Turns out, our relationship with finance is pretty much established through seeing how our parents handle money. So if they stressed about it, chances are that you will too. It has a huge impact on how we perceive money growing up and what we carry through into adulthood.
The Barefoot Investor by Scott Pape is an easy-to-follow guide that honestly helps make sense of complex finance talk. And to top it off, it’s actually really entertaining. Props to you, Pape, for making me LOL.
Here are five everyday financial lessons we learnt from this pearl of financial wisdom:
It’s simple, but it’s genius. Having two debit cards that you use for different things is a great way of keeping track of what you’re spending, and having to think more about what you’re buying. Label one card ‘Daily Expenses’ and the other card ‘Splurge.’ Allocate 60% of your take-home pay to Daily Expenses (food, rent, bills) and 10% for Splurge (almond milk lattes, Domino’s vegan pizza, another amber-scented candle because it’s always good to stockpile, etc.)
This stops the constant shuffling of money, “I’ll just transfer $40 from my savings for the completely unnecessary pedicure I got when my boss was being an arsehole”, and having a splurge account means that there is always money for what you want. And if you want to spend it on miniature ponies, the Barefoot community supports you.
How many of you reading this have zero idea of where your Super is, how much is in there, and how many funds you have? That’s what we thought.
Taking control of your Superfund is fundamental to ensuring long-term wealth, says Barefoot. He dubs it ‘the greatest tax dodge in Australia’, but makes it clear that professionals in the Super industry are getting rich off of our life savings. Which just ain’t cool.
He cites an example of one man who paid over $85,000 in fees throughout the course of his working life. $85,000 skimmed off the top of his hard-earned cash. Imagine how many miniature ponies he could surround himself with if he’d taken control of his Super at the start?
Barefoot encourages you to consolidate all of your Super into one specific fund, the Hostplus Balanced Index Fund. Do this and thank us (well, our shoeless friend) in 40 years time. We’ll wait.
A Mojo fund is a staple of Barefoot’s financial plan. He says that making sure you’ve always got a minimum of $2000 in savings allows you to reclaim power over your own finances and help you feel financially secure. It gives you the confidence that you’ve got some backing if everything were to go pear-shaped. (Or, if like Scott, your family home burnt down in bushfires. Y’know, a mild emergency like that.)
Barefoot truly wants you to be able to escape credit card culture once and for all. He says: “The biggest purchase you make on your credit card is interest. Make no bones about it, the game is designed that way.” Which is pretty scary, amiright?
Arguing that ‘credit card’ is essentially a euphemism for ‘debt card’, Barefoot claims that “debt cards make everything more expensive. And if they get out of hand, they destroy your self-confidence.”
Basically; pay it off and chop it up. Then take yourself out for dinner (paying with cash, of course) to celebrate.
This is one we can all get on board with. While sadly he doesn’t mean buying another pure-linen, ethically-made playsuit from a Byron Bay boutique, he does mean spending money on things that will make a difference to your life. Like a pillow.
Barefoot reckons that everyone deserves to rest their head on a cloud each night, and I can’t say I disagree. He says that spending money on things that you use all the time is always, always worth it.
So what are you waiting for? Get your mitts on a copy and empower yourself to regain control of your financial situation. If you’re keen to expand your financial horizons further, check out these other personal finance reads that aren’t boring AF.
Next stop, Wall Street! See you there.