I can’t recall exactly when I stumbled upon Australian Scott Pape and his book The Barefoot Investor. It was years ago, and I think it would have been the result of a Google search, closely followed by ordering his book and impatiently waiting for it to show up.
The way he wrote was so different from the boring financial stuff I was reading, and he was “fair dinkum” and no-nonsense in an uplifting and helpful way. I found his book useful, and I began to look forward to his weekly email where he answered reader questions with old school guidance, while weaving in as many Aussie expressions as he could!
I’ve recommended The Barefoot Investor to many people, and it’s not uncommon for them to come back to me following a period of rapid and positive change inspired by an “ah-ha” moment after reading the book.
Scott Pape has a chatty writing style and makes the unnecessarily complex world of money seem just plain logical. His book remains one of my most recommended resources that people can use to add some structure to their financial situation, whether they’re ticking along nicely or just one expense away from financial calamity.
Calmly, logically and with humor (and wine), this book gives you a step-by-step plan. Here are five important lessons that I’ve learned from The Barefoot Investor.
1. You have to want to change
To make the most of this book, you have to want to change in the first place. You might not yet know how or why, but you’re willing to learn. It could be that only one person in your household is interested in learning about money and creating change. Still, the benefit of this book is that it helps you start a conversation with the logical real-life examples he uses. And it’s hard to argue with logic.
Because of his liberal use of wine and date nights, he smashes the seriousness out of money. It’s not a battle between couples to be fought, but more of a thoughtful conversation about where you are at and where you are going financially. Even unwilling participants have told me that his book makes them want to change their behaviors, talk about their finances and implement his strategies because they can see a way ahead.
2. It’s okay to follow a template
Once you have decided to learn and improve your financial situation, it can be a minefield to navigate how to begin. There is a massive amount of conflicting information out there about personal finances. For those going in cold, making a start can be incredibly confusing and one of the things I hear quite often is, “I just want someone to tell me what to do”!
The reason The Barefoot Investor is so influential is that he gives you the “recipe” for financial success. He outlines a series of actionable steps that you can tailor to your situation, instead of having to go out and discover it all for yourself. This speeds up the change and stops procrastination. Start at page one and follow his steps in the way he describes. Make life easy and do what he says!
3. Make the complex easy
Most of us haven’t been lucky enough to grow up with financial mentors. The closest thing we get is our parents opening a bank account for us when we’re young. As we grow up and take control of our own money, we begin to tack on financial products (extra accounts, credit cards, overdrafts, mortgages), building up a complex and often unwieldy financial structure.
Your banking should not be complicated. You should be able to easily explain it to a 10-year-old.
The Barefoot Investor wipes all that complexity away and helps you rebuild your financial life, using his “buckets” strategy which structures your bank accounts to give you a much stronger and more effective foundation to work on. As your life evolves, your new bank accounts can evolve with you.
Often there is a catalyst for change, sometimes a traumatic event, that makes people sit up and realize that the way they have structured their money is no longer fit for purpose. Something as simple as having easy-to-understand banking brings a feeling of power, freedom and control to any situation.
4. Rapid change is possible
Inside every person who considers themself to be “bad with money” is a financially literate person just screaming to get out. I’ve witnessed countless times how once someone is given some simple tools, they just go for it.
The information Scott lays out in his book gives people the tools to change because you can open up your computer and restructure your bank accounts, start retirement funds, buy some insurance and more, all in one evening. It has never been easier to manage your entire financial life from your kitchen table and because he shows you how to do it, those who like to procrastinate are pretty much out of excuses!
5. The journey has just begun
Scott’s use of real people and their stories shows that good money habits, becoming debt-free and growing your wealth over time are attainable for everyone. Your financial history or your current rate of pay doesn’t matter, the same rules apply to us all — just follow the framework.
Regardless of whether you want to use his terms for labeling your banking “buckets” or you want to give them your own names, the point is that you have learned new skills, given your money some structure and started to take control of your finances.
From there, the debt reduces, the investments build and the knowledge grows.
And that is the final lesson that I’ve learned from The Barefoot Investor. People don’t stop there once they implement his strategies, their journey has just begun and the learning continues. They tend to “tune in” to a whole area of their life that they have ignored up until now and they start to see opportunities they had never noticed before. They tend to have a new sense of curiosity and life continues to improve.
Scott Pape calls a spade a spade. He is very clear in the belief that there is an entire financial industry that benefits from keeping others uneducated about money. As an independent commentator, there is no pandering to any financial institution and he point-blank tells you which provider to use and why. That is extremely refreshing and it’s rare to hear someone be so frank about finances. Fair dinkum!
Ruth blogs at thehappysaver.com all about how she and her family handle money. What’s the secret? Spend less than you earn, invest the difference, avoid debt and budget each dollar that flows through your hands. She firmly believes that if you can just get the basics right, life becomes easier from there on in.
