The Obvious Investor

The Barefoot Investor by Scott Pape, John Wiley & Sons,
December 1st, 2020 (first published in 2016)

Despite sharing my misgivings about the type of books you find in airports before, I have been given (gifted this time), another book from the same source. Though unlike last time, there is some genuinely useful advice to be found amongst corny pop culture references, dad jokes and regular digs at Donald Trump.

Here is a basic rundown though it doesn’t include some of the more important details found within. I have combined some from separate parts of the book because they fit together better when making a list.

  1. Get a bank account that doesn’t charge fees and add some savings accounts. One savings account should be separate and harder to access to stop you spending the money.
  2. Get a superfund that has low fees and be willing to change if you find a better deal. If you have more than one superfund then roll them over into the same one.
  3.  Get insurance including vehicle, property, life, employment and travel insurance. Don’t take out insurance or extended warranties for trivialities like consumer products. Argue with insurance companies before renewing to get the best premiums and move if you find a better deal that your insurer won’t match. Private health insurance isn’t necessary unless you have a high income and will be charged the Medicare levy if you don’t. 
  4. Don’t spend money on trivial consumer items but do spend good money on things you use. His example was a pillow and good underwear. (After buying a My Pillow, I agree.)
  5. Credit cards are bad. Debt is bad (he calls it slavery at one point! Oy vey). If you put aside savings (as advised), you shouldn’t need a credit card for emergencies and all the points and other bonuses are nonsense and usually require enormous amounts of money to be spent before getting them. 
  6. If you have a large amount of debts, make it your priority to pay them off. Focus on the smallest ones first and work your way through them that way. If you’re really stuck, don’t be shy about asking for help from relevant authorities due to financial hardship.
  7. You can increase your income by working a side-gig which could blossom into something bigger. You need to work hard and there is no easy answer for this. This was probably the lowest on direct advice but it makes sense why.
  8. Buy a house but don’t buy one out of your price range and don’t buy without a 20% deposit otherwise you will be slogged with more fees. Also, renting isn’t bad or “dead money” and an investment property mostly isn’t worth it unless you plan to move into it at some stage. Work to pay it off you home loan faster by paying more than the minimum repayments and make owning outright a priority.
  9. Invest in shares and also starting putting more in Super (15% total) and in growth funds but don’t obsess over the stock market. (He also advises against paid financial advisers and planners.)
  10. Invest in your children and the future. Put aside savings for them but into investment bonds and teach them about it. 
  11. Increase your personal savings to cover rainy days and to make sure you can maneuver if put into sudden financial difficulty. (He recommends enough savings to cover your regular expenses for three months.) 
  12. Plan for your retirement (and death) as well as leaving a legacy to your family and others. 

He has the advice broken into nine steps and there is a lot more specific information that hasn’t been listed. Generally speaking, I think he offers very good advice and following it would indeed work even with accidents, tragedies and economic downturns. I would quibble with a number of things but then I’m not involved in finance and I’m not nearly as well off as him so I will defer to someone with demonstrated qualifications and acumen. That list doesn’t give the whole thing away and he wouldn’t care if it did.

I am not insulting him by calling his advice obvious as a lot of people don’t do the obvious. Not all his advice is obvious but generally it is. For example, I rolled over/closed super funds straight away when I changed but I’m sure there are a lot of super funds being eaten by fees with no contributions. I also balked the very first time I heard about bank fees and have never been in one that did. The information about savings, debt and credit cards is good and realistic and takes into account peoples weaknesses. 

His encouragement to plan beyond your own life is also refreshing. His attitude to life is totally secular but he does at least believe in leaving something for his children and future generations. He is generally all about having families. 

When reading, I found I had done a lot of things he recommended already. I have very little debt (though also no family home), I don’t have a credit card and when I did, I never had more than a $2000 limit. Even then, I was always stressed out if that limit was even half used. I did actively start doing some things like change Super Funds and rearrange some finances. The main thing I need to do is save

I have never understood let alone been one of those people that spend money on fads or fashions. I’ve never been a big fan of consumer garbage and apart from family mementos like photographs and scrapbooks, I have very little that I don’t use. He asked this question in the chapter on the subject:

“And what did you purchase five years ago that still gives you genuine happiness today? (You can’t really remember anything, can you?)” 

I could. Immediately. I could think of many things. But then, I still have some clothing that I got when I was a teenager. I was using a toiletries bag my mum made when I was five until my mid-thirties and only stopped when she bought me a new one and insisted I use it. That said, this is good advice as there really are many people who couldn’t.

Apart from saving, the main problem with my personal finances is all the changes I’ve had in my life moving between two countries and having to start again. Still, I’ve always put money where it was most needed though I do perhaps buy coffee too often. Interestingly, the latter is not something he ever discourages and he mocks financial advice that involves making great spreadsheets of expenditures and penny-pinching. He focuses on the big over the small. There is no point saving $20 a week on coffee if you bought a new car on finance and pay thousands of dollars more than the price while the item depreciates in value every year.

The only real criticism I have is  he has too much faith in the system though he rightly notes you can’t live a life being worried about what might happen. For example, I don’t trust Super Funds to pay out and I don’t care if it is the “law” or anything like that. We’ve witnessed first hand how the law works — especially over the last few years. It wouldn’t surprise me if my Super is offered in digital currency with an expiry date in lieu of the Australian dollars when I reach retirement. That is if the system even exists. Whether or not it ever pays out, it costs nothing but a little time to shop around for one that has better fees. It makes sense to work with what you’ve got so why not do it?

The other is not related to his financial content but the typical and frequent self-depreciation that seems to be expected from Australia’s male founding stock:

The first time I ever spoke to my wife… she casually explained that she lived in an inner-city one-bedder.

I assumed she rented.

Then I asked if she’d bought it with her ex-boyfriend.

Nope.

Then I hinted she must have wealthy parents.

Bump-bow

Hold up, dear reader, I have to call time out of the next paragraph.

See, as I write this, our sons are still reading Golden Books. But one day they’ll read these words. So boys, here’s a life lesson from me to you: Daddy was acting like a chauvinist pig, and Mummy was a smart young woman who didn’t need a man for her financial plan.

No, he made fair assumptions and her actually buying a place on her own and without any help was unusual. It is probably a major reason he married her as he had solid evidence she wasn’t foolish with money. There are a few other comments and asides throughout the book including ones mentioning “old white men” pejoratively and such. They don’t detract from what he’s saying but are just… tiresome. Were these necessary for the book to be published?

In any case, the book is easy to read and easy to follow and the advice would work for people who followed it. It doesn’t require any subscriptions or suggest they buy a series of products he happens to sell. It isn’t at all a “get rich quick” book. All of his advice takes time and most of it also takes plenty of work. My mostly irrelevant quibbles aside, the book is good. As he suggests at the end, I will be passing on this copy to someone else I believe could use it. 

This entry was posted in Book Reviews, Personal, Society and tagged , , . Bookmark the permalink.