Questions About Barefoot Investor Bank Accounts

Expanding on my episode about the Barefoot Investor bank accounts I talk in more detail about practically how this way of banking works in my life.

Resources From This Episode:

Barefoot Investor Book
Barefoot Bank Accounts Video
ING Bank Accounts
$1,000 Project Book
Canstar NZ

Transcription:

I recently did an episode on the barefoot investor bank accounts and bucket, so I told about exactly how the barefoot investor recommends you set up your bank accounts, tried to make it really straightforward for you guys and also talks about the alterations that me and my wife made in order to make it work for us. So the barefoot investor bank account strategy is a great framework. It’s a great way to manage your money. We had to make some alterations because it got a bit confusing for us, so we just made it work a little bit better for us and I think that’s a good thing. You take the cool concept and you tweak it for yourself and you make it work for you and for your relationship and for your family and your banking accounts, whether you be single or whether you’d be partnered or whatever it may be.

Anyway, I received some questions from calum from New Zealand and so I thought rather than just writing back to this email, I would create a video answering these questions because I feel like it would be useful to a lot of people out there who have either read the barefoot investor and I’m interested in setting up these bank accounts or people who aren’t quite there yet, but the barefoot investor and what I talked about is kind of peak their interest and they want to learn more. So I hope you find this useful. We’re going to go into more detail in exactly how I manage my bank accounts and transfer my money and we’re going to talk about things in more detail. So yeah, I hope that you enjoy this. Hi, I’m Ryan. If you don’t know me already, I’m from on-property dot com dot a u and I help people invest in positive cash flow properties and achieve financial freedom.

And so I love these questions from Callan. So I’m going to go in and read the email to you guys and we’ll go through and answer these questions. So callum, I hope that you find this helpful and same to everyone else who’s listening. Before I read this email, just want to let you know if you haven’t read the barefoot investor book, highly suggest you check that out. Go to on-property dot com, forward slash barefoot and I’ll link to booktopia where you can purchase that book and get it shipped out to you. I recently just purchased this book, the thousand dollar project from Booktopia came in a couple of days, so really happy with their delivery and their service. So again, that’s on property.com forward slash barefoot. And if you want to watch the previous episode that’s On-property Dot Com dot a u four dash 5:10. And that’s where I talked about the bank accounts in detail.

And so you can check that out. I’ll also leave the links to those in the description down below. Let’s get into the email. Hi there, appreciate your time. And if you could just answer a few questions I have after watching your video about the barefoot investor book. I’m from New Zealand and uh, found the book to be amazing and I’m determined to set things up for me. I’ll be at with the New Zealand version of things, which is one of my points for you also. So they asked a question about that later. So question number one, I liked your idea of the pot and the everyday spending accounts. So do you have a card for each and with the everyday spending, you didn’t mention anything about whether put in the 60 percent of your pay or income each time. And so what’s the plan there? What do I do?

So what the barefoot investor recommends is that when you get paid, 60 percent of your money goes to everyday spending, 20 percent goes to a fire extinguisher to pay off debts and to put out financial fires, 10 percent saving for things that make you happy and 10 percent for a splurge account. And so I kind of altered that a bit. So what I’m gonna do is we’re going to look at that in more detail and how exactly the money flows and how I set that up. So I run my own business, that’s how I generate an income. And we also received some family tax benefit from the government and anyone that is employed, you know, this would be your employment and so my business pays us a weekly amount so each week money comes from my business and goes into a bank account that we’ve called the pot and so there’s a card attached to this bank account, but basically each week money from the business, it goes into the pot and also family tax benefit is fortnightly that goes into the pot as well.

So all of our income is going into this one account and then what we do is we then divvy up from this account into other accounts. And so that’s what we’re going to look at now. So the pot is just a regular bank account with ing. So if we go to ing, you can see my bank accounts here. So everyday banking you can see I’ve got two accounts, these both have visa debit cards, so there’s the pot, so it’s just a regular bank account. All the money goes into the pot. We have our everyday spending, which again has a visa debit card attached to it. And then we’ve got these online savings accounts which are attached to these accounts. So I can’t spend directly out of these but I can move money from these back into the pot or into everyday spending, which we’ll talk about in a little bit.

And so what I do is each Thursday I transfer money from the business into the pot and then each Sunday, which is the start of our weekly budget. So we decided to start on Sunday to the day that works for us. I’ve set up automatic payments that divvies up the money from the pot into all of our bank accounts. And so I’ll show you that now. So each Monday I have automatic payments. So everyday spending we get 50 percent of the income from my business goes into everyday spending. And so this is for discretionary purchases. So groceries, this is paying for eating out, paying for coffee or that sort of good stuff. Okay. So that’s discretionary spending or everyday spending. We also put two and a half percent into smile, which is saving for holidays and bigger purchases, two and a half percent into splurge to spend on whatever you want.

Seven and a half percent into fire extinguisher, which is going towards paying off debt or saving towards our Mojo account. And then I put 20 percent into big bills. That’s to save up for things like car registration, health insurance, electricity, those sort of big bills that don’t come around super often, but they’re always there. So a big chunk of our money goes into big bills each week. That account kind of builds up over time and then we’ll get a big bill like health insurance that are clear that account out or we might get a small bill and use some of the big bills. Money. Okay. So basically money. It goes into this. I also have the thousand dollar project, which is a new account. I don’t have any money automatically going into that one. That’s something that I’ll talk about in a future video. So basically Thursday money goes into the pot, Sunday money goes from the pot and goes out to all of these different accounts.

Now the pot has a card attached to it and out of the pot I do my regular payments, so things that happen every month or every week. So I’ve got one of my kids goes to Kindie, so that’s fortnightly. That comes out of the pot. We’ve got two cars, so car insurance that’s paid monthly that comes out of the pot. Me and my wife both have phones that comes out of the pot. So there’s regular sort of monthly things that are direct debits. They all come out of the pot, they don’t come out of big bills, they come out of the pot and so there’s always a bit of money in the pot for those sorts of direct debits. And so that’s why when I’ve got all this money going out, so 50 percent to everyday spending, that’s the business money. So that doesn’t include the family tax benefit.

So the family tax benefit one just kind of sits in the pot, so that’s kind of just like how we worked it out. So what I did to get to this point is that I just looked at my regular monthly expenses. I looked at all the big bills I’m going to have to pay over the course of the year. So it looked at how much those regular expenses or costs, how much the big bills will cost, and then I kind of. So that were the first two priorities because they’ve got to be paid, like rent has to be paid every single week and that comes out of the pot. And then I worked out, okay, how much do we think we can live off within our means? And then I decided on the everyday spending amount and then basically whatever was leftover was for smile, splurge and fire extinguisher.

Now obviously it’d be better to have more money going into fire extinguisher. I splurge and smile, but that’s something that I will work on. Upping these over time from two and a half percent to five percent to 10 percent. And for fire extinguisher from seven and a half percent, ideally getting up to 20 percent, so that’s something that we will definitely work towards. But for now I decided I wanted to get this process in place. I can’t do it as good as I would like to do it, but I’m going to start anyway. And putting two and a half percent, two and a half percent and seven point five percent aside is better than doing nothing. And so that’s kind of how it works. Thursday money goes in. That allows a day to clear between the banks and then Sunday the money gets sent around to the different accounts, setting up those recurring transactions really easily.

I just got to transfer and pay between my accounts. And then down here you’ve got a recurring option so you can do weekly starting on the Sunday and then ending with no end date. And so you can set up your payment the exact amount and then you can transfer. I also get it to send me an email receipt so I know that it’s happened and basically it just happens every week. So I’ve really easy to set that up in ing, so I hope that kind of clarifies things. It does look pretty confusing, but once you get into it, it really does work. So next question with a small account which has changed to the savings account, that’s just a reference to the point that I changed the name to holidays and happiness because small just confused my wife. Um, so we changed the name but with a small account, do you then when you want to buy something for yourself, just transfer the amount back into the pot and to do so.

So that’s exactly right. That’s exactly what we do. So there’s the holiday and happiness account. When we want to buy something, what we do is we take the money, the exact amount of what we want to buy and we put it into the pot and then we use the card that’s from the pot in order to pay for it. The reason we don’t put it into everyday spending is we want to know in everyday spending exactly what we’re spending our money on. So each week money goes in there and that’s our discretionary spending and that’s all that card’s used for, so we never use everyday spending for anything else. So if we want to pay for holidays or we want to buy a TV or something like that, that money goes into the pot and is then spent same with if we want to splurge on something, we put that money into the pot and spend it on that because you can’t spend directly from these online savings accounts.

That’s just an extra step that you need to take, but it’s not that big a deal and it’s pretty easy to do. Next question, with a different savings accounts, do you set up one where you can obviously make x amount of withdrawals from or what? Now with all of these savings accounts, you can withdraw as much money as you have in there whenever you want. So you can move money into there whenever you want. You can take money out whenever you want. So we don’t have restrictions on how much money we could spend or anything like that. And so to spend that money, we just, as I said, move it back into the pot. Next question is, with the grow account, would this be similar to our Kiwi saver which we have here? It’s what we pay each pay into over kiwisaver, which you don’t get until age 65.

So would you class it as that or should I set up another one? So for the Australians out there, we call this superannuation. And so this is a portion of your pay goes into your super or super annuation and you can’t access that until you retire. That might be age 65. I think. For me it’s age 67 in order to access that money. So with the grower account, it is not your super annuation. Well at least that’s not how I do it. And I’m pretty sure that’s not how barefoot investor advisors it. What you do in stem is basically we have this money going into the fire extinguisher, but this account money doesn’t stay in there and then goes out. So originally what you do is you use your fire extinguisher to pay off debt. So I currently have a credit card that has a limit of $2,000 that I’m paying off and so that is where my fire extinguisher money goes.

So it goes into this account and then goes back into the pot and then goes from the pot to pay off credit card debt. And so once that’s paid off then I’ll focus on building up my Mojo, which is the account that barefoot investor, that’s what they call it. But that’s basically your emergency money. So let’s say you end up in hospital, let’s say you have to pay some, you have a car accident and you have to buy a new car or you have to pay for repairs or something like that. Just something that you didn’t expect to happen in everyday life. Rather than having a credit card, you build up this Mojo and you have a decent chunk of income. The goal is three to six months worth of income in there. And so you’ve got that security for the emergencies and for the short term.

And then once you do that, well my Mojo is here. This savings account here is my mojo account and so basically it’s just an online savings account they recommend you don’t have it with ing that you have it with someone else just so it’s harder to access, but at the moment I’m happy just having a with ing and so once you’ve built up your Mojo, then you invest into growth and the goal of grow, at least for me, is financial freedom. So this is separate to superannuation, which you can’t access until you’re older. This is something that you would invest into shares or you invest into property or you’d invest into whatever it is that you want to invest into. So this could be separate bank accounts, it could be a share portfolio. You could save up and then invest this into property. You could use this to pay off mortgage debt.

Let’s say you use the two properties to financial freedom strategy that me and ben talk about. Your grow could be paying off those properties as quickly as possible so you could be putting money into an offset account to offset the interest on those properties. Or maybe you want to pay them down completely. It’s really up to you how you do it. So no, we’re not putting it into those Kiwi savers or I’m not, I’m not putting into superannuation, but obviously what you do is up to you. I can’t give you financial advice. And then last question is not sure. Have you looked into Kiwi banks, which are basically all owned by aussies anyway, but which one should I choose for an alternative for what he recommends as you can’t go ing as they’re not an Australian. So I did do some research into this. It’s very unfortunate that you can’t use ing, but the thing about ing and what makes it so good, it’s just the fact that it’s free banking.

So I don’t get charged anything for having these accounts. Ing is really good in the fact that you can use any atm. Even if you go into seven slash 11 or a convenience store and you know how they have those dodgy atm, that’s like you’re going to be charged $3 to use that atm. If you use that and they charge you $3, ing actually reimburse you for that $3, so it’s pretty amazing that you can use any atm, like absolutely anyone that’s really cool, so free, no bank account, keeping fees or anything free can use any atm, so that’s kind of you want to limit the fees that the banks are charging you and then you want those online savings accounts that you can move money in and out of as well. Just being able to separate stuff is so valuable. So here’s a website can start.co dot NZ head and there’s a few bank accounts that have zero monthly account keeping fees.

One with Kiwibank, one with a and zed one with ASB, one with sbs bank as well. So you can kind of go into these and look into these. Basically you want no account keeping fees. Ideally you want no atm fees, but I don’t know. They all have that as good as ing. Basically, your goal here is to minimize expenses so the banks not taking money from you and so kiwibank they had a neil bank account, but I think with their online savers, it was just kind of annoying in Natalie’s $2,000 to open the account. Also, if your balance drops below $2,000, you earned zero interest on that money. Um, and also this one point five percent interest rate includes a bonus of one percent if no withdraws and made within the calendar months. So if you withdraw money from the bank account, you lose one percent and you’re just getting point five percent interest rate, which is pretty terrible.

But what are you going to do? The other one was a and zed. So here we are on a and zed.co dot Nz ed. And so everyday banking, I’m pretty sure they had an n zed freedom account and the $5 monthly account fee will be waived each month if you deposit at least two and a half thousand dollars into your account over the course of that month. And as well they had a savings account here too. And said online accounts, so access to money as often as you like it. I think this one was cool and dead serious saver because you earned two point two percent if you deposit at least $20 and don’t take money out if you make no withdrawals, if you make withdrawals, I think you get zero point one percent. So that kind of sucks. But for a lot of these accounts like your holidays and happiness are not withdrawing every month from it.

So to get that two point two percent some months and to not get other months would be fine. So yeah, check out this site canstar.co dot NZ ahead. And just compare the accounts there for those of you who are in New Zealand so they have a. that’s a little more detail into how I manage my bank accounts, the alterations that I’ve done on the barefoot investor. So how did that make sense to everyone out there? If you guys have questions about this, I’m really enjoying exploring this topic. I’m really loving it. It’s actually been way easier than I thought it would be. Previously. We just had account, everything went in there, spending went in there, all of that sort of stuff and being able to have these different accounts has just been so easy, like it’s so easy. That money from the pot goes into all these savings accounts and they just build up over time, like my credit card is going to be paid off really soon because I’m not using it anymore and each week money’s going into the fire hydrant which can then go out and pay off my credit card and so it’s not going to take very long to pay it off and it just kinda happens.

Same with saving for those big bills are not going to get reggio shark. I’m not going to get health insurance shock anymore because money for those big bills is just going there and we only use it for big bills. So just the fact that it kind of happens is really amazing and really helpful. I thought it would be way harder. It’s actually easier than I ever thought it would be, so definitely highly recommend it. I really hope you guys liked this episode. If you haven’t watched it yet, then go ahead and check out this video on the barefoot investor bank accounts and bucket where I really explain that in more detail, and so if you’re interested in setting it up, that video will be good for you. Don’t forget to subscribe to the channel as well. That’s it for me. Until next time, stay positive.

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