a limit to how much you can save, but there’s no limit to how much you can earn. Turn on that money tap so it gushes into your buckets.

 Learn valuable skills: Who are the highest paid people you work with? Chances are that they’re no smarter than you. They may not even work harder. They’ll be doing either leading people, or bringing home the bacon (providing goods, marketing, or selling.   

Get a bit on the side: The easiest way to make money quickly – as in next week – is to freelance. Freelancing cuts all of the bulldust and allows you to road-test your ideas, your pricing strategy and your skills.   

Buy your home: Barefoot owns property but hasn’t drunk the Kool-aid. The Economist Magazines has labelled Aussie housing as the biggest financial bubble in history. Yet still Barefoot thinks owning your own home is one of the best financial decisions you’ll ever make. Owning your home is like a 30 year forced savings plan. Any gains you make are tax free.     

Boost your mojo to 3 months: Mojo is all about eliminating the worry of money. Once you have 3 months of salary saved up, you never have to worry about money again. If your boss is a creep? You quit. If your brother is sick? You can help him out. 

Harvest  

Get the banker off your back: If we’ve planted and grown our wealth, the final step is to reap the reward of the harvest. Most people have a mortgage, which literally means ‘agreement until death’. The whole world conspires against you paying down this debt, but this needs to be knocked off the list.