Five Steps To Financial Freedom In Your 20s & 30s
The Barefoot Investor ,
by Scott Pape, $34.95
Five steps to financial freedom in your 20s & 30s
Book Review by Kathryn Dalglish, Good Returns
There has been quite a lot of comment recently in our local daily papers about the thirty-somethings in New Zealand who are spending all their income and more, on their lifestyles, and many are accumulating personal debt at an alarming rate. As 26 year old author, Scott Pape points out, most young people cannot see that saving for your old age is either sexy or relevant. The Barefoot Investor, with its streetwise racy style, sets out to show that it is both.
Scott Pape maintains that one of the main causes of increasing levels of personal debt is that young people are being fooled by the status symbol game. Everyone has tried this at some time: spending money you don't have to buy designer label goods in order to impress people you don't care about. This book shows you how 'to allocate your money away from stupid stuff that has little or no effect on your life, towards things that will make a real difference to you.'
As Scott Pape says, 'What the Barefoot Investor is all about is living the life you want and that's the sexy part of being Barefoot. What's sexier than living a life of choice? It's about recognising that you live only once and by getting smart about the money you earn now, you'll be able to live exactly the way you choose as the years roll by. If you don't have a plan for the way you live your life, you'll become part of someone else's plan.'
The book aims first to inspire young people to actively manage their spending, especially on their credit cards. Then from there, to banish debt and then to start a savings and investment programme using Scott Pape's Five Step Plan. Formulating this plan, he says, should 'take the best part of one afternoon; requires no great sacrifices; and you require no financial knowledge'.
Step 1: Keep it Real. What is it that you really want? Scott Pape guides the reader through the goal-setting process, with short-term and long-term goals, and working out the cost involved, and breaking it down into manageable amounts.
Step 2: Look Out For Number One. The next step is to arrange for your pay to go into three different accounts, so you never have the whole amount accessible every time you have the urge to splurge. The combined force of compound interest and regular weekly automatic deposits mean 'you'll achieve your goals in no time'. Scott Pape recommends aiming to save ten percent each week.
Step 3: Repo Your Repayments. This comprehensive section of the book helps you to sort out debt, credit cards and mobile bills, and pay them off in the most effective order, because 'personal debt cheats us out of achieving the goals that we have set for ourselves.'
Step 4: Work Your Mojo. The third bank account, your Mojo account provides that little bit of magic which will give your life zing, and makes the whole programme 'downright sexy'. When your Mojo account begins to look healthy, Scott Pape offers advice and choices on where to put your money for greatest effect, where it will give you most personal satisfaction and allow you to 'do the things you love: whether it's to quit the job you hate to make a career of what you love; buy a cool apartment; go backpacking in Europe; or build a wealth portfolio for the future.'
Step 5: Have a backup plan. This step is about protecting yourself and your assets. It covers all sorts of areas which often are overlooked by young single people. In the newspaper it is often the case that young people and young families lose everything when disaster strikes because they did not realise the effect of having the wrong insurance, or worse still, none at all. The new Property (Relationships) Act also needs to be taken into account when planning how to protect your assets, as does the effect of your car being stolen or causing damage to someone's very expensive vehicle.
The final chapter gives the stories of Scott Pape and some other young entrepreneurs who have made their mark at an early age - 'who started with nothing and used their ideas, youth, passion and creativity to carve out business fortunes'. This chapter is designed to inspire young people who have the urge to strike out on their own, and in some ways is the most interesting chapter of all. An excellent list of websites and resources rounds out and completes this well-written and appealing book.
Author, Scott Pape is well-known in Australia for his popular weekly finance radio show, which gives financial advice for 'people who don't do finance'. He is also a stockbroker. This book is aimed primarily at young Australians, but it has a lot of good advice for young Kiwis, and for those who are not-so-young.
For young people who need to get some direction into their lives, this book is a great start. Besides having an easy writing style, the book has good-sized print, is not too long, and would appeal to even people who wouldn't normally read a book on the topic of personal finance. It would be nice to also see a New Zealand edition published to make it more relevant to New Zealanders, as the rules here differ for such things as Student Loans and the Property (Relationships) Act.
To buy your copy of ‘The Barefoot Investor' priced at $34.95 incl. GST from the Good Returns Bookstore click here.