Bank Accounts Setup

budgets Aug 03, 2022

If you have read the Barefoot Investor book, you will know there's a cool setup of the accounts that he uses.  It's visual, it's easy to read, and if you understand and resonate with the terminology, it makes sense.

However lots of people who have read the book, don't resonate with the names.  What does Mojo mean, and why am I putting money towards a Fire Extinguisher?

Scott Pape (the Barefoot Investor) determines percentages that an average household should put aside for various purposes. However most of the families I work with are not an average household.

They earn more than average, either because they have a mining industry job, or double income, or both.  And putting aside 60% of a very good wage towards bills is a bit over the top, and create additional bills that are not really necessary - and means that you might be missing out on doing things better.  

You might miss a chance to invest.
You might miss a chance to create more income.
You might spend on something that's not as important to you, and then one day an awesome opportunity pops up and you don't have the cash available.

You can work out your own percentages. You can manage your money on your own terms.  If you get paid a salary you can work your budget out based on dollars, not a percentage - then determine where the extra goes so it doesn't go into your spending bucket.

If you separate your money into different bank accounts, it gives you better visibility over what money you have, and what it is for.

You can see what's available for upcoming bills, and not spend it. 
You can see what's available for holidays (if you have a holiday account) and budget your upcoming holiday appropriately, and not come home from holidays in debt.
You can have your own cash to spend on whatever you like - and be intentional with spending this money (That Barefoot calls SPLURGE) on YOU... guilt free, without it impacting on the household.

It gives you the clarity to see what's available, so that you can spend on the necessary stuff, buy what you want, but not waste your excess funds on "stuff"  - you can give it a plan and put it to work... investing in one of your dreams.

Are you saving for a deposit for a new house?  Set up a new bank account and add money to it regularly.
Are you saving for a new car?  Set up a new bank account and add money to it regularly.
Are you looking to retire early?  Then you need to invest this money so that it can grow so it is ready for you when you are ready to stop work.  This might be a bank account to save chunks of money to invest, or it might go to your super fund, or it might go to purchasing investments.

What do you need a bank account for?


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