The Barefoot Investor ‘Buckets’ and ‘Accounts’ explained

The Barefoot Investor by Scott Pape is a financial plan followed by thousands of people around the world. We explain how to structure his unique buckets and accounts in this Barefoot Investor summary guide.

Millions of readers have discovered the fantastic book The Barefoot Investor by Australian Scott Pape and have applied his financial plan to their own money journey – with life-changing results. You’ve probably heard of it. Specifically that it has a few buckets and more bank accounts.

Maybe you want to join the FIRE movement, or find a system of saving for that six-figure house deposit that both you and your partner can understand? If you’re looking for a robust financial plan to help you take control of your money, we encourage you to read this post and get a copy of the book. There are also plenty of videos online explaining the system – we found this one especially helpful, so check it out!

In this article we’re going to break down The Barefoot Investor approach by first looking at the buckets and their accounts. Then we’ll give an overview of how your money flows through them and creates wealth.

  1. What is The Barefoot Investor approach?
  2. The three Barefoot Investor buckets
  3. Setting up The Barefoot Investor bank accounts
  4. The flow of money through The Barefoot Investment buckets

You can read our article on how to track The Barefoot Investor bucket system in PocketSmith here.

1. What is The Barefoot Investor approach?

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.

When it comes to financial success, control is key. The Barefoot Investor approach helps you structure your accounts and improve the way your money flows from income to investments.

In essence, the approach pushes you to reduce your daily expenses and create a surplus. That surplus first goes towards paying off your debts before growing your net worth. Your income flows through three groups or ‘buckets’. Once one fills up, the overflow fills the next one. That, in a nutshell, is the entire financial plan contained in the book — simple but elegant.

2. The three Barefoot Investor buckets

Before we get to the structure of your bank accounts, it’s important to understand the three buckets of The Barefoot Investor approach. The first bucket is for your daily expenses (Blow), the second for your emergency fund (Mojo) and the last is where you build long-term wealth (Grow).

Your money flows from one bucket to the next when accounts within the bucket fills (meets criteria) and spills over. Let’s start by looking at those three buckets in detail:

BLOW – The everyday bucket

100% of your income enters here. This bucket is to run your day-to-day life. It pays your rent, food, bills, debt, and saves for holidays, big purchases and fun activities.

MOJO – The emergency savings bucket

This bucket is your safety money or emergency fund. The idea is that it will replace your need to take on more debt or a credit card. This bucket get’s it money from the Blow bucket, and with time it overflows to the Grow bucket.

GROW – The investments bucket

This is where you will build your long-term wealth and increase your net worth. The money for this bucket is the overflow from the Mojo bucket.

A diagram showing the breakdown of Barefoot Investor buckets - Blow, Mojo and Grow

3. Setting up The Barefoot Investor bank accounts

For your money to flow through your buckets you’ll need to have a series of bank accounts – five to be exact. Don’t worry, only two of them will need a debit card. The other three can be online accounts.

Ideally, you’ll host your money with a bank that offers you accounts with a zero card and ATM fee, good interest savings accounts, and online-only accounts. These vary from country to country. In The Barefoot Investor book it recommends using ING if you’re in Australia.

Once you’ve chosen your bank it’s time to look at the accounts you need. Overall you’ll need to open two debit accounts and three online-only accounts with good savings interest rates. These five accounts will allow your money to flow through the three buckets.

Let’s take a closer look at the five accounts, in their buckets and their specific purposes:

BLOW – The everyday bucket

The Blow bucket consists of four accounts and covers your everyday expenses, fun times spending, saving for bigger purchases and paying off your debt. Each of those accounts look like this:

Account 1: Daily Expenses

An everyday transaction account with a debit card that gets 60% of your income. Use this account to pay for your regular daily expenses like rent, utilities, regular bills and groceries. The trick here is to keep all your expenses under 60% of your income.

Account 2: Splurge (or Fun Spending)

An everyday transaction account with a debit card that gets 10% of your income. This is your account for fun purchases and social activities. Use it for social meet ups, nights out to the movies or save it up to buy a new pair of shoes.

Account 3: Fire Extinguisher (or Debt Reducer)

An online account that gets 20% of your income. This money is for fighting financial fires like any existing debt or bigger non-regular bills such as repairs and maintenance. Money does not sit in this account. It moves through on its way to paying the bills you have. If there are no debts or bills to pay, the money spills over to the Mojo bucket.

Account 4: Smile (or Adventures)

An online account that gets 10% of your income. This is a long-term savings account for big purchase goals such as a holiday, new computer or updating your car.

A diagram showing the four bank accounts that need to be set up under the Blow bucket for the Barefoot Investor approach

Mojo – The Emergency savings bucket

The Mojo bucket is where you hold your safety funds and save up reserves for the Grow bucket. It consists of one bank account, with a minimum of $2000 in it. It acts as a replacement for your credit card in unexpected or emergency situations.

It is highly advised that you have this account with a different bank to prevent you from spending the money in it on things covered by the Blow accounts. However, you can choose to keep it with the same bank as your Blow accounts – you’ll just need to practice a little more discipline.

It’s important to open this account with the $2000 minimum. You might have to pick up a side hustle or sell a few items to get the funds. It will prevent you from taking on future debt. The rationale is that without debt, your Mojo bucket will keep growing.

Account 5: Emergency savings

An online savings account held at a different bank with an opening balance of $2,000. Any leftover money in your Fire Extinguisher account spills over to here. The intention is that over time, the amount in this account grows until you have three to six months of income, which in turn then spills over into your Grow bucket.

Grow – The investments bucket

Once you have reached your lump sum target in your Mojo bucket, use that money to invest in your net worth. Your investments can be anything of your choice. A good place to start is a retirement fund but you should also consider long-term savings accounts, shares, currencies and property investments.

4. The flow of money through The Barefoot Investment buckets

The goal of The Barefoot Investor approach is to generate long-term wealth. To get there, your money needs to flow through the three buckets by filling the first two until they overflow into the Grow bucket.

Money overflows from Blow to Mojo when there are no debt or bills payments for your Fire Extinguisher account to make. Either the full 20% or what is left over moves to your Mojo (Emergency fund). That continues to collect in your Mojo account. Sometimes you’ll need to use your Emergency fund and it will reduce. That’s okay if it means you’re avoiding taking on any debt.

Your Mojo bucket overflows when it has built up three to six months’ worth of your income. You can choose what you want this point to be. From there, it moves into your Grow bucket and you can put it towards investments and long-term wealth.

A diagram showing how money flows through the Blow bucket to the Mojo and Grow buckets in the Barefoot Investor approach

The only money guide you’ll ever need

Many readers have achieved amazing results by following the Barefoot Investor system — for young families looking for a straightforward guide to achieve financial freedom or simply improve their bank balance in the short term, Scott Pape’s money guide has proven to be a game changer. Many finance books make the bold claim that their system can produce life changing results — but in this case, there is plenty of proof behind the claim, as the many loyal followers of the book can attest.

Gain control over your money

When it comes to financial success, control is the key. The Barefoot Investor approach is a financial plan that will help you structure your accounts and improve the way your money flows from income to investments.

Personal finance management software like PocketSmith helps you run your financial plan smoothly, saving you time and giving you control over your money.

Keen to understand if PocketSmith is right for you? See how we support users in Australia and New Zealand to access live bank feeds across more than 200 institutions.

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