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Podcast: Should You DIY Your Entire Finances?

October 19, 2021

Should You DIY Your Entire Finances?

In this episode…

In this podcast, we discuss whether outsourcing anything financial makes sense, or whether we should strive to do it all ourselves.

We share our thoughts on financial planners, and when it could make sense to use one, designing a DIY investment portfolio, accounting, budgeting and more.

 

Listen to the show…

(or download the mp3 file here)

 

Discussion points…

  • Intro and what we’ve been up to  (01:13)
  • Choosing and implementing an investment strategy  (03:58)
  • Outsourcing investments and thoughts on financial planners  (11:28)
  • Paying for advice, super and pension rules, and keeping it simple  (19:55)
  • Budgeting and money management  (26:12)
  • Should you do your own accounting?  (30:11)
  • How to make it easier to DIY your finances  (36:28)
  • What if your spouse isn’t interested and when to consider getting help  (41:37)
  • Final thoughts  (45:43)

Resources and stuff mentioned…

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Have something to add to this discussion?  Share your thoughts in the comments below…

30 Comments

30 Replies to “Podcast: Should You DIY Your Entire Finances?”

  1. Very much a close minded or fixed mindset in regards to your comments on Scott Pape and the Barefoot Investor. His portfolio continuously out performed the market. At thd end his $100k portfolio was at +80% and the All Ords Accumulation Index was around +50%. Beating the market by 30%….not too shabby.

    Some people have an interest in investing in indivual companies and they do really well. I have built some pretty solid wealth that would not have been possible by using Etfs in a short period of time.

    Anyhoo, like everything in life it pays to be open minded and explore all possibilities.

    1. I agree with you, I didn’t agree with Pat’s assessment of the Barefoot situation, which should have been clear in the pod. From what I understand, Scott and his bus. partner had been investing for a very long time in a sensible way and decided to open that up and share it with others to emulate, while also discussing other more set and forget options, so I have no real issue with that.

    2. To be clear, I think he has done more good for personal finance in Australia than anyone else I can think of.

      I also think he is doing great charitable work this year.

      It isn’t close minded to see the evidence about active investing, coming to the clear conclusion that it isn’t something to be recommended to a general audience (let alone Scott’s main audience of extremely beginner investors) and then judging that was not a sound and consistent thing to do with the level of outreach he has and the level of knowledge he ought to have given his position, experience and education.

      The outcome of the investments is not actually relevant. That is the same as saying since Bitcoin outperformed all other asset classes over the last 2 years, that recommending buying Bitcoin 2 years ago is sound advice.

      It is actually telling that Scott eventually got to a passive portfolio at the end of that saga. It just took him longer than it should have (again given his position, experience and education).

      1. Yeah I think we need to be clear in saying that his thoughts and opinions etc have probably changed over time as he spent more time educating people and himself personally as an investor, to eventually reach the point where he thought index funds are probably the best option for most people most of the time, based on time/effort/results, etc. Just like we have too Pat.

        But as an active value investor, along with his business partner for likely a long time, who reportedly had a reasonable sensible strategy that had worked since they began investing (likely for decades investing in a big basket of value stocks, not too different from a value index since that never existed in Australia). And interestingly, if it did, out of 2-300 ASX companies, it’d probably be screened down to 70-100 for a value index. So to me it’s not surprising (or questionable) to then share that approach with others, provided you’re also giving other simpler examples to follow too, and giving people genuine education along the way, which it certainly sounds like they were.

        Given the big basket value approach, you could actually argue there was evidence backing up what they were doing (if that’s the main issue). To take the index/active argument, no it wasn’t an index fund, but they were likely investing how a value/factor index would be constructed, based on a set of chosen inputs like quality, price, and so on. It’s not the same thing, but you can probably see what I’m getting at, so a right/wrong argument certainly doesn’t seem fair.

        1. Yeah, I think they may have been targeting a Value factor investing approach. This is actually similar to what you find with Berkshire when you back analyse their stock picks, you find that they had a large Value factor tilt, they were doing it before it was so well defined and understood.

          I wouldn’t be surprised if you find the same thing if back analysing the blue prints picks.

  2. Sounded a little harsh re BAREFOOT, but you were 100% correct
    Fundamentally you can’t preach simplicity and then sell a stock picking service

    I paid $2k for a financial plan. I warned the FA that I knew what I was doing and I wanted low fee and simple.
    Got the exact crap recommendation you referred to. 13 complicated expensive funds in in a investment bond structure!

    1. Ohh sorry to hear about that FP experience, but sadly it’s the standard feedback I’m hearing. Definitely would be good ones out there, but the fact that this kind of complex ‘advice’ still exists in 2021 (and is charged a fortune for) is ridiculous. You’re on a better path with the DIY approach 🙂

  3. Good morning Dave and Pat,
    I listened to this podcast this morning as was turned off by Pat’s criticism of Scott Pape’s Blueprint. I came to this site specifically to let my displeasure be known.
    A well-educated engineer should know better than express opinions on things that they are not au fait with. As someone who did subscribe to the Blueprint in the last year it was run, I can say that Scott Pape and Mike Kemp were crystal clear on the position that one should not buy individual stocks unless willing to do the work in valuing the stocks and that a good return is not always guaranteed and stressed the importance of diversification.

    1. And, for the record, the Blueprint was not just a stock-picking subscription, they covered ETFs, LICs, portfolio allocations, as well as advice on insurance, general personal finance advice, what to organise in case of your death etc. It was very useful in my experience and I do not regret paying for the year subscription.

    2. Hi Emma

      I appreciate that Scott has done a lot of good in the personal finance space and acknowledge on the balance he has been a massively positive financial influence in Australia. Probably the most positive influence, bar none.

      I think where the disagreement comes is that the evidence suggest that valuing companies is not something that can actually be done successfully or consistently.

      The persistence scorecard from Spica that has been tracking this for many years shows that


      Over a consecutive five-year period, only 1.0% of funds consistently maintained top-quartile rankings and 2.2% of funds consistently beat their benchmark.

      Found here

      https://www.spglobal.com/spdji/en/spiva/article/australia-persistence-scorecard

      So even those with the time to “properly value companies” shouldn’t bother and Scott should know this (he appears to now)

      It is encouraging to hear that he said that “A good return isn’t guaranteed” but he should have gone further and said “a return better than the benchmark is incredibly unlikely”

      I understand that he helped many people, and this will lead to those same people defending him. I also still believe that overall he has been an outrageously positive force in Australian personal finance, I just think this one service was not a good idea.

      1. Again, I think that you have completely misrepresented the position Scott Pape took. He did not make individual stock picks and eventually go to ETFs. He had a recommended portfolio comprised of around 5 low-fee ETFs several years ago. He has consistently said that for most people who are not interested to n picking stocks, ETFs are the best option.
        My issue is not with differing opinions on investing, banking account allocations and so on, my issue is people making statements about other people that are clearly incorrect.

  4. “It is actually telling that Scott eventually got to a passive portfolio at the end of that saga. It just took him longer than it should have (again given his position, experience and education)”.

    Completely incorrect.

    The Barefoot Blueprint had a passive portfolio that was recommended called ‘The Breakfree Portfolio’. This consisted of 5 ETF that tracked Australian, Global, Property and Bond markets. They started recommending this in 2013!!!…………..2013!!!

    The Blueprint also had the $100k portfolio in which they took a deep dive into companies and taught the reader how to value a company and invest, if they wished to do so.

    Some people went passive, some people went with individual companies and some people went both…….

    Anyhoo, once again, it’s probably best to do some research before you hit record.

    1. My understanding of the $100K portfolio was to help educate those people who chose to invest in individual stocks and help decipher the good from the bad and think and analyze when to put in and pull out. Also It was BF investing in these, so he rode the wave up or down as well, not someone suggesting and pushing stocks while they don’t invest themselves.

      I agree with Pat on the small part that for the average person investing in individual stocks is not a great idea if they don’t have the knowledge behind them and doing it on a whim. I believe BF has always been clear on going for LIC or ETF for everyday people who want something simple and they don’t want to research or analyze excessively.

      1. Thanks for the clarification Bryce. I’m totally with you on how you’ve summarised Scott’s position – that’s been my understanding also 🙂

  5. Great advice about DIY entire finances, and my experience of the last 10 years is this is progressively getting easier with online support and tax. Keeping finances as simple as possible such as with index ETFs produces a huge cumulative effect of savings by not needing ongoing advisers.

  6. Recommending a passive portfolio in 2013 is indeed great and something I thought he only did when he made the “idiot grandson portfolio” so that is indeed a learning point for me.

    In the same vein, I have conflated the stock picking portion of the service with the entire blueprint service, so I will gladly rescind my previous criticism of the entire barefoot blueprint and focus it on just the stock picking portion, which I will do now so we can stop discussing the other indeed valuable parts of the service (I will also be more than happy to do this in our next episode).

    Specifically, I do not feel it is at all controversial to say that the recommendation of stock picking to a general audience is not a good idea. Even if caveated in the ways described above and even if packaged up with other valuable services or offered as an alternative to those other services. Is just this last paragraph something most people genuinely disagree with?

    Dave and I will definitely have more of a discussion about this at the start of our next episode because I have definitely got a lot of people of kilter with the way I have expressed this, lacking the required specificity, but feel like the main point that I did not get across all that well is still something that should be uncontroversial.

    In any case thanks for the responses and @Emma, I will take them with me into the next episode.

  7. I’ve listened to quite a few of your podcasts. I’m sure it won’t make any difference to you but you have lost me and I won’t be following anymore. This is coming from somebody who is extremely financially savvy, having fully retired (fired) from any sort of paid employment at 51 and my husband at 57, and being an avid follower of Scott Pape from even way before he brought out the blueprint, I have a lot of that to thank him for. I never once bought or sold a share on his recommendation but what he did do was point people in the right direction in relation to home loans, insurance, health insurance, budgeting and yes how to buy shares and a lot of things and unlike yourselves was so very practical in letting people know exactly what product to use to achieve this without any kickbacks from them. The blueprint saved me thousands over the years. You talk so much about doing your research, you really needed to do your research about Scott Pape before making the comments that you have.

    1. Sorry to hear that Susan. First, congrats on your position that’s fantastic! I know there are many people who feel as you do from following Scott and his advice over the years, which is why I couldn’t really agree with Pat’s assessment. I think the issue for Pat was recommending stock picking, and that’s pretty much all, but I do agree with the sentiments provided by other listeners here, including yours.

      I do however have to point out that we aren’t legally allowed to tell people what to invest in, whereas Scott is/was. That’s why you might hear us talking about strategies without specifically saying “you should invest in this fund”, because we don’t have a license to do so. Hope that provides some clarification.

  8. WoW The barefoot comments stirred up a hornets nest. A bit disappointing really as the key point about stock picking being a mugs game is absolutely valid.
    To reflect on my own personal experience.
    I was, and am a Barefoot fan. He is a legend.
    But also, I mistakenly went down a road where I kind of thought that stock picking (using blueprint service) was the way to go.
    All the complication with setting up three different share registry services, dealing with DRP’s, chasing annual statements etc etc. It was BS.
    And working out the capital gain/loss when I sold out took me 3 hours of spreadsheeting..!

    In hindsight a few set and forget ETF’s is the way to go for probably 99% of people.

    I really just wish there was a way to make ETF’s tangible for the average Joe.
    I can see why people are so fascinated with property. It is something you can see and touch.

  9. Wow! Is this even more controversial for Aussies than “should you buy property or not?” Haven’t listened to this podcast but am a big fan of Dave and Pat and of course I’m familiar with the Barefoot investor – how could you not? He is the closest thing in Australia to a financial cult like another of my faves, MMM.

    Anyway, just wanted to add my 2c and another big tick for simple ETF’s. Yes – you can get “richer” picking individual companies, but so what? True FIRE people would understand there is no lifestyle improvement whether you have $1M or $2M or even if you have $5M or $10M. More money over and above what is required is not the answer. If you want a super luxurious life without work, $2M will easily do that. Anything beyond that is greedy and stupid and will not “improve” your life in any real meaningful way. From my understanding of Scott Pape, this is his message. He became rich and now promotes simplicity because he has discovered ever more money is not the way.

  10. I think that people absolutely can DIY their finances, and in particular their investments which is really a small subset of their overall financial situation. But the reality is that most people don’t and won’t.

    We can see that pretty clearly in the data about the percentage of Australians who couldn’t easily come up with $1,000 in an emergency, who are underinsured if something were to happen to them, who have no idea what their super is invested in, who have zero investments outside of super, and who basically will spend every last dollar that comes in and more if the bank will lend it to them. The FIRE crowd is a very tiny percentage of the overall population, and has a very different mindset.

    Pat might also want to keep in mind that it is a legal requirement for financial planners to give clients a statement of advice if they’re giving personal advice, and it basically has to discuss and disclose almost everything under the sun. They understand that most of it is compliance stuff and general information that isn’t particularly helpful, but they have to include it to protect themselves legally. Maybe Pat’s area of construction/engineering is different in that regard, but I would be willing to be there is a lot of stuff that could be cut out of all the documents produced there as well, but it’s there because the legal department insists on it to protect the firm.

    1. Thanks Aussie HiFire

      I do understand that is a legal requirement. I have just heard some FAs defend it as being super valuable and worth the money. Some FAs are honest and tell you straight up that is a legal requirement to include all of the information that is included but direct you to the personalised sections.

      In either case, I don’t think it is worth the asking price for most people.

      I also think the fee is made up more of overheads, insurances etc than on the direct costs of providing the service, again, this adds to the cost of the service without directly increasing the value to the client.

  11. Hi Guys,

    Not wanting to go where others have already but…..
    I was a Barefoot Blueprint Subscriber for a few years before it closed.
    Before the proliferation of FIRE et al blogs and podcasts the Blueprint was (although a paid subscription) pretty useful for people starting out. I easily got my subscription fees back and then some. Very good advice on choosing financial advisors, low cost investing and saving money on mortgages etc. The only criticism I have is that some advice did get a little repetitive after the first year but not all.
    Scott Pape and Michael Kemp always advocated a passive investment approach with low cost LICs or ETFs. And were really clear that for 99% of people this was best. They had a “Breakfree Portfolio” comprising diverse low cost funds similar to VDHG. Later when it was created they advocated using VDHG for this purpose.
    They obviously had some interest from subscribers in relation to value investing and Scott put up $100,000 of his own money and Mike Kemp analysed and valued stocks. This really was more of a “for those who are interested” component and Mike Kemp actually wrote some masterclasses on how he values stocks. I actually put a little money into some of his tips in the $100K portfolio which have on the whole done well. What it did reinforce to me is that I don’t have the time or expertise or inclination to value stocks, something I would never have known. It also showed me that even very successful investors get some stock pics terribly wrong (at least in the shorter term) and there are lots of things that value investing can never factor in like bad corporate practices, chicken diseases and people making up absolute lies to short stocks.

    What Scott Pape and Mike Kemp did before the end was analyze a massive list of low cost ETFs and LICs all the pros and cons and eventually selected three for the Idiot Grandson portfolio – VTS, VEU and VAS with the US tax implications explained and VAS/VGS as an option.

    Scott Pape went on to hand in his financial services licence to become a financial counselor after completing his diploma.

    The Blueprint like most other blogs, podcasts and services came with the disclaimer that it was not personal financial advice.

    What was really good was the advice they gave in finding a financial planner should the need arise. To get my wife on board and also as a kind of insurance that I was doing the right thing with my investing (mainly VAS and VGS) I wanted personal advice. I used the information from the Blueprint (what to ask, what to look out for) and selected an advisor that basically told my wife and I we had a sound strategy and only cost $100 (small price to pay to sleep at night). You never know if the advice you get on the internet is always 100% right especially when it comes with a disclaimer.

    I love your podcasts because you guys are financially savvy, confident and give good advice.

  12. Also I believe from listening and reading the Blueprint a very large part of Scott’s personal and definitely his parents investments are in low cost LICs or ETFs. He even said many of his ex financial industry colleagues are too.

  13. Cheers for the pod guys!

    The Pod is simply about 2 guys talking smack about FIRE and financial stuff, of course they will, at times have differing opinions/views on certain topics and/or people.

    If people are getting angry about something they hear on a pod then perhaps they need to re assess a few things in their life.

    In fact I think addressing the issue again is wasting good quality financial ‘smack talk’ on the next episodes subject. I don’t know the pod numbers but I can safely assumes it many times more then the few who comment on here. Re addressing the issue is nothing more than pandering to the whining minority.

    Thanks again for the time and effort you guys put into the POD and relevant subject matter as a whole.

    1. Cheers mate. I do think it’s probably best that the misunderstanding is cleared up though, because a lot of it does centre around that, so we will be fleshing it out just for the sake of clarity. The people who got upset or took it the wrong way probably won’t listen again and that’s fine, it’s their choice.

  14. What a nauseating tirade about the Barefoot Investor. No offence, but you sound very entitled and smug in the way you go about things sometimes. I won’t be listening again.

    1. We’ll be clarifying what was meant by the comment in the next episode, since we failed to put it into proper context in the episode (part of the risk when random things come up in conversation). I genuinely like Barefoot and have no issues with anything he’s done (his book is on my recommendations page), and Pat only has an issue with one particular thing about his previous paid community. Sorry for the way it has come across, it was very poorly communicated.

  15. Hi Dave,

    I long time fan and I really enjoy your work. I think some of the comments here are pretty harsh but I think this was not one of your best pods.

    AussieFireBug just did a podcast a couple of days ago, where he actually interviews a financial planner about the same questions. The information in his podcast, was much better. His guest also explains how to check an advisors qualifications which was missed on your pod.

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