What sorts of systems do you have in place to help you think about your budget? The Barefoot Investor, Scott Pape, provided me with three great takeaways: the implementation of an electronic envelope system, a reassessment of superannuation and although I can’t participate in the idea of a “hot financial date” each month the encouragement to share my journey…
Because I am a Kiwi living in Australian I enjoy reading Finance information written by our very own people, I bought The Barefoot Investor by Australian author Scott Pape in June 2017. Because of Pape’s format, structure and layout I had quickly devoured this information in about 24 hours. There are a number of photographs and cartoons throughout his book, it is written in a very Australian dialect, Pape shares a lot of his personal experience and insights to back up his theory and divides the sections of his book into a financial to do guide for his readers to work through step by step. Here are my three takeaways from the book:
Pape is another fan of ING Bank, no bank fees, higher interest rates, cash bonus when someone signs up using your magical code, what’s not to love right?, and has a system where puts his money into three accounts or “buckets”: SPEND, SPLURGE and SAVE. I found this concept great to read about at the time as it was when I was grappling last year about what percentage of my after tax income should go towards saving and other such categories, a lot of the online research talks about the 50/30/20 rule: 50% essentials, 30% extras and 20% saving.
I was already with ING bank and the way I have been working with my spending works for me so I did not implement the structure of accounts that was recommended. Instead, I combined Pape’s advice with what I was reading about in Dave Ramsey’s work about the zero based budget and the envelope system. For those of you that do not know what the envelope system, you work out a zero based budget before you are paid, this means you carefully consider all the expenses across your life and plan them in. I started a number of sinking funds within my ING Bank account to start saving for specific areas that mattered to me that I added to on top of my fortnightly house savings (you can check out statistically how I went in 2017 here). These included:
- Travel – $200 a fortnight
- Bicycle Repairs – $40 a fortnight
- Health Insurance/Psychology/Yoga – $210 a fortnight
- Charity – $40 a fortnight transferred through
- Gifts – $40 a fortnight transferred into this account
- Beauty – $80 a fortnight transferred (because I’m single and a lady)
This really works for me. It means there is always money in an account and budgeted for when you have something come up. Haircut, not a problem, the money is budgeted, there and waiting for you. Friend’s birthday or Christmas, not a problem, it’s there and waiting!
Honestly, give it a go, it’ll free you up.
Thanks to reading Pape’s book logged into my Aussie superannuation account for the first time in ages, reset my password (yeah part of the reason I hadn’t logged in was I couldn’t remember my password) and upon a review of the last 12 months I revised a higher percentage of my super into higher and medium growth. For those Aussies that are paying the extra fees with their multiple super accounts Pape wisely advises to consolidate these funds as soon as possible.
For the Kiwis millennial’s reading along if I were you I would be stashing as much as possible into my Kiwisaver as the current government first homeowner grant is a great way to get your foot on the property ladder.
So Mr/Ms Millennial, how much extra are you putting towards your super each payday? For me I put in an additional $160 a fortnight towards my super. As a millennial I know for a fact that there will be no government subsidised super for our generation and we need to be forward thinking in this area.
When thinking about it I probably need to put even more super aside when thinking about it. Even if I purchases and paid off my house and no longer have rent/mortgage and taking into consideration 3% inflation per year if I was to retire at 65 and I was budgeting for spending a modest 26K a year now (I’m 30)…
- That means my costs next year would be up to $26,780.00
- By the time I’m 40 that modest amount is $35,990.08 a year needed to survive
- By the time I’m 60 that’s $65,002.09 for my budget lifestyle
- By the time I’m 80 that’s a massive $117,401K required. Phew! 80 is enough for me in human years, I’ll be happy handing over my estate back to the universe by then
Hats off to Pape for bringing this issue into the light!
This book really encouraged me to have longer conversations with my other single friend about finances and buying a house. I find it good to speak with other people in the same position as me, saving towards a 20 percent house deposit as an individual without help from a third party.
It’s been hard and I have felt alone in my journey to date, but shining the light on the issue will bring more people into my life on the same page as me and has also encouraged a lot of ideas, inspiration and helpful conversations with other people. A recent fact which was enlightening for me as a single woman is that single women are statistically more likely than single men to purchase a house on their own. This is because women are more risk adverse in their financial decisions whereas men are more likely to take a punt, maybe on some bitcoin.
For me, a single person reading the book, the main theme of financial dates with your partner throughout the book was somewhat disengaging. Pape tries to somewhat pander to single people stating instead they should go on their financial dates with a friend, this does not make a lot of sense to me personally. I instead have chosen to look at this concept through the lens of opening up conversations about money and achieving your financial goals is a positive one.
What did you learn from the Barefoot Investor?
Let me know about your takeaways from Pape’s book and what further enhancements you are using to hack your budget.
The Economiss is a single, female, millennial on a mission to buy her first home in Australia. A Kiwi by birth, she jumped over the ditch after she finished her tertiary qualifications in search of employment. The narratives quite often showing up online overshadowed her thoughts of buying a house alone changed in 2017 The Economiss started super charging her finances and saved over 30% of her after tax income towards her house deposit as well as cash flowing four overseas trips. In 2018 The Economiss decided to create a new narrative and share her journey saving 36% of her after tax income for a $60,000 house deposit by December 2018. Do you have some tips to share or want to be featured on the blog, please get in touch!