I’ve never been the best with money. I mean, I’m not T-E-R-R-I-B-L-E, but I’ve never been one of those people who just had heaps of savings. Do I sound like a walking cliche or what? Over time, however, people I admire have convinced me that being good with your money is an important muscle that anyone can train. This feels like something REALLY important to sort - especially because house prices in Wellington have gone nuts in the last 18 months.
I’ve become convinced that nothing is more empowering that having savings in the bank and knowing that you’ve got this. What is the point of having a luxe lifestyle, full of Gucci and Amex, if you don’t have a safety net in case you need an unexpected root canal?
Despite working in finance full time, it was only after a boozy new years eve this year with friends that I even started to think about my long term financial well being and how we might one day buy a house or invest as Wellingtonians. With the risk of aged poverty becoming more significant each year, and houses skyrocketing, being aware of what is going on with my income feels like an urgent matter to be addressed, especially as I am 30 this year.
Our Money Background
When Matt and I first met at 25, we both worked, but I wasn’t on much and neither was he. We were just trying to live day to day, pay our rent and our student loans, feed ourselves and buy a cheap bottle of plonk on a Friday night. Then Matt became a student again and worked part-time 18 hours a week while I worked full-time at a government Ministry. Eventually, I got my current job and got a much needed pay rise around the time we moved into Oriental Parade. But for almost 2 of our three years there, while Matt studied, we didn’t have much to save and weren’t left with much once everything had gone out.
Things changed when Matt stopped being a student, got working full-time again and I changed jobs and after a year got a clear mindset about saving. Matt also showed me Rabobank which is an online only savings bank that helps you save because it has a ridiculously complicated calculator you have to use if you want to move money between your accounts. This helped hugely. Suddenly I was saving.
So in 2017/2018 we saved up money and went on our first real big holiday together as a couple. I know not everyone wants to go travelling in their twenties and is very anxious to get into a home, but for us it was a priority, especially Matt who hadn’t yet been overseas but didn’t have quite the experience yet to move over full time without there being risk. So off we went! Success! (You can see some of the places we went in my travel category).
Of course, coming back home, we were more or less at zero again. This is where ‘The Barefoot Investor’ comes in, at the start of a new year. It was just the message I needed, at just the right time.
The Barefoot Investor
After we spent new years on a Sheep Station in the remotest Wairarapa, our friends Helen and Ben told Matt and I about ‘The Barefoot Investor’ written by Aussie Scott Pape, Now here’s the thing - our friends Ben and Helen aren’t what you’d call ‘Financey types’. They’re actually kind of self confessed slackers (but in a seriously lovely way where they just value one another and spending time doing things they enjoy over slaving away at work and buying stuff). Ben and Helen are kind of inspiring for Matt and I as reps for ‘who-we’d-like-to-emulate-when-we-get-older’. So this was REAL for us.
I read the whole book in a few weeks. It is easy to read and full of action points. So, inspired, Matt and I set about changing out financial life according to Scott Pape’s suggestions (he says to take what’s useful and leave what’s not). I thought that it was so good I wanted to pass on the broad messages in it to you guys and hopefully it can help you too. Here’s what Pape says, and what worked for us and what didn’t:
(1) Schedule a Monthly Barefood Date Night
Pape suggests setting a time to get you and your partner together (or yourself alone if it is just you!) and discuss MONEY. Yep - sounds scary. I grew up with LOTS of family fights about money so my association was money was a negative thing, even when there was plenty of it. He says money talk is better with garlic bread and wine and the guy’s right. He then takes you through which bank accounts you should use (not the big banks), which Superfund (here we have KiwiSaver, but his points on picking a scheme with the lowest fees still stand), getting your insurance sorted in one beer and how to live like a multi-millionaire right now. The most important takeaway is to put $2000 into a ‘mojo’ account (this is your long term savings which will be build on over time). You can use this to draw on when something goes wrong so that you can safely say ‘I got this’. Did you know most Kiwis don’t have $1000 they could draw on if they had an unexpected emergency? Scary, huh!
What we did: We did schedule a really nice date night at Ortega Fish Shack (go hard or go home, right?) where we discussed how we would save money and live for the next year. Our house was being sold in Oriental Bay so we decided to take up Matt’s parents offer to have us home in Greytown to try and save money (we still pay them for food and board but it is cheaper than rent and we also pay for our monthly train pass which is $378 each).
We don’t have an online only low fee bank in New Zealand like the one he suggests (IMG) so in the end we just stuck with our usual ANZ. I immediately changed my KiwiSaver from ANZ to (Matt was already with them) and we considered whether we could trim our insurance. We also researched which banks offer good interest rates. All up, we didn’t actually finish doing all the steps for a few months because we had a few unexpected delays but eventually we did it.
Lesson: Things might change in your plan, and not every step will be applicable, but meeting up together specifically to discuss money on a date is really healthy and positive. It makes nice memories with money, rather than just stressful ones. Making a plan will mean a better chance of sticking to a plan. You might be slower off the starting block than expected but you have the tools to manage your own wealth and that’s brilliant.
(2) Set up your buckets
Pape says your strategy should be so simple you can draw it on a napkin (which he does). He suggests splitting bank accounts into four buckets:
Daily expenses (rent, groceries, bills) (60%)
Splurge (for coffee, beer, luxuries) (10%)
Smile (for things which make you simile like holidays and weddings or saving for a house deposit) (10%)
Mojo (for your long term savings - just hold this one for now, it comes in use later on when you’ve actually saved something. To start with, you just have your $2000 base amount);
Fire extinguisher (money you use when things go pear shaped (20% - The latter two are in our Rabobank accounts.)
We haven’t automated these amounts but you should. The main reason is that now we are living with family our expenses are a bit random and also we get paid 10 days apart. It would be easier to automate if we were paid on the same day each month.
We also joined our accounts together for the first time ever (eek!) which is what Scott Pape recommends. To be honest, this felt as good as getting engaged, even before we did the deed. It is trust on a whole new level if you’ve never done it before.
What we DIDN’T figure at that stage is we would get engaged - another drain on finances - however, our Smile account has been amazing (as we’ve been topping it up) and as such we’ve been able to pay for our deposits to secure vendors immediately rather than needing to ask for money from others or wait and miss out on dates. I’ve even put a 50% deposit on my wedding dress. This is while also saving into our main ‘Fire Extinguisher’ for the future.
(3) Domino Your Debts
Does what it says on the tin: Pape says that after you’ve set up your accounts, before you get saving seriously, you MUST pay off debt. Debt is inexcusable in his books in ALL circumstances - even for the airpoints.
I had always had a small $500 credit card limit which just rolled over month after month. With Papes help, I finally cut the ties and said so-long. Matt also blizted his debt. Now we only have our student loans to pay off. Praised be!
(4) Buy Your House in 20 Months
Matt and I aren’t strictly in the housing market - yet - but this chapter has some excellent tips which really opened my mind up to buying. Pape tells you to go for appartments in the city or country-side houses. He tells you to save a 20% deposit before you get a mortgage and that you should focus on this keenly but building a side hustle to help you make some extra money on the side, such as via tutoring or freelance writing.
(5) Increase Your Super to 15 Per cent
Again, we have to read this broadly here because we have KiwiSaver but I took it to be ‘Increase your KiwiSaver to the max you can’ which I did. I’m now contributing 8% each month to my KiwiSaver. Yes, there’s a few hundy less in my account each month but I am excited to see my Simplicity go up more each month. He also explains why exchange traded funds are a great way to go for a buy and hold approach to investing and that the sharemarket always goes up overall if you take the long-term view. Matt and I are looking forward to having enough saved to start investing in exchange traded funds in the short-medium term. We might not be able to buy a house but we CAN buy a bit of Fisher and Paykel, Spark and other great Kiwi companies via the NZX.
(6) Boost your Mojo to Three Months
This is not yet done but we’re on the way - kind of. Naturally, seeing as we’re only a few months in this is going to take some time. But the idea is that if you lost your job tomorrow you’d be fine, thanks to Papes ‘Mojo’ account. This is not a new concept but one which is repeated everywhere so therefore must be reasonably important if all the financial experts agree. I can’t wait to have 3 months savings and I know it would be so useful if something unexpected happened.
(7) Get the Banker off your Back
Pape says not to be a ‘Postcode Povo’ aka leverage yourself up to the hilt to live in a fancy suburb: you’ll never be free. This chapter mainly focused on how to pay off your mortgage in a way that saves you money. Seeing as we don’t have a house yet, this was less relevant but still interesting stuff.
(8) Nail Your Retirement Number
Pape here explains why inflation means you will need more money than you expect to retire. This honestly freaked me out a bit. I just assumed that money for retirement would flow as I got older (which sounds very silly on paper) but Pape is adament that you need to start thinking about this as soon as possible, especially as a millennial.
So basically that’s the goal with Matt and my new savings strategy - to start saving for retirement at 30(ish) (agh!). There’s heaps of obstacles to overcome long-term (housing, housing, housing!!!) but I know that starting is the hardest part and so I’m confident we’re already halfway there.
(9) Leave Your Legacy
Use your money and time for good, says Pape, This is as important as saving to truly have a fulfilling and meaningful life. The fancy cars won’t last but the feeling of joy will.
WHAT DID I LEARN READING THIS BOOK: By JOVE they’ve done it!
My personal finance no longer feels intimidating and insurmountable anymore since reading this book. I know this sounds ultra preaching but it was genuinely so helpful and easy to understand. You can start applying Pape’s tips almost immediately. And while life might change along the way, at least you know you have this roadmap by your side to help you.
We aren’t perfect still: daily expenses and splurge tend to mingle as outgoings. When I bought my dress we had to transfer $1000 from our ‘don’t touch’ savings to supplement living that last week before pay day (getting paid monthly is fairly tricky).
But the difference is that we’re no longer bumping up against the bottom of the barrel whenever something unexpected happens and we have a plan for the future. We might take some detours but so far it is sticking. Automating things helps!
I couldn’t recommend this book more. It really is up there in terms of helpful books I’ve read in my life and I know that almost everyone would benefit from it. In the past, books about finance I tried to tackle felt cumbersome and very American. But this, plus the tools on Sorted.co.nz are probably all you need.
Are you a fan of The Barefoot Investor too?
For clarification, I’ve not taken a penny from anyone to write this post - It comes from my heart as a woman who believes that taking control of money can genuinely change your life and wanting to share what tools have helped me!