A Simple Guide to The Barefoot Investor

Written by Scott Pape, The Barefoot Investor: The only money guide you'll ever need is a book about taking steps to achieve financial independence. Although It is written for Australians who want to take back control of their finances, many examples and advice are applicable globally.
The book contains 3 chapters and 9 actionable steps.

Step 1: Schedule a monthly barefoot date night
Book them in with your partner or yourself right away. Make it enjoyable by reviewing everything over a glass of wine and delicious food.

Start looking at things such as the fees you're paying in your everyday accounts and your super fund. Consider opening a new account, which Pape calls the Mojo Bucket. Work towards getting $2000 in there and save it for a rainy day. Having that money put away will take a lot of stress from managing your financials.

Reviewing your super fund is also important. Compare fees and check what your fund invests in.

Step 2: Set up your buckets
The idea is straightforward: set up buckets (accounts) to plan where your incoming money will go. Basically, this is how you should allocate your income:
•60% to your Blow Bucket: Your everyday expenses such as rent or home loan repayments, food, phone bill, internet bill, insurance, and utilities.
•20% to your Fire Extinguisher Bucket: It is for less fun things like saving for a house deposit, paying off your mortgage faster, or paying off debts.
•10% to your Splurge Bucket: It contains cash to spend on things that make you feel great, like new clothes, electronics, appliances, and social life.
•10% to your Smile Bucket: It is for longer-term savings goals such as a wedding, honeymoon, or a holiday.

Step 3: Domino your debts
In this step, you need to tackle your debts. Make sure you write them down and include the interest rates for each debt.

List your debts from the smallest to the biggest. Start by paying off the smallest debts. This will make you feel like you're making significant progress and build momentum in paying off the bigger ones.

Step 4: Buy your home
Mortgage, translated from French, means "an agreement till death", so you must do it right. One of the best things about a mortgage is a forced 30-year savings plan. Any capital gains you make on your primary residence in Australia are tax-free.

Scott lists 5 mistakes people make when saving and buying their first home.
1.Wait for a crash.
2.Buy an unaffordable home
3.Buy an investment property first
4.Rent it out but forget to invest
5.Not consider other options

Step 5: Increase your SUPER to 15%
A typical example in the book is that a 30-year-old person who earns $72,000 has $50,000 already in super. Suppose the person puts super contributions on autopilot and contributes a total of 15% of the salary. In that case, that's an extra $330 per month getting contributed to their super fund.

By the time that person is 67, assuming the growth rate is 8%, and inflation is 2%, the person will have $569,073 more in the super fund than if the person didn't put that extra 5.5% in. When they retire, they would be on track to walk away with $2,063,179. It's a no-brainer!

Step 6: Boost Your Mojo to Three Months
Looking back at step one, we spoke about the Mojo Bucket and depositing $2000 into the account. In step six, The Barefoot Investor wants you to save towards three months of Mojo money to get $6k securely stashed away. If you can get to this point and achieve the other five steps, you'll be well on your way to never having that awful 'I'm worried about money' feeling again.

Step 7: Get The Banker Off Your Back
The main message is to shake the norm and start saving tens of thousands of dollars while paying off your mortgage faster. There are two ways: lower your interest rates and make extra repayments.
The following three simple rules can help you save well over $70k and wipe almost seven years off your mortgage:
Rule 1: Keep it simple
Rule 2: Don't fix your rate
Rule 3: Get the cheapest rate possible

Step 8: Nail Your Retirement Number
Rule 1: Get the banker off your back again
This game plan only works if you retire debt-free. The age pension doesn't consider the value of your family home, so make sure that your mortgage is paid off before retirement.
Rule 2: Nail your number
As we mentioned above: Do not retire until there is $170k (single person) or $250k (couples) in your super fund.
Rule 3: Never, ever retire
The Barefoot Investor suggests working even once a week or doing a job like driving Uber to keep you active.

Step 9: Leave a Legacy
If you've followed all steps above, you are on the road to securing your financial freedom. But how will you be remembered, though?

In this final step, it is suggested to consider the difference you could make in other people's lives now that you're financially stable. Consider giving away some money and time to those less fortunate. You could even make micro-loans to some of the world's poorest entrepreneurs. Think about what you stand for and how you can pay something back to the community.

The Button Line
Congratulations on reaching the end! You've mastered all of the nine barefoot steps! We hope this summary will give you clues about setting yourself up financially and make it feel more doable than it did before. However, although The Barefoot Investor is very popular worldwide, you should take it with a grain of salt. Whether you agree or disagree with it, instead of blindly following the advice blindly, you should think critically and tailor it according to your own situation.

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