The book in a few sentences

It's a personal finance book that is aimed at the average Australian. It's a pretty short and practical book about implementing financial strategies and is centred around a 10-step plan.

High-Level Thoughts

I found this book to be a great entry point to personal finance. Scott (the author) outlines a 10-step plan that is quite focused on saving money. There are a few points on negotiating a higher salary, lowering cost and getting better credit scores but the majority of the book focuses on getting your spending in check.

Who Should Read It?

• An Australian who is new to personal finance
• Anyone wanting a better savings plan

Who Shouldn't Read It?

• If you have read other personal finance books, there are a lot of repeated concepts in this book

How the Book Changed Me

I have implemented some of the strategies in the book. Like getting a virtual bank with a higher interest rate and no account fees. Or switching to a super fund with lower fees.

But the strategy that I have found the most helpful is bucket sorting my savings. I use to think that I only need to have one savings account. The book has since taught me that I should have savings accounts with different purposes. Like a savings account for buying a house, going on vacation and even luxury spending.

Summary + Notes

Step 1: Open New Back Accounts, Up your "Super" fund and figure out your insurance

Open new bank accounts

So Scott advises you to do a bit of research and pick a bank with a high-interest rate and no account fees.

Even if the interest rates change later, as long as your bank isn't one of the lowest, it is still worthwhile to stick with them. Unless you don't mind the trouble of swapping banks every few months

In your bank of choice, create multiple accounts for different types of expenditure

• Day-to-Day: Daily expenses
• Treat: nonessentials that you enjoy
• Happy: Long-term purchases that take time to save for
• Fire: Pressing needs, like paying off debt or saving for a home
• Backstop: In case of emergency

Try to make your Backstop and Happy bank account a bit harder to reach so that you won't be tempted to use the money in them

Up your Super Fund

In Australia, it is government-mandated that 9.5% (would be more now) of your income should go to a Superfund account which is the equivalent of a Roth 401K in the USA. It is your pension.

The main issue around Super funds is that there are many choices out there. Each with its own fees (visible or hidden) and costs.

The book recommends a 2 step approach. First, research low-cost super funds then for each fund, find their associated fees.

Normally found in their Product Disclosure Statements (PDS), anything more than 0.85%, you should switch funds.

I found this to be a pretty useful tool: YourSuper comparison tool | Australian Taxation Office (ato.gov.au)

Figure out your Insurance

Insurance is a tricky piece of concept for people to think about. You can either over-insure or under insure

But the book recommends two pieces of advice when thinking about it

if losing the item to insure (like your car) won't affect your financial situation, don't insure it.

And if you must insure it, try to negotiate your annual insurance premiums down.

Use the fact that companies want to retain your business, so if you have been with them for a long time, use that as leverage.

Maybe threaten to switch providers to see if they are willing to bring it down.

Step 2: Create Your Napkin Plan

Before you do any of this, you should have at least 1-3 months' worth of cost in your savings account for a rainy day. If you don't save that up until you do, then move on to this plan.

Allocate your take-home pay to the bank accounts you created, preferably automate this.

Try and allocate no more than 60% of your take-home pay to your expenses

These are your essentials like bills, rent, food, transport, etc. Then the remaining 40% of your pay should be distributed like this :

• 10% into your Treat account
• 10% into your Happy account
• 20% into your Fire account

depending on how much debt you have or what saving goals you have, it might be worth changing the percentages to meet those more/less aggressively

Step 3: Get Rid of Debt

List your debts to gain some clarity on what you actually owe

Renegotiate your interest rates when you have built some rapport with your banks

Get rid of your credit cards, Australia doesn't have a credit score system, so credit cards do more harm than good

Pay off your debts one at a time, not all of them at a time.

1. Try paying off either the smallest one or the one with the highest interest rates first
2. When you do, go out and celebrate to reward yourself
3. Rinse and repeat

Step 4: Increase your income

Nail Performance Reviews

• Set goals and targets and make sure you meet them.
• Use those as leverage to negotiate higher pay.

This I find to be quite rudimentary advice because I think everyone knows this at this point. Plus, it may not be that easy to set goals and targets at work

Transition

• If they don't want to do that, consider transitioning. Most people fear transitioning because they grew comfortable but changing companies can actually net you a higher income

Again, I think this is quite well-known at this point

Step 5: Save Up to Buy a Home

Buying a home offers a stable foundation and could be one of the best investments you make in your life but it is also one of the most stressful ones.

here are some thoughts around buying a house and be sure to run the numbers as thoroughly as you can first before making any decisions.

You tie up your income, so you can't invest and have loose cash around

You also tie yourself to that country for awhile too

Save for your target down payment first before looking and use that as your "budget"

Take your target down payment and add 20% of that to account for any phantom costs.

Try to aim for at least a 20% down payment to avoid any Lenders Morgage Insurance cost

Aim for a home where the monthly payment is less than 30% of your take-home pay. Take more and you run the risk of not paying them

Step 6: Cultivate your Long-term Investments

The book recommends investing after buying a house but I think you can do both at the same time. You might have to save a little longer is all.

Invest in shares and bonds with any extra income you have after paying off all your debts

Be as diversified as possible.

Up your employer's super contribution to 15% instead of 9.5% because you lower your taxable income too.

Step 7-8: Increase your Financial Security

Start saving for 6-12 months of emergency funds

Try and pay your mortgage off faster by dedicating more money to it

If you own > 20% of your home, call your bank to try and negotiate a 0.5% discount on your interest rate.

Step 9: Plan for Retirement

Use the 5% rule as a starting point for how much money you are going to need.

which is assuming you draw 5% of your super every year, and you don't work. how much would you need to survive?

Or just keep working, which could be one of the best things to do for a person's mental health, plus you will be less bored.

Final Thoughts

I found this book to be pretty good. It's a short read and the advice is quite practical even if the advice around negotiation and savings is quite basic. The biggest takeaway I got from this book was the advice about the super funds and bucket sorting my savings.

Notes Disclaimer

Anything written here is extremely opinionated and is subjected to bias.