In my previous blog (and Part I in this series), I spoke of my introduction to budgeting and my unwillingness to re-enter a cycle of insufficiency.
I then spoke of the two budgeting methods that stood out for me the most, see below:
'Dave Ramsey' and 'The Barefoot Investor' at a glance:
$1,000 to start an emergency fund.
Pay off all debt using the Debt Snowball Method.
3 to 6 Months of Expenses in Savings.
Invest 15% of Household Income into Roth IRA’s and Pre-Tax Retirement.
College Funding for Children.
Pay Off Home Early.
Build Wealth and Give! (Invest in mutual funds and real estate).
The Barefoot Investor
Schedule a monthly Barefoot Date night.
Set up your ‘buckets’.
$2,000 in Mojo.
Domino your debts.
Buy your home.
Increase your super to 15%.
Boost your Mojo to three months.
Get the banker off your bank.
Nail your retirement number.
Leave a legacy.
Now people like Dave Ramsey (and his 7 Baby Steps) and The Barefoot Investor are what budgeters these days are gushing over. Their strategies are ridiculously easy to understand – once you get to know them.
If you would like to see how I meshed them together, do keep reading. I promise to try and be as detailed (and painless) as possible!
Finding my way
Now I love the Barefoot Investor because he made this about his wife and himself – which is what every couple should be going for. You cannot begin a financial journey without having your spouse on board – ergo, ending up having to pay for all the unnecessary expenses that come up. That just isn’t fair.
(If you are starting off without a spouse/partner, kudos to you – the executive decision-making starts and ends with you from here-on, superstar!)
So I told E what I would be doing and with him on board, we started the process.
We bank with ANZ – and we didn’t do the ‘date night’ because of our little human at home needing us – but we did set up our joint savings account to link to both our cheque accounts (the ones our salaries came into), and need both our signatures to make withdrawals from. We didn’t use another banking institution, but we did* make a $1,000 deposit to it and linked standing orders from our salaries to top that up every fortnight.
This joint savings account became our MOJO account. This would be for all the culture-overwhelm inducing requests, and for any and all other crazy emergencies – for example, your car’s radiator cracking halfway up a hill (that day was from Satan and will be for a blog for another day). This account is basically for the mojo that sometimes catches you by surprise.
I then applied for three more ANZ accounts, apart from my cheque account (henceforth, called BLOW) and our joint account (MOJO). Can I just say that although this process took a lot of back and forth emails and in-person meetings, it was well worth the effort when I explained what I needed from them.
With ANZ, an initial deposit on a savings account is $500. That account will then be charged $8 for every withdrawal you make on it. I think you get one freebie withdrawal that doesn’t charge you, but every subsequent withdrawal is charged to discourage you from using money in your savings. Good call, lol.
I then downloaded the ANZ app on my phone, so I could track my account histories and more importantly, my spending. The app is available on the Android App store and is super easy to use. Amongst other things, I love it because I can rename the accounts I have on it. Kudos to The Barefoot Investor for coming up with these funky names:
1. First savings account:
I named the first of my newly opened savings accounts, FIRE EXTINGUISHER.
This (my amazing women on here) is for YOUR emergencies and for your PERSONAL INVESTMENTS *IN YOURSELF*.
I recently used mine to pay for an online course with Harvard that is free – but available at a price, if you would like a certificate on completion.
Pro tip? You can then tack that on to your LinkedIn account if you've completed it. That’s just an example of what you can do with that money. Think of this account as your savings for bettering you!
2. Second Savings account:
I named the second savings account SMILE.
This one (again, my amazing women on here) is for the things that make you smile.
Like a trip to the salon every once in a while, or some retail therapy (hello, Lel!).
Like a present for your man, or a trip to Pikinini Playground and a smoothie after with your little.
Girl, this account is what keeps my mental health on the steady.
I can choose when to spend it – and I personally use it more as a ‘sinking fund’ account, than anything else.
3. Third Savings account:
The last (but certainly not least!) account, I named SPLURGE.
It is basically a second cheque account. If you are anything like me, you may sometimes make some unnecessary purchases – hey, we’re all human!
This account is for precisely that. And once it’s spent, you can’t use money from your other accounts.
That is the point of this whole exercise – practicing accountability and self-control.
The Bank charges on these accounts
As any good budgeter (my husband says I'm a miser and I think that's my Choiseul blood coming through - thanks Dad!) would want to know - what are the charges on these accounts?
I made note of these below:
My cheque account (BLOW) is charged a SBD $10 VDC classic monthly fee.
Our savings account (MOJO) incurs credit interest between SBD $0.03 - $0.06 monthly, and increasing as your balance increases.
My personal savings account (FIRE EXTINGUISHER) also incurs credit interest between SBD $0.03 - $0.06 monthly; alongside a SBD $24 ATM transaction monthly fee (because I have made it accessible to transfer funds to my other accounts - unlike our Mojo account); and a SBD $8 charge for each transfer (I've already used my freebie).
My second savings/sinking funds account (SMILE) is charged a SBD $20 monthly account maintenance fee.
My second cheque account (SPLURGE) is charged a $6 ATM transaction fee.
As you can see, my accounts I intend to save money in (hello Fire Extinguisher!) has higher fees than my cheque accounts so I basically penalise myself whenever I need to move money from it.
Dividing to Conquer
Now… to put it all into practicality!
Dave Ramsey goes into some depth on this because. GURU. - but The Barefoot Investor gets down in the detail and actually suggests how you split your pay.
The 'Blow bucket' (his analogy) is where 100% of your income goes, and of this:
60% stayed in that account (formerly my cheque account, but now updated to my BLOW account) for daily expenses;
20% went to FIRE EXTINGUISHER for personal savings;
10% to SMILE for long-term savings/expenses;
10% to SPLURGE for short-term expenses.
It really does come down to you - and whether this method would be practical for you.
So what about my superannuation and dealing with pesky things like loans/debt?
That my friends, will be for the third (and possibly) MOST IMPORTANT part of this series. Please read Part III!