25 Word Summary: The Barefoot Investor book brings forward a simple system where its readers can eliminate debt, live presently and retire comfortably.
The Barefoot Investor Book Summary by a local reader
I first picked up Scott Pape’s book in 2009 while living in Adelaide. Yep, we’re talking 11 years here. Today I reside in Queensland, Australia.
This book in addition to several others has, without a doubt, literally changed my life. If you’re ready for a new journey through life, then you’ve found just the place.
The Barefoot Investor is purely no-BS or fantasy. You won’t find Scott proposing that you can “manifest your riches” or “the universe brings you everything” 😅, instead he proposes the simple life without the need to keep up with the Jones’s.
(No, not Alan Jones. We’re talking those driving unaffordable luxury cars with big houses.)
Scott’s book is on the back of the tried and tested formula of WORK. That is – you still need to work to achieve the results you’re looking for, which for most people, is the reduction of debt and financial freedom (this definition varies massively between individuals).
As one of the early adopters of The Barefoot Investor, I’ve seen this book influence tens of thousands of lives. Now today, more than 500,000 copies have been sold across the country. That’s still just roughly 4% of our population.
My favourite Scott Pape quote
While there are many quotes worth sharing from the famous Scott Pape, I believe this one takes the cake:
Ain’t that the truth. While I recommend starting a side hustle or home-based business, going into debt is almost a terrible idea. If starting a business requires you to put it on a credit card, then simply don’t do it.
Today I still own a sub $10k car with all the features I need (cruise control, cold aircon for Queensland, 5-star ANCAP safety rating) and my weekly expenses are very marginal. I use my modest online income to stack on the side.
Further still, I regularly recommend people to disconnect from social media. You don’t need to see your best mates new car or trip overseas in business class. All distractions lead to in-action.
Now, back on track. Let’s get into the meat and potatoes.
The Barefoot Investor Review
I’ve reviewed the book quite extensively over the past 11 years. Scott Pape has organized The Barefoot Investor in 3 core sections:
- Planting the seed for your financial future
- Growing and nurturing your portfolio
- Harvesting the returns in many years to come
It’s clear that Scott’s farming background is evident inside his book. Even today he continues to live the simple life in the country, despite having a substantial net worth.
The more practical elements of the book are, surprisingly, very simple.
- Use various bank accounts to better manage your money (I do this)
- Knock out your credit card debts first before paying off the rest
- Accelerate your retirement planning through using index funds
I’ll break down these lessons individually.
1. Multiple bank accounts to manage your money
Scott proposes that while men are predominantly taking charge of their family’s finances in Australia, it should really be a balanced role. Each person needs to follow a simplified system.
Money should go towards these 3 places:
- Blow it. Let’s face it, you just have expenses where money gets blown every week. Money comes and money goes. This is the tier for your normal household expenses like food and bills.
- Mojo. This is my favourite tier and the one that really stuck with me when I first read the book in 2009. Sometimes people go through tough financial challenges and this account should have 3 months worth of savings. For many, that’s really a stretch.
- Growth. For the income that’s left, this is where you can grow it over time so your retirement planning is accelerated. I’d estimate that 70% of people buy The Barefoot Investor to learn more about this.
Scott then proposes using up to 5 different bank accounts to manage this. You can opt to do it within one bank or separate them. Just keep in mind that some banks may charge $10 monthly account keeping fees while some are totally free.
Essentially, the system has:
- Daily expenses. Rent, bills, fuel etc.
- Splurge account. Restaurants and new clothing
- Smile. A big purchase that takes months to save, like a holiday.
- Fire Extinguisher. Scott proposes that you use up to 20% to reduce expensive debt like credit cards.
- Mojo. Again – my favourite account. It’s where you can generate income from your side hustle or extra hours worked.
It shouldn’t take you more than a couple of hours per month to manage all of this. What’s most important is that this system is set up and followed properly from Day 1, with the money properly allocated.
2. Starting your debt elimination plan
Australia has the highest personal debt load in the entire western world. This is an issue I feel very strongly about hence my mention on why you shouldn’t go into debt to fund a business startup.
Now, reducing credit card debt is almost always the best solution. To get started, Scott highly recommends that you cut up every single one of your credit cards into dozens of pieces. While it’s an aggressive way to make a change, it’s one that I’ll agree with…if you’re taking this journey seriously.
Since you’re essentially cutting the source on your credit card debts, you’ll make it significantly harder to rack up more debts over time while you’re knocking off the balance. This activity takes 30 seconds so you feel like you’ll already have started the journey. Burn that bridge and start the next plan of attack.
What you’ll want to do is find a competing credit card company which has a zero-interest offer. Some offer 12 months while others do offer 18 months. They will revert to a higher interest rate after the interest-free period, but the goal is to knock off the debt during this time, with no interest incurred.
When the new credit card arrives, be sure to cut that one up immediately too. The money inside your fire extinguisher account is best used to pay off this debt.
3. Lastly, start investing for the long-term
It wouldn’t be The Barefoot Investor unless it features some investing advice. After all, what are you going to do with all that money once living a debt-free lifestyle?
Instead of facing into the stock market and being burned, Scott proposes a much more conservative approach called Index Funds. These are also known as mutual funds where the portfolio marches the components of a financial market index.
You’ll be spreading your risk, lower your expenses (and commissions to brokers! 😃) though will likely have a low portfolio return. Just remember: It’s your entry into the stock market where you can test the waters while learning.
Scott doesn’t really propose real estate as an investment vehicle. While he does touch on it within his book, he does feel that the Australian real estate market is vastly overvalued right now. I’d simply agree.
That said, buying an affordable house is something that Scott does recommend. For many, it’s going to be the best asset they’ll ever own, provided it’s affordable.
My personal journey with The Barefoot Investor
After reading the book, I got to work on my financial plan and also consumed a lot more content in the personal development and wealth creation space.
I tripped, fell and got up again. I’ve done that multiple times actually.
My takeaways through my journey are:
- There is zero value in comparing yourself to others on social media, as they are often broke anyway.
- While you’ve made mistakes in the past, you can still make yourself proud by putting financial concepts into action.
- Real changes are made over years, not weeks or months. However, small decisions can have huge positive impacts, like cutting up credit cards.
- Set real goals. The type of stuff that lights you up in the morning.
I’ve also spent a lot of time inside his Facebook group. If you haven’t already, you can join The Free Barefoot Investor Facebook group. No, you don’t need to have read the book first. 🙂 Jump in and watch the banter and success stories.
Two years after reading his book, I started this blog. Since 2011 I’ve inspired 300,000+ Australians (at this time of writing) on how they can start their own business from home. At the same time, I push people away given that there is a multitude of side hustles today that don’t’ require a financial investment.
In fact, I wrote a guide 52 jobs you can do from home in Australia. I’ve had a lot of praise and feedback on that one actually.
That said, at the age of 31, it’s still early days in my journey. I’ll endeavour to update this review and summary of The Barefoot Investor over time.
Getting started with Scott Pape
Scott Pape has influenced tens of thousands of lives over the last 15 years in Australia, including myself. Reading his book opened my world towards possibilities for myself but also, how so many people struggle to make ends meet.
Today, my financial position is much more secure. I do feel empowered and blessed to help thousands of Australians through their journey.
There is a lot of noise in the marketplace. People who say “it’s easy” but it isn’t.
The Barefoot Investor reviews highlight that many are happy with this book.
Getting out of debt and starting an investment portfolio takes a lot of work, sacrifice and commitment. Fortunately, I learned and applied this over many years.
And for that, I owe a lot to Scott Pape.
