The Barefoot Investor Buckets method

In 2016, Scott Pape released The Barefoot Investor in Australia. Now, it’s estimated that more than one in 20 households has a copy. The book sold over two million copies to the country’s population of just 26 million, and has transformed the way people view money management and wealth accumulation. While the book takes readers through a comprehensive guide to building financial freedom and managing household finances, it’s Scott’s signature ‘buckets’ method that has become part of the Australian financial vernacular. In this guide, we share everything you need to know about The Barefoot Investor Buckets system, and how to implement it into your personal finances.

What is The Barefoot Investor Buckets method?

The Barefoot Investor Buckets method is an approach to building long-term, sustainable wealth. Unlike many budgeting methods that teach you how to organize your money, The Barefoot Investor method is a full ecosystem that grows with you over time and acts as a wealth building structure.

The method recommends splitting your total income into three buckets, within which you have further sub-categories linked to specific bank accounts. The three buckets are:

• Blow bucket: This is the money you spend paying expenses and enjoying life
• Mojo bucket: This is the money you save for a rainy day
• Grow bucket: This is the money you invest for the future

Within these buckets sit your sub-accounts:

Blow bucket accounts

• Daily expenses: This is your everyday account from which you’ll pay rent/mortgage, bills, food, etc.
• Splurge: This is a set amount you reserve for fun activities, socializing and non-essential purchases.
• Fire extinguisher: This is money allocated to putting out fires, like paying debts and larger bills.
• Smile: These are long-term savings for bigger purchases, like a car, holiday or wedding.

Mojo bucket accounts

• Emergency savings: This is a pot of money allocated to a rainy day. Ideally you’d work towards having 3-6 months worth of expenses in this account, and keep it with a separate bank so it’s out of reach. However, to begin with, it’s recommended that you start with $2,000 in this account.

Grow bucket accounts

• Retirement account: Your Grow bucket is money you’re investing in growing your net worth, and a retirement account is a commonly chosen account in this bucket.
• Other investments: You may also have other investments like shares or property that you separate within your Grow bucket.

But the buckets are not just categories or accounts — they make up their own system.

Pape’s system gives readers a clear structure to follow, with many of the “what about…” questions answered within the system itself. The flow of the buckets is unlike any other famed money management method, and it’s a system that you can implement once and expand as your finances evolve.

How the buckets work

The idea is that your money flows into your Blow bucket, then overflows into your Mojo bucket, and then eventually into your Grow bucket. Rather than allocating a certain percentage of your income to each bucket in the same way you would with the 50/30/20 budget, you first put all your money into the Blow bucket, and once your needs are filled there, you allow your money to overflow into your other buckets.

Here’s the skinny:

Pros and cons of The Barefoot Investor Buckets

Just like all budgeting methods, there are pros and cons. Let’s take a look at some of the upsides and downsides to Barefoot Investor Buckets.

Pros

• It’s not just a budget, it’s a wealth accumulation method. Unlike some other less advanced budgeting methods, like the 50/30/20 rule, the buckets method goes one step further. By not only giving you a system to manage your money, but also grow it, you’re given a complete solution to keeping your finances on track.
• Grows with you. The overflow nature of the buckets helps you prioritize your financial goals. You’re guided to first build up an emergency fund, and then move onto growing your wealth once there is a surplus of money to flow to your Grow bucket.
• Emphasizes planning for unexpected costs. Both the Mojo bucket and the fire extinguisher fund of the Blow bucket prompt you to prioritize minimizing debt and saving for a rainy day, while still leaving some money for spending in your smile and splurge funds.
• Reduces reliance on debt. The system is designed to minimize your need to take on debt to cover life expenses, which helps you keep making financial progress even during tough times.
• Prevents lifestyle creep. Lifestyle creep occurs when we inflate our lifestyle at the same pace (or faster) than our income, leaving us with little to show for any additional earnings. The Barefoot buckets work on percentages, and encourage overflow from one bucket to the next, minimizing temptation to overspend and surplus income. This can help prevent lifestyle creep and allow you to use any surplus of income for furthering your financial position.
• Shifts your priorities for you if your circumstances change. The flow of buckets system means that you always know where your money needs to go. If you run into an emergency and use half your emergency fund, you can simply replenish it using the flow of money coming through the buckets.
• Promotes a goal-achievement approach. Setting goals like paying down debt with your fire extinguisher fund, or hitting your 3-6 months worth of expenses in your Mojo bucket, helps you build momentum. It can be very motivating to see your financial stability start to solidify.

Cons

• It can be a big leap for first-time budgeters. The system is designed to be simple, but for budgeting beginners who aren’t used to managing their money, it might feel overwhelming at first.
• Percentages in the Blow bucket don’t work for everyone. The method recommends 60% of your income go towards your everyday expenses like rent, bills and mortgage, 20% to your fire extinguisher fund, 10% to your splurge fund and 10% to your smile fund. While these provide a good starting point, it can become complicated if you overspend on splurge and smile, or if your living expenses push beyond the recommended 60%.
• Can be complex for couples. While in many ways the Barefoot buckets work well for managing a couple or family’s household finances, some users say they and their partner disagreed on how the flow should work. If you’re implementing the system as a couple, take time to talk through your own thoughts and feelings towards how it works and consider making adjustments so you’re both comfortable.

The brain bit: The Barefoot mindset

The Barefoot Investor Buckets have been a huge success for so many people. The book broke records in Australian non-fiction publishing and many people attribute their financial transformations to Pape’s teachings. But what is it that makes the system so popular, and why do our whacky human brains love this system so much?

Our brains are tasked with processing millions of pieces of information per day. And when it comes to our finances, it can be overwhelming to know where to start. Pape’s system gives readers a clear structure to follow, with many of the “what about…” questions answered within the system itself. The flow of the buckets is unlike any other famed money management method, and it’s a system that you can implement once and expand as your finances evolve.

Unlike the zero-based budget where every dollar has a specific job, the buckets method creates an ever-moving ecosystem. Every dollar not only has a job, but a place to be and a role to play in your overall financial position. This can be incredibly satisfying for our brains, and create a hit of dopamine each time money is able to flow from one bucket to the next. The sub-goals that sit within the buckets, like paying down debt or bills with your fire extinguisher fund, reaching your target in your emergency fund, and starting to invest for your future in your Grow bucket, help to ground you in the progress you’re making and build forward momentum. The system manages to simplify the complexities of long-term financial planning for the everyday person, meaning users feel like they understand what they’re working towards and are therefore more likely to stick to it.

How to get started with Barefoot Buckets

To get started with the Barefoot Investor Buckets, you’ll need to ensure you fully understand the flow of the system. Get clear on your finances first. Look at what accounts you currently have, where money is coming in and out of, any debts or liabilities you have outstanding, and where your money is going. This will give you the information and awareness you need to start implementing the system.

Next, it’s time to organize your accounts. You’ll need, at a minimum, the five accounts recommended by Barefoot system:

Then, start working out your income percentages. How much will you transfer to each account? You’ll also need to make sure your bills and expenses are set up to come out of the correct account — this can take a little admin, but it’s worth it.

Barefoot Buckets 🤝 PocketSmith

The Barefoot Investor Buckets can be seamlessly integrated into your PocketSmith account using categories, budgets and net worth tracking.

• Your categories will help you understand how to organize your buckets
• You can easily view your account breakdown within each bucket
• You can create budgets within buckets to see how you’re tracking
• You can track your net worth as you start to build your Grow bucket
• You can even customize the Buckets system to work for you and your expenses, by creating new categories or editing your budget as you go.

In fact, we’ve got a helpful guide on how you can implement the Bucket system into your PocketSmith dashboard.

Barefoot Buckets: How to nail it

We want you to crush this new budget of yours, so here are our top tips on how to nail it.

• Automate your system where possible. Automating the flow of your money can help make your buckets feel effortless. While there’ll need to be a certain degree of manual movement of overflow money when it moves from one bucket to the next, you can automate your Blow bucket transfers as soon as your money hits your account.
• Set goals. The system prompts you to set a goal for your emergency fund, but it pays to set other small and large goals, too. Whether you’re trying to reach a certain amount in your smile account, or you want to set a target date to pay down debt, setting a goal and monitoring your progress can be incredibly motivating.
• Build a long-term mindset. A long-term mindset is key to staying the course with the Barefoot system. The beauty of it is that it helps you start setting yourself up for the future — but a long-term approach is needed to keep putting one foot in front of the other for your future self.
• Review and adjust often. Changing expenses, interest rates and life circumstances can throw off your percentage allocations in any budget. It’s important to review your numbers often and make sure that the system is still working for you. If it’s not, you can make adjustments.

Barefoot Buckets: How not to fail it

The opposite of nailing it? Failing it. Here are some potential pitfalls to avoid.

• Don’t be too rigid. The system is built to be plug-and-play for anyone, but being too rigid with the percentages can lead to missed opportunities or unnecessary struggles. If your essential expenses are higher than 60%, tweak the system to make it work for you. Likewise, if your expenses are lower, don’t overspend for the sake of it. Be open to adjusting the system to move more or less into other buckets.
• Educate yourself on investing, or get professional advice. The Grow bucket is where many people can get stuck. Allocating the money to investing is one thing — actually investing is another. The Barefoot Investor book takes you through simple investing concepts, so it’s worth a read. But it also pays to do your own research, and in some cases, get professional advice from a financial advisor.
• Consider your own emergency fund needs. The amount you need saved for emergencies varies based on your own needs and responsibilities. Be sure to spend time working out exactly what you’d need to pay for if your income or ability to work was interrupted.

The PocketSmith verdict: 4.5/5

We’re big fans of the Barefoot Buckets here at PocketSmith. It helps you organize your money in the now, while also preparing for the future. Plus, it’s the GOAT for teaching you financial prioritization.