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  • Writer's pictureMark Walmsley

The Barefoot Investor Summary

Updated: Mar 9, 2021

The Barefoot Investor Book

A one-stop financial plan for Australians’ of all ages that if followed will result in complete financial control. In nine steps you’ll go from broke and indebted, to being secure enough to be working on your legacy to the next generation. Key insights:

  1. Follow a simple and workable 9 step plan to go from financial zero to hero

  2. Let compound interest work for you – avoid fees, and save and invest early

  3. Use multiple bank accounts to help you manage money without using budgets

  4. Use a monthly ‘date night’ to talk financial matters with your partner

  5. A $1.00 saved is worth $1.50 to $2.00 earned. Saving is 2x better than income

  6. Consider property funds over physical rental properties

  7. Avoid trailing commissions on financial products like the plague

  8. Index share funds/ETFs almost always outperform actively managed share funds/ETFs

  9. Cash is king – credit cards the devil, if you can’t pay cash you don’t need it

  10. You can and should negotiate on interest rates – Scott shows you how

Book details

Full title: The barefoot investor: the only money guide you’ll ever need, by Scott Pape

Length: 296 pages, or 6 hours and 29 mins on Audible

Buy the book (USA): Amazon (book, Kindle, Audible)

Buy the book (AUS): Amazon (book, Kindle, Audible), Booktopia (book, eBook)

Key insight 1: A simple and workable nine step plan to go from financial zero to hero

Pape has a nine step process in three areas to take you from financial zero (likely in debt, renting, and stressed about the future), to financial hero (debt free, own your own house, sound retirement plan, working on your legacy). In the below section I’ll briefly summarize each step so you can get a sense of the whole system.

Part 1: Plant

Step 1. Schedule a monthly Barefoot date night. Pape wryly notes that talking about finances with your partner can be stressful – so grease the conversation with fine food and drinks. In this step Pape gets you to book five ‘financial date nights’ and then gives you a discussion menu for the first three which cover no-fee banking, super low fee superannuation accounts, and health insurance. We discuss the savings you can make here in Key Insight 2 below.

Step 2. Set up your buckets. Date night week four involves setting up your financial buckets based on the low-fee bank accounts you opened in Step 1 above. This is a cool financial planning step that doesn’t involve having an itemized budget! We’ll discuss this step a bit more in Key Insight 3 below.

Step 3. Domino your debts. Date night week five involves a process to calculate, negotiate, and then eliminate your debts – including credit cards. On this date night you’ll discuss then put in motion Pape’s plan. More on this in Key Insight 3 below.

Part 2: Grow

Step 4. Buy your home. This step is pretty simple, Pape outlines why it is a really good idea to buy a modest home in a good suburb that you’ll be happy to live in for a long time. It’s also a foundational step of the retirement plan.

Step 5. Increase your super to 15% Pape notes that for Australians investing in superannuation for retirement is a very good idea – and as a financial advisor he would know. This step is simple, increase your super from 9.5% (the current mandated minimum) to 15%.

Step 6. Boost your Mojo to three months. Mojo is the name Pape gives to an emergency fund, which by having in place means you won’t ever need a credit card. In this step he advises to increase Mojo from $2,000 to three months of living expenses.

Part 3: Harvest

Step 7. Get the banker off your back. In this step Pape has some tips for helping you pay your house off seven years and $77,641 earlier.

Step 8. Nail your retirement number. This step is all about retirement planning based around owning your own home outright (no debt remaining), having a minimum of $250K for couples ($170K for singles), and continuing to work part time in retirement.

Step 9. Leave a legacy. Pape notes that lots of research points to three drivers of happiness; a sense of purpose, strong personal relationships, and financial control. The first eight steps will give you financial control, so in this step Pape discusses how leaving a legacy can give you a sense of purpose and bring happiness to your life.

And a quote from Pape to get you started:

“You can continue living in the past, beating yourself up about the money mistakes you made when you were younger, telling yourself you’ve left it too late…or you can rise up and make yourself proud.”

Key insight 2: Compound interest – let me count the ways I love thee

Albert Einstein reportedly said “Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn't, pays it.” In The Barefoot Investor, Pape describes two general ways to turn compound interest in your favor.

1. Avoid fees. Pape notes that according to the Reserve Bank of Australia the average Australian pays $489 in bank fees each year, a crazy amount given there are zero fee banking options available (like ING bank). But you might be too lazy to change banks after all you’ve been with them since forever. So how much will this cost you? In the chart below I assume you pay $489 per year in avoidable fees from age 30 to 82 (current life expectancy), when you could have invested that amount and received a 6% return.


The direct savings over the 53 years are $25,917 (53 x $489), but that’s not where the benefit came from. The investment returns on those savings amounted to $149,853 over the same 53 years. This leaves you an amazing $175,770 better off with no-fee banking accounts. No wonder the Aussie banks report such huge profits. Where else does The Barefoot Investor propose you can cut fees to enjoy huge life time savings like those above?

  • Stop paying bank fees

  • No frills private health insurance

  • Low cost superannuation funds ß this is huge!!

  • Lowest interest rate on your home loan ß and this as well

  • Income protection insurance

By putting the effort to minimize fees, charges, and interest rates you can literally save hundreds of thousands of dollars over your lifetime.

2. Save and invest early. Pape talks about using compound interest to your advantage by saving and investing early. He’s an example based on the one he provides in his book. Suppose you wanted to save $250,000 for retirement and your considering two strategies. Plan A is to work hard in your teens and invest a one time amount at age 20. Plan B is to enjoy life and save nothing until you’re 40 and then start an annual saving and investing plan. The question then is how much would need to invest under each plan.

  • Plan A. A one time investment of $7,531. That’s it – just $7.5K

  • Plan B. An annual investment of $4,103 for every year from age 40 to 65, for a total of $106,678

See the graph below.


This should blow your mind. And get you saving straight away.

The ‘saver from 40’ has to put away 14x as much money as the ‘smart at 20’ investor. That’s the power of compound interest. Now this analysis discounts taxes on earned income etc, but it still illustrates the point. So how can you use this in your life:

  • Start saving for your house early

  • Pay your home loan off early

  • Increase your superannuation to 15% early

We all know we should spend less and save/invest more but the above example really rams the point home. As Pape says:

“Success isn't found in the eyes of others: buying things you don't need, with money you don't have, to impress people you won't know in 20 years' time.”

Key insight 3: Show me the money – grow, blow, mojo, splurge, smile and fire extinguisher!!!

Okay, so I had fun with the title of this key insight, but so too does Pape with the names of his buckets (categories) and bank accounts. If you Google ‘The Barefoot Investor buckets’ you’ll find the image below. Let’s go through them in slow time to explain how they all work.

Grow bucket. This is basically your personal financial investments including your employer provided superannuation fund. It will also include your house when you buy it, any shares or funds you own, and any investment properties.

Mojo bucket. This is effectively an emergency fund – and Pape advises to have it in a separate no-fee, interest paying account (Pape suggests UBank). Pape suggests starting with $2,000, then increasing this to at least three months of living expenses. In retirement you might want this at three years of living expenses so you are happy to keep your grow bucket investments fully invested in the stock market. The genius of this fund is that it means you don’t ever need credit cards. They only hit you with hidden fees, and the loyalty points aren’t worth peanuts. So by taking away the need for ‘emergency funding’ with your Mojo bucket, and now you don’t need credit cards.

  1. Blow bucket. This is where bulk of your day-to-day spending happens and is actually made up of four specific bank accounts as described below.

  2. Daily expenses account. This is a debit card account where you put in 60% of your wage and covers all your normal living items like rent/mortgage, food, transport, utilities, school fees, house maintenance, etc. There is no discretionary spending through this account (see Splurge account below).

  3. Splurge account. This is a debit card account where you ‘splurge’ on fun items like takeaway, restaurants, movie tickets, makeup, nails, hair colour (ladies or men), and so on. This is for spending that you could live without, but then life would be pretty boring. It’s capped at 10% of your after-tax income so once it is spent you have to stop and wait till next payday – no accessing the other accounts. The genius in this account is that you don’t need to ‘budget’ your spending. Both partners have access to this splurge account, but some might consider having separate ‘his’ and ‘hers’ splurge accounts at 5% each.

  4. Smile account. This is an online account only with no debit card access. This is where you save for the overseas holiday, new car, or backyard renovation. Think of it as splurge for large items. Put 10% of your after-tax pay here.

  5. Fire extinguisher. This account is very clever in its design. It could be called ‘the account for achieving my next important financial goal.’ It’s this account that is used to raise $2,000 for Mojo initially, and when that’s achieved, to pay down credit cards. Put 20% of your after tax pay here.

In relation to the 'fire extinguisher', and assuming you were starting from an indebtedness position and following all The Barefoot Investor steps, then you might use this account for the following reasons in this specific order"

  • Save $2,000 in your Mojo account

  • Pay off all your debt (then cut up your credit cards…yay!)

  • Save 20% for your house deposit (then buy your house…yay!)

  • Save three months living expenses in your Mojo account

  • Save to buy shares, funds, or an investment property in your Grow bucket

  • Save three years living expenses in your Mojo account

  • Save for your legacy

Other insights from The Barefoot Investor

4. Ongoing monthly date nights. Pape suggests that even after you’ve finished the first five financial date nights associated with his program, you keep the regular discussion going by reverting to a monthly financial date night. Aside from a good night out with your partner, you can check in on progress towards paying down debt or saving for your house. In the latter years you can discuss how your legacy is going.

5. A $1 saved = $2 earned. How can that be? In one word – tax. If you earn $2 on the top tax bracket you pay 45% income tax and 2% Medicare surcharge. For simplicity let’s round that up to 50% tax. Well 50% of $2 is $1 in tax payable; leaving you with just $1 in your hand. So ‘saving’ $1 is worth earning $2 (or say $1.50 on lower income levels). That $489 in bank fees could be worth as much as $978 in income.

6. Investment property or property investment fund. Pape advocates for buying shares in commercial property – say BWT Trust which owns Bunnings sites on long term leases – rather than an investment property. The reason is fees. On a $600K investment property you bought then sold would have fees and charges of $100K over ten years meaning the property needs to sell for $600K just to break even. If you add in 2% inflation for 10 years the breakeven price is actually $731K. If you wanted to achieve just a 5% return per year over 10 years you’d need to sell the property for $1.18 million. A commercial property trust on the other hand can be purchased on your iPhone in 2 minutes for $20 at different sizes and pays 6% dividends each year and with growth potential. Next time someone says they bought a property for $500K and sold for $1M ten years later, realise they may not have made that much profit.

7. Trailing commissions. These are paid to the salesperson or sales website ( that gets you to purchase a home loan, on insurance products like health insurance, or on investment advice. It could be 0.5% per year of the purchase amount for years. These drive up costs dramatically on long-lived items, but thankfully are easily avoided with research. Make sure you do the research and avoid them at all costs.

8. Index funds/ETFs versus managed funds. The research here is pretty compelling. Index funds/ETFs – investments which track the broad market – beat boutique managed funds 80%+ of the time. Over the long term the figure is higher. And low cost index funds have fees below 0.05%, compared with managed fund fees as high as 1.5%. Over 30 years this can literally be hundreds of thousands of dollars of lost returns through the compound interest impact of higher fees. A great starting place for all your investments is low cost index funds or superannuation providers.

9. Cash is king. Step 3 in The Barefoot Investors process is to pay off all debts then cut up your credit cards. Never buy anything on debt – your primary residence is excluded. No matter how enticing the credit card offer with loyalty bells and whistles looks, it is never a good deal and don’t touch it. If you haven’t saved up for it you can’t have it.

10. You can negotiate on rates. When it comes to your home loan interest rate, or credit card interest rate you can negotiate with your financial provider. For credit cards you can get a special rate while you pay down your debts. The same applies for your home loan – especially if you’re with one of the big four banks. Pape provides the scripts in The Barefoot Investor for you to follow.

Why you should read this book if you’re under 30

Two words – compounded benefits. The sooner you start making wise financial decisions the sooner those decisions start compounding in your favour. Start being wise from say 18; and you could be financially free in your 30s and retired in your 40s. It’s that important to start early.

This is a soup-to-nuts financial advice book uniquely prepared for Australian residents interested in achieving financial freedom. It explains how the nine steps bring financial discipline and management to your finances, while avoiding high fees and interest rates, and saving early for your retirement. Folks across Australia in terrible financial positions have followed the advice and achieved financial control and freedom.

Regardless of whether you’re an indebted 20 something, approaching retirement without enough savings, or doing well but could do better; this book has a wealth (pun intended) of information for you to improve your financial future. It is essential reading for every 20 something to understand how they should be approaching money throughout their lives to avoid any disappointment.

Relationship to other Eruditeable books

#1 – The Algebra of Happiness. This book notes that wealth = equity, or in this case financial security. The Barefoot Investor is the practical guide for Australians’ to gain financial equity, and thus have wealth in their lives.

#2 – Atomic Habits. This book provides a range of tips and tricks for making better daily choices. The insights here can be turned to your financial live in terms of saving money, or regular check-ins on financial performance.

#4 – The Defining Decade. The premise of this book is that your 20s lay the foundations for your 30s, 40s and 50s. Never was this more true than in a financial sense; which is where The Barefoot Investor comes into play.

#6 – The Magic of Thinking Big. This book encourages you to think big in relation to your goals, relationships, career, and life dreams and realize that almost anything is possible.

#10 – 50 Economics Ideas You Really Need to Know. This book will help you understand how our modern capitalist economy functions. Understanding opportunity cost, incentive structures (financial planners for example), and more will give life to some of the concepts in The Barefoot Investor.

#17 – Crucial Conversations. This book will help you navigate difficult conversations throughout your life with partners, financial advisors, your bank manager, or even your rebellious kids!!

#19 – Gifts Differing. This book will help you understand folks different approaches to thinking about finances. Some will want the executive summary only, others will want every possible detail. Some value spending on feel good items (holidays, experiences), while others will want to save to invest. This book will help you understand these differences.

#22 – Never Split the Difference. This book will show you how to negotiate to get the lowest mortgage rate, the best trade in price on your used car, and many more things in your financial world.

#24 – The Seven Principles for Making Marriage Work. This book will help you approach financial discussions with your significant other, in a manner that enhances your relationship. And trust me, that’s a good thing, as financial stress is a leading cause of breakup.

Book resources

About the author

Scott Pape OAM (born 1978) is an author and radio commentator who lives in Melbourne, Australia. He is best known through his online persona, the Barefoot Investor, which is also the name of a business show he hosts. He grew up in rural Victoria, where he held odd jobs – once being paid by his father with a single BHP share, and later attended La Trobe University, receiving his Bachelor of Business degree in 2001.

Pape writes a weekly syndicated column that appears in the Courier Mail, Herald Sun, Adelaide Advertiser, Hobart Mercury, Sunday Perth Times, Yahoo7 and Daily Telegraph. He is also a radio commentator for Triple M, and a regular contributor to ABC radio. In 2003, Scott presented a weekly finance show for young people on SYN Radio in Melbourne. In 2004, Pape wrote a book, The Barefoot Investor. It has since been revised and is now sold throughout Europe. Pape has a business show bearing the same name The Barefoot Investor, which runs on CNBC. He has appeared as the financial expert on the SBS show The Nest, The 7pm Project, and was a participant in the Australia 2020 Summit.

External links

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