Barefoot Investor Buckets: Structure Your Money to Build Wealth

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barefoot investor buckets

The Barefoot investor book was an incredible success, selling over 1.43 million copies since 2016. Australian’s were clearly struggling and needed a simple money management system

The Barefoot investor started a movement, sometimes light-heartedly referred to as a cult. Once you have read the Barefoot investor book, you do notice those little orange cards everywhere.

Wouldn’t it be nice if you had a complete understanding of your household budget? If a system to let you know how much money you could splurge and when you should tighten the purse strings?

This article will outline the pros and cons of the Barefoot Investor buckets, and alternative money management systems. 

By the end, you will have decided on a system that will work for you.  Whether or not you have a mortgage, single or multiple offset accounts, and steady or lumpy and irregular income. 

Article Outline

Why is a Money Management Strategy Necessary?

The success of the Barefoot Investor came down to the need for people to have a money management system. We all want to save towards long-term goals, but we also want to have fun along the way.  Personal finance is getting more complex, with a dizzying array of savings accounts, credit cards, loans and investment products available.

It is very easy for you to find yourself with multiple bank accounts, savings accounts and credit cards. It’s easy to completely lose track of what you are spending on. And can lead to spending time shuffling money from one transaction account to other accounts, trying to avoid an overdrawn fee.

How can we Get Savings Just Right?

Most of us would like a Goldilocks solution to our financial plan. We don’t want to over save and miss out on experiences and adventures that we could have responsibly afforded. More often, people ignore their futures and spend almost everything on luxury purchases and experiences.  Often, they are overwhelmed with the task of working out how much they need to save, so assume it’s impossible and give up. 

Neither is the way to a balanced and happy life. We all need to find the balance between YOLO (You only live once) and financial independence (retire early or by traditional retirement age).

Somehow we need to work out how much to put aside in savings accounts and investments, while keeping as much money aside for special bank accounts


Barefoot Investor: Saving 20% 

I think Australians collectively gave a sigh of relief when Scott Pape drew a line in the sand.

“Save 20% of your post-tax income towards your long-term goals.”

Of course, this is not as accurate as setting specific goals, and forming your own financial plan. But it’s a bloody good starting point for most people. I would have found the 20% guideline very handy before the age of 30, when setting goals and forming a retirement plan were an overwhelming prospect.

As we get older and the crystal ball gets slightly clearer, we can get round to making a detailed financial plan (with or without professional help). If you’ve already been saving 20% by this point, you will have little difficulty reaching those goals.

What Are the Barefoot Investor Buckets?

I can recommend the Barefoot Investor, unusually readable for a finance book and extremely popular. 

If you like the vague outline here I’d recommend buying a hard copy as it’s easier to refer back and make notes on. With the novel type layout, it takes a bit of flicking back and forth to get clear on the structure. I find the paper copy easier to manage than the kindle (or maybe I’m just old).

-The Barefoot Investor Bank Accounts

The critical feature of the barefoot investor buckets are to separate your income into four accounts plus superannuation:

  1. Mojo Account – Emergency account. Fill to $2000 first.
  2. Grow Account – Superannuation (once you have your money management system out this will include other investments outside super)
  3. Blow Account from which living Expenses are paid for – 60% of post tax income (cut your expenses until you hit 60%) and money is direct debited into:
  4. Splurge Account – 10% of post tax income AKA fun money to spend on wants (not needs)
  5. Smile Account – 10% of post tax income – Short term goals you need to save for eg holidays
  6. Fire Extinguisher account – 20% of post tax income to fight financial fires. This could be whatever financial fires are top priority. Scott Pape suggests pointing your fire extinguisher at credit card debt, emergency fund (increase Mojo), home deposit, your mortgage and using it to top up superannuation and invest outside super.

My Experience with Barefoot Investor Buckets

At the start of 2017, just as I had decided to get serious about making a financial plan and investing for retirement, I read the Barefoot investor. 

Instituting it did involve changing my system to open the Barefoot investor bank accounts. Back in 2017 this was a day’s work at the time. I have recently refinanced with a new bank, and it is much easier to change all accounts and direct debits now!

One of the bank accounts I opened was with ING for my splurge account.  

Incidentally, opening my ING accounts was hassle-free, all manageable online in a few minutes. The ING card allows ATM fee withdrawals worldwide and no international transaction fees for overseas purchases, awesome for those of us with family overseas.

I have found the Barefoot investor’s claims about ING allowing ATM fee free withdrawals to be true. It works in any random ATM I have tried. The fee is initially withdrawn from your account, then refunded by ING in a couple of days.

Check out my Up bank review to compare ING, Up bank and ME to decide which is best for your barefoot buckets.  

I liked the system, it was organised. I previously had direct debits coming out of random accounts, occasionally creating overdrawn fees. 

Alterations to the Barefoot Investor Buckets

-Even More Accounts

I did find myself opening more accounts, as my “Smile account” goals were numerous! I wanted to save for our next car, the childrens’ education and holidays. A further detailed review on the Barefoot investor buckets are available at Sustainable Living (Check out the video, hilarious!)


-Utilising an Offset Account as Mojo Account

Scott Pape suggests putting your Mojo money in a savings account with an online bank, not your mortgage offset. This is probably the most controversial part of his system, and where many choose to make their own variation. 

Three months of living expenses is a lot of money to anyone, whatever their income. Keeping it in an account earning 0.3% interest means it is losing value against inflation. In a few years, it will cover less than 3 months living expenses because the cost of everything has gone up. 

The motivation behind Scott’s suggestion is to try and protect the reader from themselves. If you’re not looking at that money sitting there, you are less likely to spend it on a non-emergency. 

I don’t know about you, but there is no way I would forget I had that amount of money “hidden” in an account. Most accounts are accessible with a few clicks, so it’s not really inaccessible. 

Most with a mortgage will put their Mojo money/ emergency fund in an offset. 

Learn all about the power of the offset here.  Label it “Emergency” or “Disaster” or something that will remind you it is a big deal to spend this cash. 

You have to learn some self-control with money management. Over the long term this is unavoidable.

-Barefoot Investor Buckets with a Credit Card

Scott Pape is very anti-credit card. Fair enough, with the average Australian holding a balance of $2813 that will take over 6 months to pay off. 

He feels the points and interest free period just aren’t worth risking an interest charges if you miss the payment deadline. This is a perfectly reasonable approach, that many people stick to. 

Nowadays you can use your visa debit to pay for everything, there is no need for credit cards.

But ultra-optimisers love those points and a 55-day interest-free period. They will utilise the automatic repayment option to eliminate any risk of missing a payment. 

I recently paid the school fees on my credit card. I know the theory of compounding interest, but still shocked when I noticed this warning on my statement. If I were to make minimum payments only, this credit card debt would take over FOURTY YEARS to pay back! On ~$4,500 worth of credit card debt!

credit card minimum payment 

Of course, I am in the fortunate position of paying my credit card in full each month without fail. But this is literally daylight robbery. You can see why people struggling to survive on a meagre income could fall into a bad debt cycle, from which it would soon become almost impossible to escape. 

-Barefoot Investor Buckets with Irregular Income

Many of the readers of this blog will have highly variable income, either through variation in out of hours, or total hours worked each month, or because they are self-employed. 

Those with self-employment income need to manage their own tax, keeping tax to be paid ideally in an offset account until payment is necessary.

How do you transfer 20% fire extinguisher cash regularly when you don’t know how much you will get paid? Organising manual transfers each pay based on the income amount would be onerous and annoying. 

Many will be able to average last year’s pay and base the percentages on that. But this still doesn’t account for any extra income that may come in, or those on wildly irregular income. What if this year’s income maybe double, or half of last depending how your business performs (and global pandemics?)

The system is not really set up for this scenario. 

-Splitting Splurge into Two Bank Accounts for Couples

Money is a major cause of marital discord and divorce. Couples need to be able to manage their money so both parties feel valued.

We have very different hobbies outside the kids. What I see as a great splurge purchase, hubby sees as a pile of rubbish and vice versa. Splitting our splurge money into two splurge accounts, one for each of us was essential. It means we can both spend some cash on what we want, no questions asked. When we do things together, we take it in turns to pay or split the bill.

Barefoot Investor Buckets – Great Bits

The highlights of the barefoot investor buckets, in my opinion, are:

  • Separating discretionary spending from essential spending
  • Putting a limit on discretionary spending automatically makes us prioritise what really provides value without feeling like we’re completely missing out.
  • Giving a concrete goal for super savings (increase to 15%) and other savings (20%). Not perfect for everyone, but good enough for most
  • ING account (I love it)

Barefoot Investor – The Problems

The book is really good, but by necessity attempts to create a one size fits all system for Australians. Not everything will suit you.

If you have a mortgage, you really need multiple offset accounts to use as the barefoot investor bank accounts. Otherwise, you are paying unnecessary interest on your mortgage, whilst earning (and paying tax on) interest from a savings account.


An Alternative System: Money Smarts

I have raved about Empower Wealth before. They are a property investment company, and run the hit podcast “the property couch”. They also have a “Money Smarts” online management system that anyone can access for free and have released the book Making Money Simple again. 

As a client of Empower Wealth, I have been encouraged to move over from my 12 (!) bank accounts to using My Wealth Portal. 

I was very happy with my Barefoot Investor buckets and resistant to change.  

I re-mortgaged with ANZ for an investment property. ANZ only 1 offset available, I forced away from my barefoot bank accounts to reluctantly try the Wealth Portal. 

A Simpler Money System? The Portal

The portal is intuitive and easy to use. You do not need to be an Empower Wealth customer to use the platform. 

The system is really made with a purpose of carefully tracking and capturing income surplus, which can then be used to invest. 

I think it would be especially useful for those who want to invest in property and need to accurate calculate they can afford to. Ambitious savers/investors who want to maximise every dollar would likely also benefit. 

Wealth Portal Data Input 

It requires a couple of hours, depending on the complexity of your situation to get all the data in to begin with accurately. It is a time commitment to do this, and you really want it to be as accurate as possible. Nonsense in equals nonsense out. 

You will need to go through past bank account and credit card statements to find out what you actually spend, not what you would like to spend. I do worry it would be quite easy to miss out spending categories completely, or to declare expenses twice due to the categories. 

Wealth Portal – Money Management System

The system is based around you having two accounts (primary and living and lifestyle) +/- a 55 day interest free credit card. 

All Pay Goes into a Primary Bank Account

All pay goes into your primary account (offset against your mortgage).  A set amount of “living and lifestyle” money goes into a second account each week.  Any weekly discretionary spending should come out of this account. 


All Post Tax IncomePrimary AccountCredit cardEssential spend only (bills, direct debits)
  Direct paymentsBills, direct debits
  LoansMortgage, car loans etc
  ProvisionsIrregular provisioned spending eg holidays
  SurplusUnspent cash to accumulate and pay down mortgage/use to invest
  Living and LifestyleDiscretionary spending including groceries
SuperannuationSuper contributions as normal  

In contrast to the Barefoot approach, the living and lifestyle Mojo account equivalent includes grocery spending. Groceries are a grey area – your household obviously need to buy some food, but most of us throw quite a few discretionary items in the trolley at the same time. 

The intention of including groceries in the living and lifestyle budget is to limit this, and as a result capture those extra saving.

Those who feel comfortable with a credit card will pay all the essential expenses they can using it, and have an automatic repayment for the full payment scheduled from the primary account each month. 

A critical point is that no discretionary spending should go on the credit card.

Those who would prefer not to use a credit card simply pay for all essential expenses directly from the primary account.  

You can set “Provisioned” spending on the portal to be taken from your primary account. This includes lumpier spending, such as the annual budgeted holiday.  

Discretionary / Essential Grey Areas Not Included

Groceries are included in the living and lifestyle / discretionary account. But there are other grey areas that are not considered. 

Fuel to get to work is necessary, but repeated long-distance travel for camping or other leisure activities is discretionary, but under this system will be included in essential spending. 

Similarly, basic clothing is essential, but upgraded spending on a nicer sweater than the “base model” is discretionary. 

Groceries are likely to be the most regular area of discretionary overspending. The other grey areas will be captured within the primary account budget, but not have a similar level of attention as grocery spending.

Those trying to capture a surplus in a tight budget may benefit from examining these grey areas more closely, particularly if they’re prone to over spending in these categories.

Wealth Portal – Surplus Target

Once you enter all the initial data, a simple dashboard displays your income, expenditure and target surplus, per month and year. The goal is to match or beat your target surplus. 

If your target surplus is inadequate for your goals, you get to examine ways to increase the gap between income and expenses.

The portal then has a “Money Fit” section where you can compare your situation with other participants who have entered data on the system. This is good for identifying areas in which you spend more than the average.  

The “Money Stretch” section then lets you input data from the platform to get a visual representative of how long your savings would last should your income be interrupted.  

My Wealth Portal – The Great Bits

I think with any money management system like this, the benefit you receive is dependent upon the effort you put in. In this case, it is mostly upfront effort and then only a brief monthly entry to update the system on the balances on your accounts and credit card. 

It will likely take me a while to get used to, although I can already (I hate to admit) now see the benefit of having almost all the cash in a single savings account (offset in our case). 

I had been concerned having a large amount in one account may make me feel wealthier and subconsciously spend more. 

But actually, so far, I find myself motivated by being able to see clearly the progress made towards fully offsetting our own home mortgage.   

The best parts of this system in my opinion are:

  • Separating discretionary from essential spending
  • Great for data nerds (ahem) who like to see a visual representation of progress towards goals
  • If you put the effort into maintaining accuracy, excellent at finding that little extra surplus cash needed for investing
  • Manageable with a single offset or online savings account

Simplest Money Management?

This is for those not wanting to put in a huge amount of data (either for privacy or hassle factor). 

If you just want to simply manage money effectively and save a decent amount, despite income variation, can I suggest a very simple system inspired by the two systems above?

Ask your work to put a set amount of discretionary money into a mojo account (you can then direct debit half to your partner if you would like to separate your fun money). 

Separating your discretionary from essential spending will help you stop accidentally absorbing any extra pay, such as the extra net pay your receiving from the 2021 tax brackets changes.  

Ask your work to put the rest into your primary account.

All post-tax income

All post-tax income

Fun money account? 10%

Coffees, nights out, can be combined or separate for couples


Primary account/ offset

Emergency fund – Account should never dip below the value of your emergency fund


Investment amount? 20% – direct debited out to your share portfolio or investment mortgage


Living expenses (bills, food etc) +/- credit card for essential purchasing only


Short term savings goals  – track in Excel (eg $200/fn towards next car)


Optimise up to $25,00 annually


Direct debit 20% (or however much you need) of your income out of your primary account into an online savings account or investment of your choice (or superannuation).

If you have short-term savings goals (for example saving for a holiday), you can keep your cash in the primary account / offset and keep track of is using a simple excel document.  

You may need to reduce living expenses and/or fun money, or increase income to make meeting these shorter-term goals possible.  

Use your primary account / offset or a credit card that is paid off automatically each month from this account to pay all direct debits, bills and living expenses. 

Aim to keep your balance above your emergency fund target (3-6 months living expenses) at all times. If it dips below, urgent action is required to increase income or cut spending to restore.

You can use an expense tracker to track your spending on categories such as groceries, and budget a certain amount each month, or just monitor for changes in spending.       

Which of the above systems do you prefer? Do you have a different approach? Comment below to help others looking to manage their money effectively. 

Aussie Doc Freedom is not a financial adviser and does need offer any advice. Information on this website is purely a description of my experiences and learning. Please check with your independent financial adviser or accountant before making any changes.

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