Top 3 Things I Learnt From The Barefoot Investor

When my friends first started telling me about the barefoot investor my daily expenses accounted for most of my wage and I couldn’t see how I could stretch my money any further. I desperately wanted to save more money, but I was convinced I didn’t have anything left to spare.

Switch banks

Even if you haven’t read the Barefoot Investor, I think the one thing everyone knows from the book is the Orange ING card. There are a lot of skeptics out there about the bank without a branch and some people are just too set in their ways to change. Although for me and many of my friends, it was one of the best financial choices we made. This is why you should too.

No account fees

As long as your deposit $1,000 a month into your ING account, you’ll never be charged any account keeping fees. Now don’t freak out, this is easily covered by your wage going into your account. Now, you’re probably thinking that account fees don’t cost you that much, what’s the big deal? If you’re like me you probably don’t have one account, you might have several. Let’s say you have three accounts and your account fee is $4 a month. That’s $144 a year just to keep your accounts open. I don’t know about you but I’d rather that be going ono to my car loan.

No ATM fees

I feel like this is something that people really discredit but it’s personally one of my favourite things. ING will reimburse you for ALL ATM fees. The way I look at it is that 5% of time I’m withdrawing money at the bank for a specific reason and the other 95% I’m doing it at a 7/11 or in a club when the ATM fee could be upwards of $5. Never having to worry about how much the ATM fee was enough to make me change.

High Interest Rates  

When it comes to savings interest rates, it’s worth looking around for the best deal. The Barefoot Investor suggest ING as their interest rate is 0.25% above most other banks. If long-term savings is your goal, this could make a big difference to you at the end of the day.

60/20/10/10

By far the best thing I learnt from the Barefoot Investor was how separate my money to make it go further. Scott suggests setting up four accounts and distributing your wage following these percentages and categories.

Daily Expenses (DE) 60%

You daily expenses should covered just that, your daily expenses. One thing I think most people forget here is to accurately work out their expenses. You should be considering healthcare, insurances, gym memberships, if you get your hair done once a month you should account for this too. The Barefoot Investor states that if you DE is more than 60% then you need to cut something out.

Fire Extinguisher (FE) 20%

Fire extinguisher is there to put out financial fires. If something goes wrong, this is your safety net. You can also use this money to quickly pay off your debts.

Splurge 10%

Your splurge account is for you week to week splurges. If you want to go to the movies or out for dinner or buy that new top, this is where you take the cash from. This is one of the hardest lessons for me to learn because I felt like it wasn’t enough money. Maybe it doesn’t leave you with a lot to spurge on either but if the aim is to get ahead then you should follow it.

Smile 10%

Your smile account is for your longer-term things you want. It might be your next holiday or your wedding. The smile account is for that thing in the future that makes you smile.

Change your super and consolidate your super accounts

Before I started on my Barefoot Investor journey, I think I had 5 different super accounts all with a few thousand dollars in them. I had no idea how much I actually had in my super because it wasn’t in one place. I quickly consolidated them all and it made me start to think about my future more realistically.

Being in my 20s I never took my super fund into consideration. I ended up with multiple accounts because I always just signed up for a new one when I changed employers and I didn’t consider which one offered the best rates. While you might be a little more clued on than me, it could be worth comparing your super fund to others to make sure you’re not paying more than you need to me. The Barefoot Investor recommends Hostplus as they generally have the lowest fess but you can compare the market here.

If you’re looking to get ahead financially, purchasing the Barefoot Investor might be one of the best choices you ever make. I know it has been a blessing for myself and so many of my friends. Even if it doesn’t work out for you, I can think of plenty of worse ways you could have spent $20. You can purchase a copy of the book from Big W or online from Booktopia.