I used to consume pop investment books like candy. Well, maybe it wasn’t that bad, but I did seem to read about one a month, going back a few years now. Then I went through a period of not reading any. I have now broken my pop investment book drought and got myself a copy of The Barefoot Investor.
Apparently millions of people have already trodden this path before me, but this was the first time I have read anything by Scott Pape. I was curious to see why there has been such interest in his investment philosophy. Also, I was staying the weekend in an AirBnb in country Victoria without any Wi-Fi or mobile coverage, and I’d forgotten my Kindle, so it was a good way to pass the time.
Pape is a fun writer. He is a little bit sweary, and sprinkles his text with folksy language. I couldn’t help but enjoy phrases like “alpacca attitude”, “plenty of fish fingers in the sea”, and “call a spade a bloody shovel”.
He appears to be inspired by Great Depression-era approaches to building wealth, where people saved up for things rather than using loans, and where owning your own home outright was the principle objective. This reminds me a bit of those who point back at the Good Old Days of the mid 20th century, and aim to recreate aspects of this era today. This put me off-side a little, as there are also aspects of this era that don’t apply today, e.g. the husband-as-breadwinner assumption.
In any case, there are two key pillars that I see underpinning the Barefoot way and are novel to me: (1) avoiding loans and credit, and (2) develop positive emotions around positive financial practices.
The one exception to avoiding loans is for having a loan to buy a home, but then all efforts are to be put into paying it off as quickly as possible. Otherwise, the message is to have no credit cards, no car loans, and no investment property loans. This last one links to Pape’s disinterest in investment property in general, as without borrowing to buy investment property, it doesn’t produce great returns.
The positive emotions are tied to many aspects of Pape’s model. He urges having a monthly family financial meeting, but emphasises alcohol and dessert be part of this. He gives emotional terms to different bank accounts and payment cards like “smile” and “splurge”. Also, he recommends paying off smaller debts ahead of bigger ones, even if the bigger ones are at higher rate of interest, because of the positive buzz gained earlier from paying off the smaller debts. The upshot should be that financial matters avoid the taint of being a taboo topic, and that it can be discussed in a family setting just as a planned holiday might be discussed.
I can see that the recommended steps in the Barefoot way could work for many people. Especially if they need to develop financial discipline, are living in a stable family situation, and are on the more youthful side of 40. However, the model should be taken with a grain of salt, and might not be the best option for everyone. There is a disclaimer at the start of the book that it is general advice rather than specific advice tailored to an individual’s situation, but sprinkled through the book are statements to the contrary. For example, at one point he says “if you follow the Barefoot Steps that I’ve laid out for you, your success is guaranteed”. That kind of statement is not helpful.
All up, it was as entertaining as it was informative. If this is what it takes for someone to read an investment book, then this is probably the book for them. For those who know they want to get serious about investment and their financial future, I would recommend reading more widely.
Rating: 3.5 stars.