10 things the Barefoot Investor teaches us about money

Have you heard of the Barefoot Investor?

If you’re reading this for Australia, chances are you have. The Barefoot Investor was one of  Australia’s best‑selling books of the past decade. And it’s not just any book, it’s a finance book.

Who is the Barefoot Investor?

It’s a persona created by Scott Pape, a guy from country Victoria in Australia who wrote a book in 2016 titled ‘the only money guide you’ll ever need’. It sold well, with more than 1.26 million copies sold, grossing more than $29.6million.

Is the Barefoot Investor a cult?

Many read the book and feel like they’ve joined a cult. Readers often buy and stick with the products that the Barefoot Investor recommends.  They write his catchphrases on their bank cards and chant phrases like “smile” and “mojo”, a language only understood by followers of the Barefoot.

The book teaches the barefoot steps, which are very similar to Dave Ramsey’s baby steps outlined in Dave’s Total Money Makeover book, published in 2003. But what can we learn from these barefoot steps about money?

Here’s 10 things the Barefoot Investor teaches us about money:

1. Schedule a date night

The Barefoot Investor proposes having a date night once a month where you go out with your partner and discuss your finances. If you’ve never talked about money with your partner, this can seem terrifying. Here are our tips for how to talk to your partner about money and bring it up on a first date if you’re single.

2. Use the Barefoot buckets strategy

The Barefoot Investor has a three buckets strategy. This involves putting your money into three buckets, namely the Blow, Mojo, and Grow accounts. This helps you manage your daily expenses, your savings, and your retirement fund. These buckets are three bank accounts for different purposes.

3. Domino your debts

The Barefoot teaches us that paying off your debts is like a game of dominoes, knocking them down one by one. He recommends negotiating lower rates on your credit card debt, before cutting up your credit cards, which many followers take a photograph of and share with pride.

4. Buy your home

The Barefoot Investor teaches us to save a 20% deposit when buying a house. This practically means saving up 20% of the purchase price before you take out a mortgage with a bank. This also avoids extra bank charges like lenders’ mortgage insurance.

5. Save 15% of your income for retirement

The Barefoot asks you to save for retirement early and contribute at least 15% of your salary. This includes considering the tax benefits of contributing additional money to your retirement fund from your pre-tax income.

6. Save 3 months of living expenses

The Barefoot suggests that you should save up to 3 months of what it costs to be you. He calls this your mojo bank account, which is essentially an emergency fund. This money should be saved in a separate bank account so that you aren’t tempted to spend it.

7. Pay off your mortgage quickly

The Barefoot Investor wants people to pay off their mortgage quickly by lowering their interest rates. You can do this by making extra repayments to pay down the mortgage debt quickly. Given most mortgages are a 25 to 30 year commitment, this can add up over time.

8. You don’t need to be a millionaire to retire

The Barefoot says that so long as you own a home outright, you can retire with less than a million in the bank. His strategy involves topping up your retirement fund with the government’s age pension. Most of us think that we need a huge amount of money to retire so this is comforting.

9. Don’t forget to leave a legacy

The Barefoot asks you to consider giving money to others. He suggests doing this via products like Kiva, providing micro-loans to support entrepreneurs. It’s worth considering how you can leave a legacy with your own finances and consider the different ways to give your money to a good cause.

10. Don’t just read the Barefoot and stop there

The Barefoot Investor is a great starting point. But it absolutely is not the only money guide you’ll ever need. No one person, no one voice speaks for everyone, nor should it proclaim to. The Barefoot is great but his perspective is not the only perspective worth listening to.

The Barefoot Investor is a good beginner’s book for managing money.  

It can teach us many things, including how to buy a house and eliminate debt. Make sure you think critically about what you read. For example, don’t just pick a bank account or combine money with your partner because the book recommends it. Look at many viewpoints, read widely, and decide what works for you.