About a year ago, I wrote Saving For Travel - Here's How We Did It! to highlight how we got to where we were and managed to have an extended 9-month North American adventure. But the great thing about life is that you’re always learning along the way and your plans evolve with it.
Since then Scott Pape (that guy again!) has released a new version of his book, The Barefoot Investor and he’s made us rethink our budgeting approach. Scott’s plan is definitely a little simpler than recording all your expenses on a daily basis and much easier to follow. And that’s a good thing as you're more likely to stick to the plan and that’s really the objective, isn’t it?
I still think it’s a great idea to record your expenses over a 6 or so month period as it will give you invaluable information on where all your money is going. And it also sets you up nicely for Scott's strategy.
Scott’s simple strategy, which we now follow, looks like this:
The Income Tap - where your money comes from.
The Buckets - where your money ends up.
There are 3 buckets:
Blow - which includes your home (rent or mortgage), car, spending (clothes, food, going out, electricity, phone, etc.).
Mojo - this is your emergency fund. If everything turns to shit, like losing your job, having a mojo bucket really reduces your stress. It's recommended to have 6 months worth of living expenses in this bucket (one of the reasons why recording your expenses over a 6-month period is still pretty important). Have this money in a high-interest, online saver.
Grow - your investment bucket. Shares, Superannuation, Property Investment.
So how does it look? As an example, your 6-month budget highlights that you can live a pretty comfortable life by ‘blowing’ 75% of your income. Therefore automatically direct 15% into your Mojo bucket and 10% into Grow bucket until your Mojo has enough to support you for 6 months. Or if you're conservative, 25% into your Mojo until the desired level is reached. After that, direct the whole 25% into your Grow bucket.
By having 25% automatically coming out of your account every month (or whatever period you choose), you can ‘Blow’ the rest. And not feel guilty about buying that coffee you’re hanging for!
Pretty simple, hey? That’s why Scott calls it, “How to put your money on autopilot”.
Over the years we've discovered a few tricks to save money that require just a little planning and not too much sacrifice which allows you to direct more money into your Grow bucket. For some simple money saving tips, check out Saving Money on Foreign Transaction Fees, Budget Travel - Cheap RV Hire In The USA and How To Find Cheap Short Term Apartment Rental.
Another way to add to your Grow bucket is to make more money - wow Mick, you're a genius! Seriously though, think about a side business or doing a few more hours. And when you're thinking about side business ideas think portability as this will allow maximum flexibility when travelling.
I'll be putting an article together in the next couple of weeks to show you what we do with our Grow bucket so stayed turned!
If you have questions or other simple strategies for staying on top of your spending, please leave a comment below.
Disclaimer: we don't receive anything for recommending Scott Pape. In fact, he probably has no idea we recommend him so much! But his ideas just make sense and his strategies are very easy to implement.
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Mick is a lover of speed runs and hitting every feature on the mountain. Ex road bike and motocross racer with plans to dabble in mountain bike racing. Spends a lot of time looking at fast cars and bikes. Jen’s instagram model and selfie camera holder due to long arms. Sometimes an optometrist.