From the back (emphasis is mine):

At 26, Scott is a successful stockbroker and media commentator. He runs his own weekly finance radio show, chooses to drive a wreck and lives a full and rich life. His radio show has been described as finance for people don’t do finance. He makes money funky; your money can look after you once you learn to look after it.

The Barefoot Investor is the only finance book I’ve managed to read from start to finish; lets face it - finance is a bit of a boring subject for most people. The book distills much of the jargon and dry subject matter into a form which can be easily related to, easily understood, and easily acted on.

It’s hard to describe the difference this makes. While reading The Barefoot Investor, you start thinking about how you are going to implement the tips and ideas you get, and more importantly, when. This book makes you want to take control over your finances, and it gives you the information you need to do it.

It’s important to note that this book is (mostly) not about short-term gain. Most of the advice is based on long-term strategies which will make you “financially free” (i.e. not worrying about your finances and not living payday to payday). There are some short-term strategies for helping you get on the right track, but mostly the book looks at the “long game,” or - in Barefoot Terminology - “working your Mojo.”

For me, the best chapter (or “step”) in the book, is #3 - “Repo Your Repayments.” This chapter primarily deals with debt and what can be done about it. It clearly looks at many of the common forms of consumer debt, why they’re bad, and more importantly, what can be done to get out of the trap.

So in summary - buy this book. If you’re looking for a book to help you understand your finances, with clear, practical advice, I don’t think you’ll find one much better than this.

¹ Examples would include: Your Money or Your Wife, What Price the Little Things, and Be a Bank Account Tart

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The reason given was consumers are giving less “presents”, preferring instead to give cash. It is, after all, more flexible for the recipient. So really it would seem retailers are looking at lower sales pre-Christmas, but to make it up in the sales with less discounts than in previous years. Why would this be?

Speaking from experience, it’s probably because people realize everyone has increased amounts of debt. By giving others cash, we let them choose how to use it - whether it’s to buy their own gift, or use the money to pay back credit card bills or the like.

I’ll certainly be using any money I get to pay back my credit card; this year I wouldn’t have been able to afford much of anything for others without my Visa. So unfortunately no Wii for me, but it’s not the end of the world. I’d rather be debt-free sooner, no matter how sweet Twilight Princess may look…

It would be easy for me to end with a rant about the crass commercialism of Christmas, and how we should go back to simpler times when we were happy to get an orange in our Christmas stocking, but cliché’s can kill so I’m not going to.

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Money comes and money goes, but broken hearts can last forever. By sitting down and talking openly about your finances you may avert a potential disaster down the track. When all is said and done money isn’t as important as our relationships
– The Barefoot Investor (Scott Pape)

Money has long been a high contributor to strife relationships. Of the estimated 40% of marriages ending in divorce, finance issues must be up there with cheating partners as a reason. From personal experience and observation, the main problems are lack of communication and lack of understanding.

Hear No Evil, Speak No Evil

In the past my wife and I rarely - if ever - talked about money. When we were dating it wasn’t a big deal; I had my account and would pay for a night out and she would keep me fed for a few days and drive me here, there, and everywhere. Then we had our son and moved in together. I was paying almost all bills while the groceries were her responsibility, in addition to running her car.

On the surface things seemed fine, though a few times we’d turn to the other because we were short. The truth was we were both making a lot of mistakes and racking up more and more debt. Things compounded when we bought our house and started planning to get married. In the end I stumbled upon a load of stashed credit card statements which led to a “we need to talk” moment.

Looking back now, if we’d only been open and honest about what we were doing with money a lot earlier, a whole lot of trouble could have been avoided. So why didn’t we?

Most people don’t like talking about money with others, unless a) they absolutely have to, or b) they’re an arrogant, show-offy twat. Most people don’t want to be seen as the latter. When we talk to partners we might also fear “cheapening” the relationship by bringing money into it. In my case I was worried what my partner would think if she found out my level of debt.

In the end, this failure to talk about money stopped us from considering opening a joint account together. At the other end of the scale are couples who rush into opening an account together even though they have no idea of each others monetary habits. I’m saving joint accounts (and by extension, joint debt) for a later entry, so I don’t want to get into them too much here, but suffice to say that mixing both your cash together when you don’t talk openly about money is about as good an idea as the proverbial chocolate fireguard.

It’s often be said you don’t truly know someone until you’ve lived with them for a while, but if you’re thinking about moving in with your partner you absolutely must find out what sort of person they are with money.

Women Are From Venus, Men Want an iPod.

Next to communication, lack of understanding is the next main source of financial trouble between couples. By understanding, I mean the fundamental differences in attitudes to money.

It may be a gross generalisation, but men are programmed differently than women. This quote on Money Crashers summed it up beautifully. It certainly applies to my Wife and I:

…women could live with absolutely NO gadgets if they had to. Women would churn butter if it meant owning the house or car of their dreams. Men would rather buy a $200 gadget from sharper image to shave their face and iron their shirt at the same time. Okay, that would be weird, but you get my point.
Marriage and Money: Men and Women Have Different Financial Wants and Needs

I’ve previously mentioned I’m a gadget hound. I could happily live in a pretty crappy flat (and have done many a time) so long as I was able to afford what I desired whenever I wanted it. On the other hand, my Wife doesn’t understand this thinking. She would rather have the nicest house in the nicest area possible before anything else enters her head. The Money Crashers article mentions men want money so they can provide security and status (be it for partners or - my interpretation - themselves), while women just want to feel safe. I’d mostly agree with the thinking there. As said, this is a generalisation so if you disagree, let your feelings be heard in the comments area below.

If You Only Take One Thing From This Entry, Let it Be This:

Talk. Often and openly. Learn to understand how each of you perceive money, what it means to you, and - most importantly - what you do with it. If you don’t learn to communicate with and understand each other here, you’re heading for trouble somewhere down the line.

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A month goes by and you’ve dutifully put aside your £150. The same happens the next month, and the next. Then, at 4am one night, you get a call: your girlfriend has gone into labour (”Eh? What happend to the 9 months pregnancy bit?”). You need to get things for the baby and fast. Before you know it, all your savings are gone. No problem, you have a couple of bonuses coming up - they’ll take care of the laptop. It’s a shame babies are amazingly expensive and instead of managing to save anything, your debt pile is building higher and higher - those bonuses turn into nothing more than temporary relief from credit card companies.

Soon, you’re coming to the end of the 12 month term on your laptop. You dig out the contract to remind yourself what it will cost you per month. It’s then you see the clause stating that although you’ve not had to make any payments for 12 months, the 0% interest only applies if you pay the balance before the end of the 12 month term; if it’s not paid, the full 12 months interest will be applied. The normal rate for this type of deal is about 13%. You don’t need to be good at maths to know that adds up to a lot of extra money.

If you’re anything like me, your reaction would be along the lines of “bugger”.

While the example above may be extreme (it’s true though), it’s an illustration why these types of deals are bad. Nobody can tell the future. You don’t know if your car will need to be replaced, if you’ll get a large, unexpected tax bill, or any other major expense. 0% finance deals are nothing short of a gamble. You’re gambling on your ability to pay back the loan before the term expires. If you fail, you have to payback the interest which you thought was “free”. The interest builds from the moment you take the finance deal and invariably is on a rate close to credit card level (read: very high).

The same principle applies to 0% balance transfers/purchases offers on credit cards. There really is no such thing as a free lunch when it comes to consumer credit.

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Now I’m a (semi) responsible adult, paying for all the past debauchery, I finally know the difference between the two. I’ll simplify things a fair bit, but Good Debt and Bad Debt can be looked at like this:

Good Debt

Good Debt is debt incurred for something that increases in value as time goes by. The best example of this would be a mortgage. Good Debt is (unsurprisingly) a good thing. By the time you’ve repaid the debt, your investment is worth more than what you paid for it.

Bad Debt

Bad Debt is debt for items that decrease in value. This typically includes personal loans such as for a car, or nearly anything bought on a credit card. Avoiding Bad Debt where possible is key to obtaining financial independence.

I realise I’m generalizing and there’s probably more to it then my simplified explanation, but it’s more of an explanation than I ever got… If at least one person is able to avoid getting into a tight spot because of it, I’ll be quite happy.

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