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Book cover for Book Review: The Barefoot Investor

Book Review: The Barefoot Investor

Author: Scott Pape

Rating: ★★★★★

Genre:

Themes:

Format:

Finished: May 11, 2019

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This is the most important book that I read in 2018. It is targeted towards Australians, but the basic ideas are applicable everywhere. Here is a summary of ideas from the book.

Ensuring your financial well being

  • Choose banking institutions which have the lowest fees, ideally zero fees.
  • Save at least 10% of your paycheck for retirement fund (RF).
    • In Australia, this is your super.
  • Invest your RF in a diversified portfolio.
    • Also make sure fees charged by your financial products is as low as possible.
    • Don’t hire wealth advisers who charge a percent fees.
  • Automate your banking.
    • Create an expense account.
      • Deposit monthly expenditure money in this account.
      • Create and maintain a monthly budget.
      • Watch out for small but frequent expenses.
    • Create a goal oriented savings account(splurge). For trips, splurges and so on.
    • Create an emergency fund (EF) account, ideally this account is not easy to withdraw from.
    • Keep mone to cover at least 3 months of expenses in EF.
  • Property
    • Dont invest in property.
    • Only buy the house you are going to live in.
    • Always negotiate your mortgage down.
    • Dont fall for mortgage traps, getting extras. Focus on keeping fees down.
  • Credit and debt
    • Use your splurge account to get rid off any debts.
    • Get rid off your credit card.
      • Unless you can automate credit card bill payment, having it is not worth it.
      • Most miles etc are useless and not worth the risk of having a credit card.
  • Earn more.
    • Learn to negotiate your pay.
    • Figure out a way to get extra income.
      • Sell stuff you dont need.
      • Acquire skills to start a side business.
  • Give back
    • Whatever little you can.

Most important lesson you can learn is - Power Of Compounding. A small pay rise every year, will compound to bring you lot of money in next 10-20-30 years. All small fees you save, will add up to become significant over a period of time. Think long term.