Scott Pape’s three most important pieces of financial advice

WHEN Barefoot Investor’s mum roped him into doing a church presentation he decided to structure his speech around the Ten Commandments — which he whittled down to three.

Charlton Heston in the film 'The Ten Commandments'.

‘DID you get a letter … from the Bishop?” my mother asked casually over coffee a couple of months back.

I looked at her for a full 30 seconds in silence.

“I get a lot of letters from old people,” I told her (only half-jokingly).

“I think he wants to book you for a speaking gig — for the clergy. But I want you to know that I haven’t committed you to anything” she said (and I believe her — my mother is a good Christian woman, and she wouldn’t lie).

Still, in her world, the Bishop is kind of like my Buffett.

He’s a big deal.

Even so, I gently explained to her that my days as a travelling seminar speaker are now over, and as a result I wouldn’t be able to do the gig.

So this week I … walked into a church in Bendigo to do my presentation for the faithful.

(I decided it’d be wise to keep in good with the big boss … after all, she is my mum).

I was there to answer their specific financial questions.

However, I first wanted to give them some context: explain to them who I was, and what I was about — because my worldview affects the advice that I give.

I also decided it would be fun to structure my speech around the Ten Commandments — which I called the Barefoot Commandments — and I whittled them down to three, because, well, that’s what the kids do these days.

(Cue nervous laughter from the congregation.)

So, as I prepare to pass the plate around, let me give you my Barefoot Commandments:

1. Seek Safety and Security

Standing in front of my burnt-out home following a savage bushfire was a good test on what matters.

To my surprise, I worked out that I honestly didn’t care about my stuff (and I proved it by not replacing a lot of it).

Yes, that sounds like a story from Chicken Soup for the Soul, but it’s true.

Instead, what mattered in that moment was that I was able to turn to my family and say “I’ve got this”.

And over the next couple of years we not only rebuilt our home, but rebuilt our family life. I did the unthinkable — I quit prime time television, and turned down almost every opportunity that involved travel.

Today I spend my time on the farm with my wife and two sons.

Your net worth isn’t the same as your self-worth.

Everyone wants to get wealthy, but in the process, some give up their safety and security.

Case in point, you’d be surprised at the number of $300,000-a-year executives who are rushed, stressed, and chained to their salary — but justify it all by saying “I’m doing it for my kids” (who they hardly see).

Feeling in control of your life — and being in control of your time — is true wealth. Picture: iStock

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The best part is that safety and security are achievable for pretty much everyone who has a full-time job.

If you’re living in a home you can afford (rented or owned), spending less than you earn and have some Mojo (my word for savings) tucked away, you’ve all but eliminated the biggest cause of family break-ups.

Feeling in control of your life — and being in control of your time — is true wealth.

2. Keep It Simple

I get a lot of hate mail these days, and most of it is from people criticising me for being too simple. (Guilty as charged).

Let me explain why I’m so simple. These days I’m fortunate enough to be classified (in the eyes of the law) as a ‘sophisticated investor’.

This basically allows me to invest in all sorts of weird and wonderful investments that smaller investors aren’t allowed to access.

I get to drink off the investment top shelf!

However, what I’ve learned from the experience is this: anyone who make things overly complicated is usually trying to sell you something.

And generally it’s rubbish.

Case in point: Warren Buffett famously laid down a 10-year, million dollar investment bet against Wall Street exclusive hedge fund managers — and cleaned their investment clocks with a dirt cheap no-frills index fund your grandmother could invest in.

Besides, what sort of weirdo wakes up wanting to make things more complex?

Life is busy enough, and I’m still getting my head around programming the dishwasher.

If you make managing your money too complicated you won’t stick with it — especially if you have a partner who isn’t as money-focused as you. There’s power in keeping things simple, and focusing on one thing at a time builds more safety and security in your life.

3. No One Cares More About Your Money than You

I’ve written this column for over a decade, and I’ve made a lot of enemies in the finance industry.

Yet the truth is, I know of no other industry that makes so much money from the complacency and ignorance of their customers.

No-one cares more about your money than you. Picture: Getty

Let’s take one example:

Bank-owned super funds have, on average, underperformed not-for-profit industry super funds by more than 2 per cent over the past decade.

The difference basically comes down to the fees.

A study by Industry Super Funds (using SuperRatings data), found that over a 19-year period your balance would be 5 per cent higher if it was in a low cost industry fund.

It doesn’t sound like much, but it’s potentially tens of thousands of dollars (or more) that you don’t get to spend in retirement.

When it comes to your family’s financial future — and their safety and security — no one cares more about your money than you do.

Amen.

Tread Your Own Path!

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