The Barefoot Investor seems to be the topic on everyones lips at the moment and after some badgering from our social media wiz, I decided to read some of the Barefoot’s work over the recent Christmas break. I was pleasantly surprised by much of what he said.
To be clear, this article is not pro nor anti the Barefoot Investor, merely some observations.
The Barefoot Investor describes his book as ‘not a typical finance book’. When you really drill down into the book the ideas presented seem different and are presented in a common sense modern day everyday jargon approach. The ideas are not really that unique, just well presented and organised.
The most important things I took out were:
- Read his books to gather some basic financial literacy. Don’t expect to become an overnight financial guru. As he points out, most Australians don’t even take to the time to gain any financial knowledge. Yet, at the same time, they might easily commit without a second thought to buying a home for $1 or $2 million and maybe borrowing $800,000 to $1,600,000 from their bank. Scary numbers!!
- He doesn’t believe financial budgets work for people as most people can’t and don’t stick to a budgetary regime. Rather he wants people to put money aside on a systematic and regular basis, no matter what, for different purposes (living, housing, investment etc). One senses this is budgeting by another name. The focus though is that people need to discipline themselves with their finances, month after month, year after year. That’s the real battle – to discipline yourself with your finances with a regular plan to follow.
- Barefoot is anti-bank fees, credit cards and bank borrowing (debt is a four letter word). Whilst he recognises most people can’t buy their homes without debt, he encourages everyone to pay off that debt as quickly as possible. Credit cards he regards as almost financial lunacy- they encourage undisciplined spending.
- Regardless of the cost of buying a house, the Barefoot Investor encourages everyone to buy their own home as soon as possible. He sees it as a 30 year forced savings plan.
- He encourages investment of your surplus funds. However, forget speculative investment activity and barbecue investment talk ideas from your friends. Everyone in the world has the same crystal ball as to the future. We can only predict the future.
- He also encourages you to invest without the need for bank debt (that four letter word).
- Work out how much you need for your retirement. He throws some numbers into the mix and what you can afford with your living standards. One point he emphasises is you should never fully retire for some type of employment. Some extra income will be valuable.
This article should not be interpreted as providing financial advice. You should seek the advice of a qualified financial planner for much of the Barefoot Investors ideas and your personal investment activities.
If you would like some advice on your personal investment activities please contact Rede Accountants here.