Step 2 Set Up Your Buckets — The Barefoot Investor - Scott Pape (2024)

FAQs

What are the buckets in Barefoot Investor? ›

Yes, our entire money management plan consists of dividing our income into three 'buckets': a Blow Bucket, for daily expenses, the occasional splurge and some extra cash to fight financial fires. a Mojo Bucket, to provide some 'safety money', and. a Grow Bucket, to build long-term wealth and total security.

The book makes setting up the buckets easy for you, but basically, this is how you should be allocating your income each pay: 60% to your Blow Bucket. 20% to your Fire Extinguisher Bucket. 10% to your Splurge Bucket.

The Barefoot Investor guide builds long-term wealth by moving your income through three buckets. Within these buckets are a chain of bank accounts. The approach suggests that you live day-to-day on 60% of your income, with the other 40% going towards paying off debt, saving and building your wealth.

Well, many people may be better off with ING's higher rate. But in your situation, you're probably better off with UBank, Up, or even ME Bank, who don't (yet) play these silly games. Scott. Reminder: I first wrote about this years ago and highlighted the low fees.

People may find it empowering to organize their money in four buckets: liquidity (cash), lifestyle (spending), legacy, and perpetual growth. In this way, they discover whether their money is organized—and utilized—in a way that supports their intentions.

The 50-30-20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should dedicate 20% to savings, leaving 30% to be spent on things you want but don't necessarily need.

While some of the examples and methodologies are specific to just Australia, overall we like the way Scott Pape recommends building a financial foundation. It covers all the must know sections in finance in a step-by-step method.

The buckets are divided based on when you'll need the money: short-term, medium-term, and long-term. The short-term bucket has easily accessible money, the medium-term bucket has money in things that generate income, and the long-term bucket has money in things that grow over time.

60/20/20 budget rule

This rule was implemented by Scott Pape, a financial advisor who wrote the popular finance book, “The Barefoot Investor: The Money Guide You'll Ever Need” and he suggests that 60% should go towards needs, 20% for wants (aka splurge in his terms) and 20% for savings.

What are the four accounts in barefoot investor? ›

Scott Pape, 46, wrote in his newsletter that he keeps 'roughly 95 per cent of [his] net worth' in low-cost exchange traded funds (ETFs). 'An Aussie shares index fund, and a couple of international shares index funds. That's it,' he said of his simple trading philosophy.

He advises to use the "lowest cost" super fund that's available in the market. Now ,one of things I want to action ASAP is to get a handle on my super. I am currently with Mercer. The rates they are charging me are far less than the company Barefoot recommended which is HostPlus.

American Express (AXP)

Buffett is a long-term believer in America's 16th largest bank, having first invested in AXP stock back in the 1970s.

Dunlopillo latex pillows are made from natural Talalay latex, and the Barefoot Investor says they are good value for money, but they can be expensive.

Key Takeaways. Bucket 1 consists of cash, Bucket 2 is your high-quality, short- and intermediate-term bond portfolio, and Bucket 3 is the growth engine that will hold the remainder of the assets.