The Barefoot Investor, page 1
Welcome to the 2020–2021 update
G’day!
In 2019 I had a major life change.
I decided to go back to school and study to become a not-for-profit financial counsellor. That means I now volunteer my time helping vulnerable Aussies in financial hardship.
My first role was helping bushfire victims … and then came COVID-19.
I’ve updated this book to take into account what I’ve learned in the financial trenches helping people who’ve lost their homes, jobs or small businesses get back on their feet.
As I write this, we’re officially in a recession, and it’s shaping up to be the deepest economic downturn in our lifetime.
Australia has just come off the longest economic boom in history — lasting almost 30 years. As a result, most people are not prepared for what comes next. Australians are drowning in debt … we are some of the most heavily indebted households on the planet.
Yet there’s one group of people who are financially confident despite the deepest economic downturn in living memory:
My Barefoot community (which has been described as ‘the biggest financial cult’ in Australia by the media).
What’s their secret?
It’s not that they’re earning more money than you.
It’s not that they’re in safe jobs … many have had their hours cut, or lost their jobs in this crisis.
Yet, almost without fail, they’re staring down this crisis and saying: ‘I’ve got this.’
What gives?
You’re about to find out.
A quick note about the products mentioned in this book
Four years ago, when I first sat down to write this book, I expected to sell a few thousand copies at best.
So, I wrote it the same way I’d talk to a mate if we were at a pub (remember those days?):
I talked about my simple ‘bucket’ strategy … the exact bank accounts I use … even the pillow I bought that I couldn’t shut up about!
After reading the manuscript, my editor boldly proclaimed: ‘I predict this will sell at least 20 000 copies!’
And then … all hell broke loose.
We sold 100 000 copies.
Then 500 000 copies.
Then 1 000 000 copies.
Then 1 500 000 copies.
Now we’re closing in on 2 000 000 copies.
For a few years now, people across the country have been signing up to ING and buying Dunlopillo pillows … and now banks are piggybacking off the popularity of my book with multimillion-dollar ad campaigns about buckets!
For a guy living on a farm, it’s all a little strange.
In the ‘barstool chat’ spirit of the original book, in this update I’ve kept those references to many of the products I use myself.
But the truth is, I’m not a ‘rate tart’: I don’t go through the switching rigmarole each year to earn an extra $8 in interest.
There are now better deals on offer than the ones I use. Case in point: today there are several index fund offerings in super that are just as cheap as (or cheaper than) the Hostplus fund I mention in this book!
So before you sign up for the same accounts as me, you should do a quick Google to see if there are any better deals on the market right now.
Welcome to ‘the cult’.
Scott Pape
Family Farm
October 2020
Praise for The Barefoot Investor
This book will help you protect the people you love.
— Melissa Doyle, host of Sunday Night
Scott is one of the best communicators on financial matters in Australia — in fact, one of the best communicators full stop. More importantly, what he writes not only makes common sense, it’s correct and has integrity. He’s a commentator with no axe to grind (apart from the one at his farm), and there aren’t many of us.
— Alan Kohler, ABC Finance Presenter, Constant Investor
In this book you will read true accounts from a divorcee road train driver, a young widow and a returned defence officer — all of whom have ‘gone Barefoot’ and are massively better for the experience. They join thousands who are following the Barefoot strategies and are happier, more confident and, importantly, wealthier.
— Tim Fischer, Former Deputy Prime Minister
I have always enjoyed reading and listening to Scott talk about money. He is my sort of money guy as he talks in a language we can all understand. More importantly he speaks the truth about money. There are, barring a miracle Lotto win, few shortcuts to wealth, it takes time and effort. This book can really help you to take control of your money. Scott’s no-nonsense style is easy to read and he provides a step-by-step guide that will give readers a path to financial security.
—Paul Clitheroe AM, Chairman Australian Government Financial Literacy Board
Why is this the #1 book I recommend to anyone who wants to invest in financial freedom? Because it is much more than just another money book. Scott provides a framework, great ideas and compelling writing to bring to life practical strategies that will truly allow the reader to tread their own path — to achieve financial security, live a purposeful life and leave a lasting legacy.
—Arun Abey, co-author of How Much Is Enough?
Scott Pape has delivered on a promise often made but rarely kept: this is useful, inspiring and practical advice. His story about the apple tree is worth the entire cost of the book.
—Seth Godin, bestselling author of Linchpin: Are You Indispensable?
No funny stuff, just money stuff
The information in this book is general in nature and for educational purposes only. It should not replace individual, independent, personal financial advice, tailored to your specific needs.
Neither Scott Pape nor anyone associated with Barefoot Investor or the making of this book has received any kickbacks, commissions or fees — or even so much as an invite to a corporate box at the footy — for mentioning anything contained herein. We never have, and we never will.
We are fiercely independent.
The bottom line: you’re reading the same information that I’d give to my mum, God love her.
First published in 2017 by John Wiley & Sons Australia, Ltd
42 McDougall St, Milton Qld 4064
Office also in Melbourne
Reprinted with updates October 2020
Typeset in 9.75/14 pt Caecilia LT Std
© Barefoot Investment Management Pty Ltd 2017
Illustrations © Jeffrey D Phillips 2017
The moral rights of the author have been asserted
National Library of Australia Cataloguing-in-Publication data:
* * *
Creator: Pape, Scott, 1978- author.
Title: The Barefoot Investor: the only money guide you’ll ever need / Scott Pape.
ISBN: 9780730324218 (pbk.)
9780730324225 (ebook)
Notes: Includes index.
Subjects: Finance, Personal — Australia — Handbooks, manuals, etc.
Saving and investment — Australia — Handbooks, manuals, etc.
Dewey Number: 332.024
* * *
All rights reserved. Except as permitted under the Australian Copyright Act 1968 (for example, a fair dealing for the purposes of study, research, criticism or review), no part of this book may be reproduced, stored in a retrieval system, communicated or transmitted in any form or by any means without prior written permission. All inquiries should be made to the publisher at the address above.
Cover design by Hyungtak Jun
Cover image by Isamu Sawa
The author and publisher would like to thank the following copyright holders, organisations and individuals for their permission to reproduce copyright material in this book: © ING Bank: p.18; © Australian Securities and Investments Commission: p.27; © Rob Hill / Getty Images Australia: p.51; © piranka / Getty Images: p.51; © Pacific Brands: p.55 & p.56; © champja / Getty Images: p.62; © AAP Image/Dan Peled: p.142; © Australian Foundation Investment Company Limited: p.176; © Pacific International Music / Lyrics by Garry Koehler: p.244.
Disclaimer
The material in this publication is of the nature of general comment only, and does not represent professional advice. It is not intended to provide specific guidance for particular circumstances and it should not be relied on as the basis for any decision to take action or not take action on any matter which it covers. Readers should obtain professional advice where appropriate, before making any such decision. To the maximum extent permitted by law, the author and publisher disclaim all responsibility and liability to any person, arising directly or indirectly from any person taking or not taking action based on the information in this publication.
The author is not affiliated with and does not endorse any of the corporate entities mentioned in or involved in the distribution of this work, or any third party entities whose trademarks and logos may appear on this work.
For Liz.
Home is wherever I’m with you.
Date: 12 February 2014
Location: Romsey Emergency Evacuations Centre
She leaned in, gently put her hand on mine, and said, ‘Honey, I know it will be difficult for you, but you’re going to need to let people help you. You’ve got a young wife, a little baby … and you’ve just lost everything you own. I’m a financial counsellor. I help people in crisis. Let me help you.’
10 per cent of all author royalties are donated to the not-for-profit financial counselling peak body, Financial
WHERE TO GET HELP
Financial health and mental health are intrinsically linked.
Financial Counselling Australia and Beyond Blue have a public awareness campaign to encourage people in financial stress to seek support.
beyondblue.org.au/financialwellbeing
CONTENTS
Cover
About the author
Prelude: Living Barefoot
The alpaca attitude
Part 1 Plant STEP 1 Schedule a Monthly Barefoot Date Night Money talk is better with garlic bread and wine
Barefoot banking
The world’s cheapest super fund
Your insurance sorted in one beer
How to live like a multimillionaire right now
STEP 2 Set up Your Buckets The Serviette Strategy
STEP 3 Domino Your Debts Removing the brainwashing
Domino your debts (except your HECS-HELP and your home)
Recap of Part 1: Plant
Part 2 Grow How to double your income
STEP 4 Buy Your Home How to buy your home in 20 months
STEP 5 Increase Your Super to 15 per cent Your Golden Ticket — becoming an investor
The automatic millionaire — how to put your investing on autopilot
Should I buy an investment property?
How to be a hero — investing for your kids (or grandkids)
STEP 6 Boost Your Mojo to Three Months The power of Mojo — never worry about money again
Recap of Part 2: Grow
Part 3 Harvest STEP 7 Get the Bankar Off your Back The curious case of the postcode povvos
How to save $77 641 and wipe almost seven years off your mortgage
STEP 8 Nail Your Retirement Number The Donald Bradman Retirement Strategy — why you don’t need $1 million to retire
Finding your financial advisor on Tinder
It’s not about you — a gift for your family
STEP 9 Leave a Legacy Building your legacy — a very special Barefoot Date Night
Recap of Part 3: Harvest
Freedom starts today — you don’t have to wait …
We’ll meet again
I’ve got this
Index
End User License Agreement
About the author
Scott Pape is the Barefoot Investor.
For the past 15 years he’s reached millions of Australians through his national weekend newspaper columns, appearances on TV and radio and his bestselling books, The Barefoot Investor (2016) and The Barefoot Investor for Families (2018).
In 2010 independent research firm CoreData found that:
Scott Pape is considered the most knowledgeable regarding financial matters, topping the ratings in the areas of superannuation, investment, taxation, insurance and economics. Pape is also considered the most trustworthy, truthful in how he presents himself and in touch with financial matters that affect everyday Australians.
In 2014 he was chosen to assist with the government’s national financial literacy in schools program. He has worked with AFL and NRL teams, struggling single mums and elderly pensioners.
In 2020 Scott gave up his financial services licence to become a volunteer financial counsellor.
Scott lives in country Victoria with his wife Liz and their three children on their family farm and is often seen belting around in an old ute that doesn’t need to be locked.
Prelude: Living Barefoot
A blackened sheep stopped right in the middle of the road and eyeballed us.
Its feet were badly burnt. It was shaking. The wool on its side was scorched into curly knots, revealing its bloodied ribcage. It was heaving in and out, clutching for air. In shock. Dehydrated. Traumatised.
With our fences destroyed, the poor girl was left stumbling around on her own, searching for water on our home block. Most of her flock had been burnt alive when a bushfire ripped through my farm 24 hours earlier.
Bang … Bang … Bang.
Without my knowledge or approval, the Department of Environment and Primary Industries had rolled up at first light and begun destroying my surviving sheep. Apparently they can do that when your farm is declared part of a disaster zone.
The sheep limped off to the side of the road. They’d find her soon.
I gripped my wife Liz’s hand and continued driving down our driveway towards our family home.
Two chimneys and a pile of rubble were the sum total of a lifetime of possessions.
Her wedding dress. Tea cups. The few last remaining photos of her late father, who had died 10 years earlier. Butter knives. All of my baby son’s clothes. All of his toys. Everything was gone.
Overhead, a TV news chopper hovered. Later, it would land amid our dead and dying animals, and a reporter would enter what remained of our private family home and kick through the still-smouldering personal possessions that had made our little family us.
At the time I was used to fronting the nightly finance news; that day I was the news.
With the thick smell of everything burning, the sight of everything we’d worked for in ashes and a chopper buzzing around us, my wife erupted. She began screaming uncontrollably. Deep, loud groans of pain. Our baby son, who was strapped in his car seat, began bawling in sympathy.
At that moment, when everything was falling apart, I looked in the rear-view mirror and said to myself the first thing that came to my mind:
‘I’ve got this.’
That’s the truth. That’s exactly what I said. Don’t get me wrong: I’m not some Bruce Willis diehard tough-guy character. Far from it. But if this was the lowest point in my life, there was something deep inside of me that knew I could handle it.
And over the next two years, I did.
The belly of this book came from that one moment.
Because here’s the thing: at some stage you’re going to face your own financial fire.
It could be when your partner walks out on you and the kids.
It could be when you’re sitting alone in the work carpark after the boss has made you redundant.
It could be after you go to the doctor for a simple ‘check-up’.
It could be your girlfriend telling you she’s pregnant.
It could be when you glance at your super statement and wonder how you’ll ever afford to retire.
No matter what you face in the future, I want you to be able to look yourself in the eye and confidently say to yourself:
I’ve got this.
And by the end of this book, that’s exactly what you’ll be able to do.
Plant, Grow, Harvest
After the fire, we looked at the devastation that surrounded us, and were totally overwhelmed.
The smell gets into your lungs … into your brain.
The day before, we had a ‘to do’ list. Now we had a phone book.
With a million things to do, where would we even start?
Well, we chose to … plant a tree.
An apple tree.
It wasn’t a short-term fix, obviously.
After all, you don’t plant an apple tree on a Saturday and then come back on Sunday and stand with your hands on your hips and scowl:
‘Where are my freaking apples?’
No, you don’t do that.
You don’t pull out the sapling a week later and replant it on the other side of the yard where you think it’s (maybe) sunnier.
You don’t stay up at night worrying that your golden retriever is threatening to lift its leg on the trunk.
You don’t nervously watch the weather on the nightly news and think to yourself, ‘There’s no rain on the five-day forecast! El Niño will wipe out everything. This is a disaster!’
You don’t get desperate and google ‘How to grow a thousand apples a day, with one tree’.
No, you just plant the bloody tree.
