Pape pens nine steps to financial freedom, in an incredibly approachable way. We love it so much that the next three blog posts will cover the basics of the book.
Step One: Monthly Date Nights
Book them in with your partner, or yourself, now. Date nights are the perfect way to track how your financial goals are going and if you’re sticking to the steps. Review everything over a glass of wine and some delicious food. You might want to try a new place each month, keep it fun and something you look forward to. So much nicer than those crappy after work convo’s at home.
Everyone should be aware of his or her financial situation. This means both parties in a relationship too. If one or both of you isn’t there yet, date night is a great way to start the discussion.
Start looking at things such as the fees you’re paying on your every day accounts, and your superfund. You should be paying zero bank account fees and if you are being charged, switch to a new bank ASAP. Consider opening a new account, which Pape calls the ‘Mojo’ account. Work towards getting $2000 in there and save it for a rainy day. Having that money put away takes a lot of stress out of your financials.
Reviewing your superfund is also important. Compare fees and check what your fund invests in. If you’re unsure how to approach this area, give us a buzz and we’ll guide you in the right direction. Pape also suggests looking at your insurances here. Are you covered for everything you need? You may not be aware of what’s available or necessary to your situation. We can give you a hand here too.
Step Two: Set Up Your Buckets
The book makes this bit easy for you. This is how you should be allocating your income each pay:
60% to your Blow Bucket
10% to your Splurge Bucket
10% to your Smile Bucket
20% to your Fire Extinguisher Bucket
The Blow Bucket is for every day expenses such as rent or home loan repayments, food, insurances and utilities.
The Splurge Bucket is cash to spend on things that make you feel great like clothes and your social life.
The Smile Bucket is for fun longer term savings goals like a wedding or holiday.
The Fire Extinguisher Bucket is for big savings goals too, but less fun things like a house deposit or paying off your mortgage faster. It can also be used for paying off debts.
Step Three: Domino Your Debts
In this step, The Barefoot Investor suggests you tackle your debts. Write them down and include the interest rates. Figure out if you can negotiate better rates with the current lender or move to another one who will offer you cuts.
Order your debts from smallest to biggest debt. Start by paying off the smallest one. It’ll have you feeling like you’re making great progress and built momentum to reach those bigger debts.
Now you’re a third of the way there. Stay tuned for our next posts… in the meantime we recommend grabbing a copy and reading it yourself. If you need anything clarified pick up the phone!