Is the Barefoot Investor Right?

Is the Barefoot Investor Right?

You’ve probably heard of ‘The Barefoot Investor', and for good reason. Scott Pape was voted ‘Australia’s most trusted finance expert’, he’s the finance guy on Channel 7 and radio station Triple M.

He has his own show on CNBC, which gets to 12 million viewers worldwide and he helps AFL and rugby league team understand wealth-creation.

Needless to say, his achievements are impressive.

But do his investment strategies work in the real world? We decided to take a look at one popular strategy, relating to saving.

The Barefoot Investor saving strategy

This strategy is about distributing your income in a smarter way. It looks like this:

  • 5% of your savings goes to a ‘goals account’. This is for holidays and ‘big ticket’ items you’ve always wanted.
  • 10% is ‘mojo’ money. This goes into a high interest savings account and is tucked away just in case you need extra cash. The reason? Scott Pape says that having money allows you to ‘call the shots’ (that is, preserve your mojo).
  • 35% goes into an everyday account. You can do whatever you want with this money.
  • 50% goes into an expense account. This pays for bills and other essentials needed for everyday life.

Is the saving strategy any good?

We like the practicality of Scott Pape’s income distribution strategy a lot. It takes into account the human element of saving, which is something many strategies overlook.

Putting away 35% of your income for ‘anything you want’ is an excellent example of this. How many times have you felt guilty for dining out when you’re supposed to be saving for that big trip? Using this method, you’re able to allow for impulse buys in a measureable way.

Financial Freedom

Scott Pape started working in the finance sector because he wanted financial freedom. To him, that meant not having to worry about the bills, the banks or whether he could afford a real holiday. Instead of ‘get-rich-quick’ schemes, he advocates a commonsense approach to investing, which is designed to achieve success over time.

Head here for more insights from the Barefoot Investor. To find out if you’re home loan ready, talk to our mortgage brokers.

* Financial Advice Disclaimer: This information is general in nature. Mortgage brokers do not provide financial advice. Clients seeking financial advice will be referred to a qualified financial planner.