wallet26th May 2016 – 

This week’s article comes from an unexpected source. However, my guest writer has asked to remain anonymous so even under threat of torture, I can’t reveal who he really is.

What I can say is that he is well respected and has many years of experience providing financial advice to both private clients and to the world in general through various social media forums.

And this week, he’s sharing his thoughts, with us on creating ‘systems’ for saving, reducing debt, and being smart with your stash while still allowing yourself to have a life as well.


For me it’s simple

For me it’s simple – work, spend less than you make, put the extra aside, when that pile is big enough – stop working.

Of course it’s simple now. After finally getting my shit together. I was a late bloomer. I lived pay check to pay check until I was 30 and now a handful of years later – I’m a financial planner with zero debt, my own place in Thailand and a growing 20k stock portfolio. If it were a competition I’d surely lose compared with those my age – but lucky I just have to beat the yesterday version of myself. And I’m smashing that clown.

Something that helped me sort out my money was to set up systems that tied my thinking of my finances and my reality together. It’s so easy to trick yourself in life, but numbers don’t lie.

By this, I mean so many people think they spend X amount on food/fun/hobbies and that they save Y amount. But so many of those same people also chuck everything on a credit card and pay the bill off every month. Sure they still have money left over but I don’t think they will count every transaction and hold themselves accountable to their spending.

Alternatively they use a debit card and pay everything from the one account. Again – not ideal.

“Fun/blow” money is one the easiest ways to lose money but also the easiest problem to fix.

“I spend $150 on fun” he barked over a latte and sucking on a Jaffa.

That’s pretty tidy.  That equals $7,800 a year. Still plenty of room to save with the smallest of pay-cheques.

But go over this by $40 every week, which isn’t hard to do, and it’s up to $9,800.

An extra $2,000 you could have used to travel/invest/fix that emergency. What if you saved an extra $2,000 for the next ten years on top of your current savings rate? I think you get the point.

And this number goes up exponentially of course. It’s not hard, in Australia, to spend an extra $150 each week, just go out with your mates on Friday night for two drinks and a muffin.

One way to hold yourself to your fun money number is to take that out every pay, in cash. Put that in your wallet. That’s your fun money. Once it runs out – guess what? No more fun. Such a simple concept but it’s quite scary the lesson it can teach you.

It’s so easy to blow money and you can quickly use your $200 fun money without realising it. Monster at the servo, Maccas meal, frog magnet at the market. The $200 becomes $88 before you reach Friday when it’s time to actually spend it.

The first time I tried this method I never made it to the end of the week for about one month. I remember the first time I ran out of fun money on Friday and payday was Tuesday.

Now here’s the key move.

What do you do when you run out? Do you say “Whoops” and take out more fun money and promise yourself to do better next time?

No don’t be ridiculous why would you think that?

Would you do that with a child if you were teaching them a lesson in consequences?


You hold yourself accountable.

In the case of myself – I stayed home all weekend and went out without spending money. There is usually food in the house and hopefully you have internet/a tv.

The two days of boredom and your self-made reality will  help you more than anyone telling why you should stick to your budget. Your experience and discomfort will teach you.

Common sense still applies – don’t eat mee goreng noodles for 6 days and give yourself cancer. Also, don’t miss a job interview because you can’t afford fuel. But eliminate all “fun/extra” activities once it’s gone. You are now just living like a peasant until you learn better. Let’s say a Chinese peasant in the Qing Dynasty to really paint a picture.

If that’s your fun budget then stick to it, maybe you need to stop eating out during the week if you want to party on the weekend? Or if you think it’s not enough – do you want more fun money? Are you happy to up it to $300 or $400 a week? That’s getting up to $15,000 and $20,000 a year.  Most won’t be comfortable with that amount being wasted on burgers and bracelets, lattes and parties.

So unless you stick to your budget – that’s exactly how much you’ve been wasting for years. That’s why you don’t have any savings after working for 10 years right?

We all get busy and caught up in actually living our lives – so a system that is easy to manage is essential in my opinion.


My system is simple.

Get paid and split that bad boy up immediately. Immediately! Pay day is banking day.

So with my pay I split it accordingly.

  • transfer money I need to invest/save into Ubank
  • transfer money for bills into separate sub account in NAB
  • go to atm and withdraw my fun money for the week/pay period

This is a simplistic overview of course, you may have different categories and goals but the key is you know you can safely spend whatever is in your wallet/purse.

You can blow and there will be no negative consequences.

Bills are paid, money is being invested and you’re moving forward.

Please note, if you are still in debt I imagine your investment money would be used instead to pay off debt or build up your emergency fund to a 3-6 month level. In this example I’m assuming zero consumer debt and a full stacked locked and loaded emergency fund.

Once you are out of “bad debt” (i.e. not your house) and have an emergency fund built up, this basic system is beautiful. When you spend less then you make and save every pay you really wonder why you didn’t before .

It’s so simple. Every day that I work I’m better off than the last. My “pile” is growing and I’m one step closer to the day that work isn’t an option.


Let’s put it into reality.

How many days did you feel knackered after work? How many weeks did you return home a zombie? How many shit bosses did you put up with? It seems mental to have nothing to show for it. Literally in the same position financially – this is all too common for the first 10-15 years of work.

At least when you are saving each pay you are getting some benefit from it. The end result being a paid for house or a nice income stream from dividends. Or ultimately, the need to not have to work if you don’t feel like. Which I assume is why you’re reading this.

So stop using your credit card and paying it off, stop using one big pile and sorting it out later. That never works. Make your spending a controlled physical reality – handing over cash.

To change the topic slightly. Let me touch on something that I think a lot of people miss out on.


Unexpected money.

So you’ve done your budget and you know how much you can save/invest/spend/travel with – great. Your budget is made with your pay-cheque in mind.

So what happens when you get a $500 tax refund, or a $60 scratch-it win? $80 from ya nan? You view it as free money of course.


“Hey I can blow this money. Right? I didn’t earn it.”


By that logic you should never reinvest your dividends – just take them and blow them each quarter.

Whatever your financial goal is you know how much the little things add up. Tackling a debt $20 a time, growing your wealth through compound interest – it’s really the little amounts applied regularly that do the damage. We see it in our Super – people save a million dollars without even trying. Super perhaps a topic for another article.

So what to do with your unexpected money? You need a plan for it. You wouldn’t have starved without it – you would have kept living your life as if nothing happened.

So use it.

Use it to speed up your plan. Gain more traction and motivation.


Let’s get down with some real life examples.

In one year – a bog standard year. What kind of unexpected coin can you expect?

Let’s run a hopefully believable scenario.


Receive $300 in a tax return

Win $30 on instant scratch it.

Sell things on eBay for $200.

Found $20 on the ground in the toilet.

$50 in change you saved up in a piggy bank


We’ve got a cheeky $600 here.


That’s without even trying. Ideally you would put 100% of this money into something good – home loan/debt/stocks. But even if you put 50% it would still help. It would still reduce your home loan by months, pay off your credit card few weeks early and it would become $4,874 after ten years (hypothetically depositing $300 a year getting 9% on average).

Have a plan for it. Your goals are set based on your income, so use the opportunities of unexpected coin to get ahead when you can. You might break-even as there could be something to set you back later. Just don’t waste it.

I have seen to clients choose a tasteless cereal to save $20 then flutter away $100 after a cheeky casino win. If you’re not in crazy hard-core mode then save half. That’s the general move. Half for you, half to save.

When I started doing this I saved an extra $700 in a 6 month period. Granted I was saving 100% of it mostly, but it’s amazing how much money actually passes through you when you pay attention and try to hang onto some of it.

So get amongst it, go old school with your finances and see yourself get ahead. Credit cards, pay-pass and direct debits aren’t made to make our lives easier – they are made to detach us from our money so we spend more. So do what your grandma did and carry money around. Don’t go so old school that you contract the bubonic plague – but just enough to save.

While these ideas may seem simple and even patronising it really is the key you need. The client that sticks to their budget and saves an extra $100 a week will rise above his equal – even if the equal had a better investment rate. Hell you could get to a million faster than others just saving enough under your pillow if it was high enough.

Obviously you need to do both – a high savings rate and a great return.

But you need to master the first before you tackle the second. I hope this article can help with you that.


Readers, what systems have you put in place to keep your spending on track? Do you have ‘blow’ money stash set up for entertainment spending? Tell us about it in the comments.

16 thoughts on “Guest post – It’s all about having systems”

  1. I put everything on my credit card, pay it off every month – recently we started going through our credit card line by line and sorting the charges (I have been posting it on my site for visibility/accountability)

    I do employ your system on payday – everything is auto transferred to the respective account – same day.

    I use a savings rate goal instead of a budget, auto transfer enough to hit the goal, whatever is left, we spend ( guilt free)

    1. I’m pretty much the same AE. Everything gets paid by credit card (think of the points) which gets paid off every month. Like you, I have a pretty good handle on what I’m spending and on what so don’t keep a budget. I go through each line several times a month and check that each charge is authorised and correct so again, I keep a constant overview of where my spending is going rather than taking a hands-off approach that I think gets many into trouble.

  2. I get paid weekly. I know what bill or debt or savings each check is destined for. I treat most “discovered” money the same as earned money.

    1. Yep, it’s all about having a system that works for you. There’s a ton of advice out there on different methods of budgeting, spending, saving etc. It’s all about adopting what is best for your circumstances. Thanks for the comment.

  3. Paid monthly. $5k directly into shares and pay the monthly bills (only really rent and utilities). Whatever is left I spend… Wisely. Like the others, I have a good grasp on my spending so can maintain 60+% SR each month

      1. Thanks. It depends. I seldom get large amounts of unexpected money, but it varies. For example I won a $1500 award at work which coincided with moving house so I needed a new fridge etc, so in that case I spent it. But my end year bonus which may be eg $10k I’d put straight into ETF portfolio.. So long as I maintain my $10k emergency/dry powder, anything extra into ETF. But nothing less than a $5k chunk due to brokerage. I’m very content if I’m investing that $70k a year and spending $30k, and don’t feel I’m depriving myself.

        1. Thanks for sharing that with us, Leigh. Don’t you hate it when you receive a chunk of unexpected money and then the next minute an unexpected expense takes it all away again!! Hate that.

  4. Nice article. in our budget, we do similar things. Except for the cash withdrawal of the fun money.

    The part that stands out: ” but lucky I just have to beat the yesterday version of myself.” I have always known that I do not need to compare myself with the people that FIRE at age 32 or 35. This little phrase made it crystal clear to me that the only one concerned, the only one to beat is myself.

    1. Hi there ATL and thanks for your comment. Great to have you on-board. At the end of the day, the only one to benefit from reaching our FIRE goal is ourselves so if we cheat, we’re only cheating ourselves aren’t we.

  5. I do use a credit card for almost everything. But for me, the key is to pay myself first. I automatically deduct my savings before spending. Then I can spend the rest on whatever I want. I don’t need to worry about living within the constraints of a budget.

    1. Sounds like a good system FS. How do you do this? On a month by month basis or payday basis? What do you you do with surplus cash if you haven’t spent it all at the end of the allocated period?

  6. Just as a side note. I do track my spending so I know where my money is gong and for what. But my spending account generally hovers anywhere from $2.5k when I’ve been paid down to $500+ toward end of pay. I just keep a general eye over it throughout the month. That surplus cash at end of month I just keep there and cycle continues

  7. A very good explanation how easily things can be changed to make your budget better. Another good point is that you are only racing yourself to FIRE. Everyone else has had different lives to get to where they are, it doesn’t help to compare, except to be motivated to do well.

    We have a budget, and we also track what we’re spending. However, at the moment we are trying to reduce what we are spending so much, we have very few other expenses other than the necessities.

    We are very aware of what compounding can do for our wealth, hence why we have started at a reasonably young age, hopefully it works.


  8. Systems are the key. When I fall out of my routine it all goes to hell. My system is probably a bit convoluted but it works for me, you know?

    1. Hi NZM and welcome to my site. Yeah, that’s the whole point of this article is to create a system that works for you and then stick to it. Little modifications along the way are ok but if you don’t have a system, or process, it’s almost impossible to be disciplined enough to achieve your goals. Thanks for your comment.

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