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the barefoot investor the common-sense path to financial freedom

The Common-sense
Path to Financial Freedom

The Barefoot
Investor rocks!
Sir Richard Branson

CONTENTS

The Industry Outsider......................................... 3

Dear Barefoot.................................................... 15

Scott Pape tells journalist Susan Cram about the

day he was killed on live radio

Can you get my hubby to join the Compound


Interest Club too?

The Millionaire Next Door................................... 5

Multiple streams of income

Where can I meet investors like me?

What a rough-looking bloke in ugg boots


taught a gentleman in a Gucci suit

A Politically Incorrect Response to All

Dear Barefoot...................................................... 7

Help me pay less tax!

Mortgage, super or shares?

How much do I need to retire?

Those Who Say Were Doing It Tough ............ 16


Has it ever struck you that in Australia at least the
last 25 years of uninterrupted economic growth have
left us, well, kind of soft?

How to Increase Your Investment Returns


20-fold ................................................................. 9
This could quite possibly be the most important
article youll read in your investing career grasp
its key concept and youll compound your wealth
many times faster than the average investor

Dear Barefoot.................................................... 11

How do you pick the best stocks?

Save tens of thousands without extra mortgage


payments? prove it!

My parents are being pushed around by


their planner

Why Old Stubby Fingers the Accountant


is Ripping You Off ............................................ 12
Or why most people shouldnt have a self-managed
super fund (SMSF) and what they should
have instead

TAKE THE NEXT STEP

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the barefoot investor the common-sense path to financial freedom

The common-sense path to financial freedom

An independent survey by CoreData Research Australia found that,

Scott Pape was considered the most knowledgeable regarding


financial matters, topping the ratings in the areas of superannuation,
investment, taxation, insurance and economics. Pape was also
considered the most trustworthy, truthful in how he presents himself
and in touch with financial matters that affect everyday Australians.

Scott Pape tells journalist


Susan Cram about the day he
was killed on live radio
Susan: Legend has it that youre the only financial
advisor the ABC has ever had to use the kill
switch on.
Scott: Thats true but it wasnt me dropping the
F-bombs. I was doing a talkback segment on the
sneaky fees the financial planning industry pockets
and why youre better off not paying them and a
financial advisor rang up and proceeded to have a
brain meltdown live on air.
Susan: But youre a financial planner yourself!
Scott: Guilty as charged. But I made the decision
long ago to get my own financial licence so I could be
completely independent and answerable to no-one
and to be free to poke the big boys of the industry
who create complicated, high-cost products that
make them millions.
Theres so much rubbish out there passing off as
financial advice, it makes me angry. Its caused me
a bit of grief in the past people have threatened to
sue me numerous times for what Ive written in the
papers. But at the end of the day Im a country boy
from Ouyen and Ive been raised to call a spade a
bloody shovel!

Susan: You seem to do a thousand


things columns, radio, TV, keynote speeches. Do
you sleep?
Scott: Not much. But my wife and I are about to
have a baby, so Im in training.
Susan: What do you like doing best, then?
Scott: Its hard to say. I work at both ends of wealth:
from helping widows and single mums struggling

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the barefoot investor the common-sense path to financial freedom

to put food on the table, to advising AFL and NRL


footballers on managing their wealth. Youd think
these famous footballers on huge salaries would
have it all not a money worry in the world. But they
have their problems just like all of us do. For them its
getting into bad habits, blowing all their cash.
Susan: But what do normal people worry about the
most with their money?
Scott: They want to know where to put their money
so that it will grow safely. Thats exactly why I created
the Barefoot Blueprint, my investment newsletter.
I asked the smartest, wealthiest mentors of mine to
help out. Our head analyst, Mike, is a retired multimillionaire (I say hes the best analyst money cant
buy) who has traded on dealing desks around the
world. And in its first year our little newsletter put
most highly rated professional fund managers to
shame. We outperformed the broader market, and
by investing in businesses that most of the pros had
never heard of!
Susan: Youve also been working at the other end of
the age scale teaching school kids?
Scott: This is one of my real passions financial
literacy for young people. ASIC (the Australian
Securities and Investments Commission) asked me to
develop a program for schools, called MoneySmart
Teaching. Its now up and running.
Susan: How does it work?
Scott: The trick is, finance shouldnt be taught once
a week in a specific class it needs to be integrated
into the curriculum. So MoneySmart is taught as part
of English, history, science, maths that way kids get
to learn about finance without really realising it they
just get it.

ASIC asked me to develop a


program for schools, called
MoneySmart Teaching. Its now
up and running.

But weve taken it one step further by educating


teachers about money as well. For it to work,
teachers need to feel confident about managing their
money so they can share it with the kids.
Susan: If this is a very public government program,
how can you call yourself an outsider? After all,
the Government employs you to help teach kids in
schools, you do tax tips each year for the ATO, and
youve even helped them explain new credit card
laws!
Scott: Well, Im an outsider to the financial services
industry. But at the same time Im working on the
inside with schools, the media and the Government
to help people see some old-school commonsense
truths about money.
Susan: Thanks for your time today, Scott, where can
people find more about you?
Scott: I write my nationally syndicated column, the
Barefoot Investor, each Saturday in News Limited
newspapers, and in Sundays newspapers I write
a Dear Barefoot column that answers readers
questions from right across the country. I also work
with Eddie McGuire on Triple M, and I do a lot on the
telly the most recent is my own show on CNBC, the
largest financial news network in the world.

Hey, in reading back over this interview, I sound like Im a bit of a wanker (as my old
man would say). So let me tell you about a time when I fired myself from a job...

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the barefoot investor the common-sense path to financial freedom

INVESTING

The millionaire next door


What a rough-looking bloke in ugg boots taught a gentleman in
a Gucci suit
What Im about to tell you is still very sensitive
so I cannot name names.
My nightmare started when I was
approached to be the feature money writer
for a lifestyle magazine.
Editor: Our readers are dashing,
sophisticated and worldly they are opinionmakers.
Barefoot: George Clooney reads your
magazine?
When I got off the call, the Barefoot team quizzed
me: Youve never read that magazine, have you?
I hadnt. So later that evening, after getting home
to the little country town where I live, and feeding
my dog Buffett, I headed down to the local IGA
supermarket to get my hands on a copy. I stood
flicking through the mag in my standard Monday
night wardrobe: ugg boots, tracksuit pants and a
flannel shirt.
The pages were chock-full of buff models, aftershave
(sorry, cologne) and handbags (sorry, compendiums).
It spoke to a wealthier, better-looking version of
me. And this aspirational tone was exactly what the
advertisers wanted.
That night I wrote my first column for the mag three
times.

So I wrote my article about how the wealthy people


I know get rich: working hard, saving money and
compounding their wealth.

So I wrote about how the


wealthy people I know get rich:
working hard, saving money and
compounding their wealth.

I compared what a real millionaire does (like buying


a decent second-hand car) to what a try-hard does
(like leasing a Beamer), and even added a handy little
chart so theyd really get the message.

I finally decided that, given this was an aspirational


magazine, what the readers really wanted was to
be able to afford the images being sold to them.

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the barefoot investor the common-sense path to financial freedom

Bloodied and bruised

And, unlike the magazine editor, I can pick my


(Barefoot) readers in 30 seconds flat.

My article came back slashed, gaping with red


changes:
You cant say not to lease a BMW they are a major
sponsor and so are the high-end fashion labels you
mock. Please understand that our reader is, well, a
little more sophisticated than youre used to writing
for.
Truth be told, I know dozens of self-made millionaires
and a quick straw poll I conducted showed that
none of them had read this magazine. I reckon that,
like most image-based marketing rags, the mags real
readers were image-conscious wannabes exactly
the people who need to hear my message the most.
But that wasnt the game, so I politely told the editor I
was happy to stick with my unsophisticated, wealthy
audience.

They come in all shapes, sizes, ages and


occupations. But they all have one thing in common:
theyve made building wealth a priority. They may
not be flashy talkers, but theyre slowly and surely
heading towards incredible wealth.
And, as Ive said before, to become wealthy you need
to be around people who are moving in the same
direction as you. And you need someone you trust to
give you the guidance and select the investments that
will compound your money over time.

Kickstart Your Career


Coming soon in 2013...
In this six-week series, set to launch in 2013, Im going to coach you to:

Editor: Let me get this straight youre telling me to


get stuffed?

Barefoot: Thats right.


The awesome thing about working for News Limited,

Safely transition from your current


job to a six-figure (plus) career
Ive built my career by bucking the trend, and in this
course, Im going to explain why the traditional career
ladder is dead, and how you can leapfrog your way to
a new, highly paid career even if you dont have the
qualifications, or skills (right now).

Plus, the team and I will:


Help you define once and How to negotiate your salary

... the mags real readers were


image-conscious wannabes
exactly the people who need to
hear my message the most

for all what your dream


career looks like

Ensure that it builds on


your personal strengths
AND passions

and ethically build in


pre-set future bonuses

Show you how to grow your


network, help people, and
have loads of fun

Explain, step-by-step, a
strategy for getting in front
of key decision makers

Triple M and Channel Ten is that Ive never been put


in the situation where I had to pull a punch or change
my content to keep advertisers happy. Not once. Its
something Ill never do.

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the barefoot investor the common-sense path to financial freedom

Dear Barefoot
How much do I need to retire?
Roger asks: Hi Scott, Im a dedicated reader
of the Barefoot Blueprint. What you write makes
sense to me like nothing Ive ever read before. Ive
had years of financial planners dazzling me with stats
and jargon, and where has it got me? You just state it
like it is, in terms we can all understand. So could you
help me with my problem?

Help me pay less tax!


Dear Barefoot: My husband works in IT and earns
$125,000 per year. I work part time three days a
week in a small consulting firm but take the bulk of
my income (around $30,000) cash in hand, which
allows us to still claim childcare benefits. Ive been
offered another job for $45,000, but would have to
pay tax on this. What would you do? (name withheld)
Scott says: Youre a thief.
I really dislike paying my taxes so much so that I
spend good amounts of money doing everything I
can to legally minimise the amount I pay out but I
still pay them. And its not because I think either side
of politics spends it wisely (they dont). Its because I
cant buy back my integrity.
You may think youre winning by cheating and
getting some government benefits, but youre not.
Successful people dont have your situational ethics.
With ongoing national budget problems, middle-class
welfare will be on the chopping block and about
time too. The idea that a household on $160,000
should get a government handout is ridiculous.
People need to harden up and stop looking to
Canberra to solve their problems theyve got
enough of their own.

After a lifetime of work, my wife and I have the


princely sum of $178,000 in superannuation. Thats
combined. I went to a seminar recently and they said
that to have a comfortable retirement you need at
least $1 million in super. Weve got no hope of hitting
that. Well get the pension, but how much do normal
people like us need?
Scott says: Hey Roger, youre not alone plenty
of people feel they havent got enough to retire on.
The difference is youre doing something about it by
becoming part of my wealth-building community.
In answer to your question, the pension provides
a couple with around $30,000 a year, but for a
comfortable retirement the latest thinking says youll
need about double that which is where the milliondollar-plus lump sum figure comes from.
Many people are unaware that Centrelink doesnt
include the value of your home in its pension
calculations so as a couple you should be entitled
to a full pension of around $30,284 (combined), and
you can supplement that with both your pension
earnings and part-time work.
The real question is: who says you need to retire at
65? In 1909, when the pension was first offered, the
retirement age was set at 65 but most people were
dead by then (average life expectancy was 55). Today
were living on average till were 82, but were still
trying to retire at the same age.

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the barefoot investor the common-sense path to financial freedom

Either way, to have a decent retirement when you get really old, youre going to have to keep working and
topping up your savings but thats not a bad thing. Its often said that the two most dangerous years of your
life are the year youre born and the year you retire.
Why not work at Bunnings and teach young flatheads like me what a Phillips head is?

this money in an offset account even though its


a more tax-effective way to park your money, for
most people theres too much temptation to blow
it.) Dont think of your Mojo money as a traditional
investment its purpose is to give you the Mojo
to live life on your terms. Theres power in giving
money a name.

Mortgage, super or shares?


Martin asks: Im 39 and have one big debt: a home
loan of $450,000. I want to pay it off, but I also feel
I should start building my long-term wealth super
and shares. I dont want to miss the boat. So should
I put every penny into the mortgage until its paid,
or should I balance the mortgage with super and
shares?
Scott says: Hey Martin, to keep things really simple,
I want you to think of your income as falling into three
different buckets:

Blow bucket: Your spending money, your


home repayments, and everything else labelled
lifestyle. This bucket has a hole in it every
dollar that goes in leaks away.
Mojo bucket: Set up a high-interest-paying online
savings account and aim to eventually have a
sum equal to a quarter of your annual income
saved up. (By the way, I dont advise you keeping

Grow bucket: This includes your super, your


share portfolio and your investment properties.
This is the most important bucket because it will
compound over time (doubling every seven to
ten years). And it will save you a heap of tax: for
every dollar you put into super, youre effectively
halving the amount of tax you pay (or more,
depending on your marginal tax rate).

Im a huge fan of getting the banker off your back


and owning your home debt free. Ive seen single
teachers whove gone on to build million-dollar share
portfolios because theyve managed to slay their
mortgage in their 30s. But while Id certainly make
paying down your mortgage a priority, make sure
youre filling all three buckets!

S
G
IN
SAV
Mojo

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Blueprint

Businesses
Investment
Opportunities

Managed
Property
Trusts

Blow

Grow

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the barefoot investor the common-sense path to financial freedom

How to increase your investment returns 20-fold

This could quite possibly be the most important article youll


read in your investing career grasp its key concept and youll
compound your wealth many times faster than the average
investor
Investors become wealthy by buying cheap stocks
and selling them at much higher prices, right?
Nope. In fact youre not even close.
Wealthy investors, those who go on to multiply their
wealth over and over, dont pay a lot of attention to
the share price in the short term at least.
Instead they focus on what Albert Einstein called the
eighth wonder of the world compounding and
specifically on how they can turbocharge their efforts
to reach their wealth-building goals. Let me explain

Where the Returns Really


Come From
Good companies earn profits. Great ones retain and
reinvest some of those profits back into the business,
then, twice a year, share whats left over (the dividend)
with their investors.
Research from Professor Jeremy Siegel, of the
prestigious Wharton School at the University of
Pennsylvania, shows that 70 per cent of an investors
return comes from the dividends they receive in the
mail not the share price increasing.
And if you choose to reinvest the dividends you
receive into buying more shares, your investment
grows because the dividends also start making
money. And with time your investment takes on the
appearance of a snowball rolling down a hill, getting
bigger and bigger.

How to Double Your Money in


46 Years
Professor Siegel looked at the returns of share prices,
adjusted them for inflation, and found they only went
up by about 1.5 per cent a year.

70 per cent of an investors


return comes from the dividends
they receive not the share price
increasing

In other words, the average punter makes just 1.5 per


cent a year in share price gains (and thats before we
take into account fees and taxes). At that rate youll
double your money (in todays dollars) in 46 years.

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the barefoot investor the common-sense path to financial freedom

How to Double Your Money in


10 Years
Now lets see what the wealthy do. Remember all
those dividend cheques in the mail? They dont
spend them. They use them to buy more shares.

Want more? The investments that Siegel studied


used an average bunch of companies. Which is easily
replicated by buying a listed investment company like
AFIC and hanging on for the long haul.
But what if you own better-than-average companies?

How?
Well, some companies make the reinvestment of
dividends really easy. They offer shareholders the
option to sign up to a Dividend Reinvestment Plan
(DRP). Not every company does this, but many do.
When a dividend payment falls due, their DRP will
issue you with extra shares rather than cash. This
not only saves on brokerage fees for you, but as an
added benefit theyll usually offer the new shares at
a slight discount to the share market price. Double
bonus.
So, using Siegels figures, these dividends add
another 5.5 per cent to the returns, making a total
of around 7 per cent per year (and this is being
conservative). With these returns your investment
now doubles in 10 years, not 46.

Compound Your Compounding

If you can find wonderfully profitable companies, like


Woolies say, youll in effect be compounding your
compounding. Even if they only squeeze out an extra
1 per cent annual return, your initial investment will go
up 35-fold (turning $10,000 into $350,000).

The Barefoot Approach


The most reliable way to create wealth is to build it
over time, by buying shares in good companies and
using the power of compounding. Not trading.
And if you find great companies (like those weve
selected for you in the Barefoot Blueprint), youll be
well on your way to not only becoming a successful
investor, but an incredibly wealthy one.

With these returns your


investment now doubles in 10
years, not 46.

And in the time the average punter has doubled


their money (say, turning $10,000 into $20,000 over
46 years), yours will have increased 20-fold (turning
$10,000 into $200,000).

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the barefoot investor the common-sense path to financial freedom

Dear Barefoot

How do you pick the best Stocks?


Steve says: Im a single dad, focusing on raising my
daughter & rebuilding my financial plan after the end
of my marriage. Being at the top end of middle age I
know its time to get cracking. The specialist articles
in your Barefoot Blueprint each month are great,
but I really get the most out of the analysis of your
Blueprint Businesses. What I want to know is, in a
nutshell, what do you look for in a stock?
Scott says: Steve, your daughter is lucky not
everyone has a parent who cares like you do and
who is looking out for their long-term security. When
picking stocks with my investment analyst, Mike, I
look for long-term security just like you. We pick only
good companies with strong earnings, low debt and
a good economic moat around them (the capacity
to withstand competition). Then we look for one
more thing: a low price. If we sniff a great company
at a bargain price, we recommend it to you in the
Blueprint. And remember, were investing alongside
our subscribers, so weve got our own skin in the
game.

Save tens of thousands without


extra mortgage payments?
prove it!
Col asks: I consider myself a savvy guy. Ive just
gone through the Mortgage Slasher special report
you sent with the Barefoot Blueprint. Save tens
of thousands of dollars on your mortgage without
making any extra repayments. Alarm bells rang. It
sounds good but I just cant help being a bit sceptical
how is it possible?
Scott says: Col, its good to be sceptical. But I can
assure you that its on the level. I got my mortgage
guy (who does my personal financing) to put the
report together. I paid him $2,000 for his research

time, and gave it away free to Blueprint subscribers.


Its 100 per cent reliable and it 100 per cent works.
Less than one out of every hundred people receive
truly independent home loan advice in this country
now you can be one of them.

My parents are being pushed


around by their planner
Tillie asks: Earlier this year (when they received an
inheritance), my parents had just under $1 million
to invest. They went to a financial planner with
high hopes ... and came home deflated Dad was
upset, Mum was confused (he tried to sell them on
a geared managed fund). I gently put the latest
issue of the Barefoot Blueprint in front of Mums
nose and she started reading it (she thought it was
funny Dad went straight to your investment returns
page). That was it! The next day she and Dad told
the planner to go jump. Do you find this is a common
story financial planners who only confuse things?
Scott says: Sadly, yes. A good financial planner is
worth their weight in peanuts, but a bad one will end
up just giving you a cookie cutter plan that you can
find on the back of a Weeties box (and theyll charge
you a hefty fee to do it). In the end, though, its up
to you to take responsibility, because no-one cares
about your money as much as you do.

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the barefoot investor the common-sense path to financial freedom

Why Old Stubby Fingers the Accountant Is Ripping You Off

Or why most people shouldnt have a self-managed super fund


(SMSF) and what they should have instead
busy doing what they do best turning your hardearned money into theirs.

Lean in close, because Ive got a deal for you.


Im going to instantly find you $20,000 to $200,000
that you can use to invest. And, without you doing
anything, thousands of dollars will flow into your
account to invest in any way you want each quarter.
Pricked your interest?
Im going to show you how to invest the existing
money you have in superannuation directly into
stocks without having to set up a costly and
complicated SMSF.
And Ill also show you how to boost your investment
returns by 34 per cent guaranteed!

The $390-billion-dollar
gravy train

Slash your tax by 50 per cent


or more

After a long, hard day spending their kids inheritance,


Baby Boomers across the country pull their
Winnebagos into caravan parks, pop open a chardy,
and talk to their silver fox friends about what some
news reports have labelled the latest must have
financial fashion accessory a self-managed super
fund (SMSF).

Superannuation is the only profitable option for


cutting your tax by half or more. It really is the
last great (legal) tax dodge a dollar invested in
superannuation slugs you only 15 cents in tax, rather
than your marginal income tax rate, which could be
as high as 45 cents in the dollar.
And less tax means theres more money to invest,
and to compound.
So even if you dont chip in any extra money and
just let your employers contributions pile up your
super will eventually become the largest item in your
net worth calculation.
You can rest assured that this fact hasnt gone
unnoticed by the financial services industry. Theyre

Its a sign of financial strength. It shows your


peers that youve got at least $200,000 in super,
and that youre smart enough to choose your own
investments, rather than relying on the woeful returns
of retail super funds, explained an accountant friend
of mine.
You know youre dealing with a sophisticated,
well-oiled marketing machine when they make the
expensive, compliance-ridden job of administering
your own super fund fashionable.

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the barefoot investor the common-sense path to financial freedom

Almost one million Australians now have an SMSF


a figure that has grown 50 per cent in the past five
years. Bragging rights aside, I believe there are two
main reasons why so many wealth accumulators
have set up an SMSF:
(1) They got sick of seeing their super fund going
nowhere (and being charged for the privilege) and
decided to invest the money themselves.

Set up the trust deed correctly (which can


cost thousands)

Ensure its registered with the ATO

Set up a separate bank account

Maintain stringent financial records

Make sure the investments comply with


(ever-changing) superannuation laws

Have a written investment strategy, and


review it each year

Conduct a yearly audit of both your financial


accounts and your funds compliance.

(2) Their accountant told them it was a good idea.

Or you can pay an accountant a few grand to set it


all up, and a few grand each and every year to take
care of it for you but if you get audited by the ATO,
youre on your own.

Accountants are the new


financial planners
Ive had some cherished, high-profile dust-ups with
the financial planning industry over the years.
For years Ive called them on their bulldust as they
ripped off their clients by trousering shady kickbacks.
And Ive campaigned to end the rorts that have
robbed investors of billions of dollars a year of their
retirement money.
Yet while this was happening, the industry shifted
foot and this time its the turn of the accountants
to construct a billion-dollar yearly gravy train from
investors retirement funds.

Most SMSF investors are unaware that their SMSF


could rob them of hundreds of thousands of dollars
over time. Thats because its not in an accountants
best interests to tell them theres a dirt-cheap way to
invest their super directly into shares.

How to boost your investment


returns by 34 per cent
guaranteed!
I promised Id show that you DO have money to
invest, and that you can boost your returns by 34 per
cent.
Introducing what I call SMSF Lite (though super
funds have their own names for it).

Let me show you how it works.


When you run your SMSF, you basically need to jump
through the same costly compliance hurdles as the
billion-dollar funds. The trustee of an SMSF (thats
you) must:

Over the past five years traditional retail and industry


funds have watched some of their best customers
leave them to set up an SMSF.
Now the funds are fighting back.

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the barefoot investor the common-sense path to financial freedom

There are a number of public offer funds that you can join that allow members to invest their super balance
directly into shares just like a traditional SMSF, but without all the hassles.
And best of all, theyre around 34% cheaper than running a traditional SMSF. And you know what that means?
More money for you, and less money for old stubby fingers the accountant.

SMSF

SMSF Lite

$200,000

$200,000

Set-up fee

$2,000

Average annual fees

1.76%*

0.1%**

Post-tax annual contribution

$5,000

$5,000

$853,139***

$1,141,370***

Starting capital

20-year end balance


Difference fees make to
your end balance

$288,000 EXTRA

* Source: A statistical summary of SMSFs 10 December 2009, Australian Government Review into the Governance, Efficiency, Structure
and Operation of Australias Superannuation System
** $180 plus brokerage costs assumed to be 4 trades of $20,000 share parcel ($160 brokerage) for a total of $340 per year on average
balance of $350,000.
*** Based on an 8% return per annum.

So, Barefoot, youve got me interested how do I do it?


Take a look at the funds that offer this type of product. When youve narrowed your search, go to each funds
website and investigate further. Youll want to look out for three things: fees, investment features and insurance
options. And, if youre a little uncertain doing it yourself, please speak to an independent financial advisor,
wholl help you make the best choice.
Many people have said to me they love the idea of becoming an investor but dont have the ready cash. With
an SMSF Lite youve now got the ticket to ride.
Not only will you become an investor with a healthy and growing portfolio, youll do it 34 per cent cheaper than
the so-called wealthy investors with their SMSF bragging rights.

--Disclaimer: This article is an excerpt from a longer article in the Barefoot Blueprint. There I go into detail
about what SMSF Lite funds are available and the tips and tricks to watch out for.

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the barefoot investor the common-sense path to financial freedom

Dear Barefoot

Can you get my hubby to join


the Compound Interest Club
too?
Rebecca asks: Scott, I got such a kick out of
reading your report How to Join the Compound
Interest Club in the Blueprint. It made such sense
and cleared my head about how money can work
for me, not against me. Ive never been much good
at investing but you put it so simply even I found it
easy to understand. To think I could turn $5,000 into
$420,000 in 25 years blew my mind. One problem:
my hubby wont believe me and doesnt even want to
read it. What can I do to get him on board?
Scott says: Rebecca, great work on educating
yourself. The cynical side of me says that if your
husband cant get excited about making $420,000
with no effort, then maybe you married the wrong
dude! My kinder side says that you cant force things
on people, you need to be patient. Maybe a little
down the track (when your dollars start to add up),
hell get it.

Multiple streams of income


Pete asks: Investing has always been on my to-do
list, but I havent made the leap yet (Im 27). When do
you advise people to start investing before or after
buying a house?
Scott says: I started early. When I was a little kid,
instead of paying me pocket money my dad gave
me one share in BHP. He sat me on his knee and
said, youre now a part-owner in one of the biggest
companies in the world and they share their profits
with you. That was a life-changing day for me. Even
better was the day when I saw the profits (dividends)
hit my account.
You dont have to wait until youve paid off your
house you can get started now. The aim of the
game is to create multiple streams of income other
than just relying on your job or your home. You
dont need a lot of money to get started as little as
$1,000. At first its like a drop, then a splash, then it
turns into streams of money!

Where can I meet investors like me?


Deenah asks: I was never once interested in investing, never great with money. But since I got onto your
Blueprint Ive been learning quickly. I get such a buzz each Friday when it arrives. I like reading about stocks
to buy, but you know what I like best? Its that I feel part of a community. Do you have any events I can get into
where I can meet fellow Barefooters?
Scott says: Hey, Deenah. You be amazed how many people feel more confident when they are part of
something big. And like you they want to meet other people on the same path. Stay tuned 2013 is going to
be a big year, with plenty of opportunity to be part of the Barefoot community.

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the barefoot investor the common-sense path to financial freedom

A Politically Incorrect Response to All Those Who Say


Were Doing It Tough

Has it ever struck you that in


Australia at least the last 25 years
of uninterrupted economic growth
have left us, well, kind of soft?
Thats the only conclusion I can come to after spending some
time with my grandparents and other octogenarians, hearing
about their life experiences. Unlike us, they lived through
genuinely tough times.
Ive got a huge amount of respect for the dignity with which
the so-called silent generation lived their lives (financially and
otherwise). And with all the navel-gazing negativity going on
today, lets draw on some lessons from their lives in the 1930s
and 40s.

They paid their bills

They paid in cash

They saved money

They fixed stuff

One of the nicest things I ever heard said about my grandfather was that he always paid his bills on
time. For him it was an integrity issue: you were either a man of your word, or you were a crook. Going
bankrupt was not an option.

They didnt have a choice. Credit cards were yet to be invented, and bankers back then behaved like
responsible corporate citizens. More than that, people had an aversion to debt, caused by the borrowing
binge that preceded the (not so) Great Depression, which was still fresh in their minds.

The hard times left them with a healthy respect for risk, and this stayed with them and ultimately
served them even after the economy picked up post World War Two. Saving wasnt a diversification
strategy it was a survival strategy. These were the days before mass-market consumer credit, so most
people simply couldnt live beyond their means.

Things were fixed, not thrown away. Both my grandfathers had sheds where they could get away from
the missus, have a crafty beer or a fag, listen to the footy, and tinker. Things were handed down from
eldest to youngest. (Maybe they were the first greenies? Sure, lets go with that.) Shoes were re-soled,
socks were darned, dresses were hemmed.

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the barefoot investor the common-sense path to financial freedom

They worked hard

They didnt expect handouts

They lived in modest homes

They lived through genuinely tough times

They had a sense of community

10

With five mouths to feed, there was no time to find themselves (let alone protest at the inequities of the
world). For both my grandfathers this consisted of manual labour, and while both parents worked long
and hard, there was only one income. Second and even third jobs were common.

The dole was something to be ashamed of, or at least it was for my grandparents. You worked hard,
paid your taxes and paid your way. Listening to them, it seems like there wasnt the entitlement attitude
that pervades our politics today. Case in point: remember the outcry over families earning $150,000
having their (middle-class welfare) government benefits cut?

One of my mates grandfathers once told me, I remember growing up with dirt floors it was like
Christmas when we got carpet imagine that, being happy with carpet! They bought what they could
afford, then they slowly added mod cons like carpet and curtains.

I learned this when my grandmother said (out of the blue) that we skinned rabbits in the old days
whatever it took to make ends meet (wait KFC was around even back then?). Still, I understood what
she was getting at. There was large-scale unemployment and married women werent accepted in the
workforce. They simply did what they had to do.

While Gen Y are the most connected generation in history, its commonly cited that theyre also
the loneliest. Things seemed to be simpler back then maybe because there wasnt a TV piping
pipedreams into their homes each night making them feel unworthy. Instead, they lived with dignity, they
saved money, and they competed but on their integrity and their family rather than the stuff they had.

They created a real legacy


Each generation that has followed the silent generation has done everything in its power to reduce the
risks of life: credit now enables us not to have to stress about living within our means, superannuation
means we dont have to worry about funding our retirement, and populist politicians claim to be able to
fix whatever worries are left over so long as we vote for them.

But its impossible to be fully insulated from risk. And even if you could be, you wouldnt want to. A bit of pain
is lifes way of telling you to stop doing dumb stuff and its essential in sharpening your long-term decisionmaking skills.
So despite all the doom and gloom in the newspapers and the bleating we hear from Tony et al, we need
to remember that right now at the very least things are pretty bloody good. After all, weve got low
unemployment, first-class (and basically free) healthcare and subsidised education.
Or, as an old bloke once said to me: Life isnt fair, and if you expect it to be, well, what you need to do is get a
bucket, a spade and some concrete and harden up, cupcake.

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the barefoot investor the common-sense path to financial freedom

Speeding Things Up
Im a proud wealth-accumulator. Dont misunderstand
me. I dont wear designer labels, I drive a very
unfashionable ute, and my most expensive accessory
is my dog Buffett. Whats important to me is financial
security, building up a sufficient level of wealth so I
can do what I want, when I want. Money wont make
you happy, but it does give you choices about how
(and with whom) you spend that non-renewable asset
your time.
Now my parents gave me a wonderful education
and the best upbringing in the world, but when you
dig down to it, Im just a kid from the country. But I
learned a few things.
The way I sped up my wealth accumulation was to
focus on earning more money. But it wasnt easy, and
to some degree it was risky I missed out on a lot of
social events, and worked harder than my mates.
I chose to invest in my career, first by undergoing
a massive amount of training and education, and
by spending a huge amount of time developing a
network of contacts that I helped and who eventually
helped me. The increase in earnings took me from
$31,000 a year to well over $200,000 a year.

You may not agree with the way Ive done things.
The bloke I met who said that what I do is common
sense was an accountant, and he argued that
with my income I should be borrowing to invest.
Technically he may have been right. But the fact of
the matter is that he was much, much older than
me, and after I spoke to him for a few more minutes I
realised I was much, much wealthier than him.

Then I started my own business.


No, I didnt become a millionaire overnight. But I
worked hard, reinvested my earnings and grew my
business. (Even better, I got to do work that I find
incredibly fulfilling, and that Im passionate about.)
The wealthiest people I know follow this pattern.
They back themselves in their career, or start their
own business but they invest their money very, very
conservatively.

Money wont make you happy,


but it does give you choices

What Ive just told you may be common sense but


as Ive grown older Ive come to realise that thats
what makes it so darn powerful.

Thats how they stay wealthy. Im now at another


stage of my life, focusing on starting a family and
moving to the country. But my approach will stay the
same work hard, pay down debt, invest smart.

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the barefoot investor the common-sense path to financial freedom

So Thats My Story, Now its Your Turn


Today Im inviting you to become a member of my Barefoot Blueprint.
Why would you become a member? For the following reasons:

Youll have access to a professionally selected, continually managed portfolio of value


investments. And I invest alongside you where your money goes, so does mine.

I offer special bonus reports throughout the year the best home loans on the market,
savings accounts, tax strategies and insurance all provided by me and my group of
experts, 100 per cent fiercely independent.

Each week I answer the Blueprint communitys money questions, and am on hand to
inspire, motivate and keep you moving towards your wealth goals. All for less than a few
hundred bucks a year.

In addition, YOULL GET a whole bunch of bonuses:

Investing 101: A Fast-Start Guide


to Making Your Very First Successful
Investment

The Business of Being Barefoot:


My Five Lessons for Business

The Mortgage Slasher Strategy

How to Get Started in the Share


Market

Join the Compound Interest Club


My Serviette Strategy for Putting
Your Money on Autopilot

Remember: We also have a no-questions-asked 30-day guarantee.


Now you could rip me off. Theoretically you could take the brokerage, read all the reports, and get your
money back before the free trial ends.
But Im not too worried. I truly believe this is the best investment youll make in 2013.

So, if this is the year youll take the next step, click here.

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the barefoot investor the common-sense path to financial freedom

LEGAL STUFF
Members of the Blueprint team own shares in Berkshire Hathaway, Thorn Group, Metcash, Collins Foods, Woolworths, AFIC and
BWP.
Please remember that investments can go up and down. Past performance is not necessarily indicative of future returns.
IMPORTANT: This Barefoot Blueprint Newsletter provides general financial product advice only, not personal financial product advice.
It has been prepared without taking into account your objectives, financial situation or needs.
Before acting on our recommendations, you should consider their appropriateness to your specific investment objectives, financial
situation and needs. If you are uncertain as to what your objectives and needs are, you should contact a financial adviser who is
licensed to provide you with personal financial product advice.
Please refer to our Financial Services Guide for more information at www.barefootblueprint.com/fsg or email us at blueprint@
barefootinvestor.com to request a copy.
The Barefoot Blueprint bases recommendations and forecasts on techniques and sources believed to be reliable in the past but
cannot guarantee future accuracy and results. The Barefoot Investor will not be liable for any loss or damages arising from the use of
this information.
The Barefoot Blueprint is published by Barefoot Investor Pty. Ltd. Registered Address: PO Box 16215, Collins St West, Melbourne
VIC 8007 (ACN: 112 545 169 ABN: 80 112 545 169) Australian Financial Services License: 302081.
Copyright 2013 Barefoot Investor Pty. Ltd. All rights reserved.

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