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Speaker 1: You're listening to the Saturday Morning with Jack team podcast

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Speaker 1: from News Talks, that'd be It's.

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Speaker 2: Good to two eleven on your Saturday morning, and we're

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Speaker 2: talking personal finance with Ed McKnight from Opie's Partners this morning,

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Speaker 2: and it has this thing called an economists pay Routine

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Speaker 2: and alternative to budgeting that will help you budget, which

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Speaker 2: seems counterintuitive that he's here this morning.

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Speaker 3: Hey, Ed, great to talk Dear Jack.

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Speaker 2: Yeah, great to speak with you. So run us through

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Speaker 2: your steps here, because this is really cunning. Basically that's

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Speaker 2: fair right, a way to budget without budgeting.

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Speaker 3: Well, the trouble is, if you ask pretty much any

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Speaker 3: New Zealander how do you get better with money? Everybody

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Speaker 3: would say got to do a budget, And probably ninety

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Speaker 3: nine percent of your your listeners, except for the accountants

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Speaker 3: out there, would probably be saying, yeah, we should budget,

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Speaker 3: but most people don't except for those accountants. And so

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Speaker 3: despite the fact that we all know we probably should

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Speaker 3: be keeping better track of where our money's going, most

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Speaker 3: people don't. And so I think, rather than telling you

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Speaker 3: to do something that you're probably not going to do,

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Speaker 3: just start automating your money. And what I mean by

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Speaker 3: that is put it into some buckets. And probably the

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Speaker 3: best system I've seen comes from Australian guy called the

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Speaker 3: Barefoot Investor, And what he basically says is take sixty

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Speaker 3: percent of your pay. Doesn't matter how much you get paid.

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Speaker 3: Everybody can do the sixty percent of the pay that's

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Speaker 3: going to be on what he calls your blob account.

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Speaker 3: So just your every day standard living, your rates and

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Speaker 3: all of that stuff you've just got to pay for.

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Speaker 3: Then we take a small amount of it, call it

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Speaker 3: ten percent. That's just for your little splurges, and you

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Speaker 3: should just automatically transfer it. And you can set this

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Speaker 3: up automatic transfer across to an account called your splurge account.

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Speaker 3: That's for your coffees or your movie tickets, anything fun

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Speaker 3: you want to do over the weekend. We can have

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Speaker 3: a little allowance as well that he calls smile. That'll

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Speaker 3: be ten percent. That's for your holiday savings. Will say

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Speaker 3: that that's for birthday presents. But here's the really important one.

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Speaker 3: We want to also be automatically transferring twenty percent of

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Speaker 3: our pay. Whatever's left over, that's going to be our

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Speaker 3: fire extinguisher. So it can take twenty percent of our

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Speaker 3: we're going to put that against credit cards or personal loans,

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Speaker 3: any high interestet or also savings or property or investments

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Speaker 3: or shares, whatever it happens to be, and that's how

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Speaker 3: we're going to get ahead financially. And the main thing

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Speaker 3: I encourage people to do is automate their money so

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Speaker 3: they don't have to think about it. Because if you've

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Speaker 3: got to think about a can need to transfer this

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Speaker 3: amount of money into a movie budget, orm coffee account,

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Speaker 3: and I've got to transfer twenty percent into savings and investments,

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Speaker 3: you have to make that decision every single week or

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Speaker 3: fortnite or months that you get paid. And it's really

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Speaker 3: important if you automate it, you only have to make

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Speaker 3: that decision once. So I often encourage people, whether you

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Speaker 3: want to invest in shares, whether you want to invest

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Speaker 3: in property, set up that account and just make it

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Speaker 3: an automatic habit so you don't have to think about

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Speaker 3: it every single time. Now I do this myself my accounts,

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Speaker 3: and if I logged into an ASB account and showed

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Speaker 3: you today, Jack, they are called blow, they are called smile,

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Speaker 3: they called spillurgs, they're called fire extinguisher. And this has

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Speaker 3: changed my money life. I used to be horredic with money.

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Speaker 3: And as soon as I started using a system like this,

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Speaker 3: that has completely changed because I'm not one of those

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Speaker 3: people who is going to have a spreadsheet and account

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Speaker 3: for every single dollar of where it's going to go.

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Speaker 2: Yeah, I think you're really onto something here. My sister

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Speaker 2: does exactly this. Her and my brother in law have

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Speaker 2: this where they have the different accounts and just everything's automated,

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Speaker 2: and so, like you said, they're able to kind of

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Speaker 2: keep on top of things and they engage with their money,

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Speaker 2: but it's all automated, so they're not at the start

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Speaker 2: of every month kind of meticulously going through everything. And

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Speaker 2: it just seems like it's a really kind of effective mechanism.

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Speaker 2: And also there's a simple way of just taking advantage

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Speaker 2: of the benefits of, you know, banking in a digital

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Speaker 2: world day, Like it's easy to set up an account

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Speaker 2: called a splurge account, it's easy to set up an

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Speaker 2: account called a fire extinguisher account. This isn't too complex.

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Speaker 3: Yeah, And the thing is, you get some funny looks

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Speaker 3: when you go and apply to get a mortgage. But

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Speaker 3: it's really interesting the people who do this. They give

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Speaker 3: you a little smile when they look at what you're

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Speaker 3: acounts are called and they go, oh, I know what

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Speaker 3: you're doing here. And one other fascinating thing, there was

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Speaker 3: a really great study I always talk about comes from

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Speaker 3: the University of Chicago and what a guy called Richard

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Speaker 3: Saylor came out with this idea that mental accounting matters.

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Speaker 3: And what he basically said is, look, you could come

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Speaker 3: up with a spreadsheet, you could particulously decide where every

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Speaker 3: cent and dollar goes. But what works almost exactly as

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Speaker 3: well is just having these little mental rules of thumb.

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Speaker 3: Now you don't have to use the one that our

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Speaker 3: I outlined today. Another common one is fifty thirty twenty

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Speaker 3: Fifty percent of your money goes to needs, thirty percent

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Speaker 3: goes to once, twenty percent goes to long term savings

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Speaker 3: or paying down debt, whatever the numbers work out for you.

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Speaker 3: I encourage people to speak to their partner or to

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Speaker 3: themselves if first single, and just be like, Okay, what

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Speaker 3: are those percentages going to be set up? Those three

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Speaker 3: or four accounts have some different cards for them potentially,

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Speaker 3: and just automate that money so you can start keeping

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Speaker 3: it on top of it. Now if you want to

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Speaker 3: go whole hog and come up with spreadsheet and budget

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Speaker 3: it to your as far as you can to your

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Speaker 3: heart's content. That's perfectly fine. But this is a really practical,

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Speaker 3: easy way that people can get get started and five

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Speaker 3: or ten minutes logging into their banking app.

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Speaker 2: Love your work here, fantastic, Thank you so much. That's

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Speaker 2: Ed McKnight from Opie's Partners with Us. This morning, we'll

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Speaker 2: put all of his advice up on the website. Of course.

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Speaker 1: For more from Saturday Morning with Jack Tame, listen live

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Speaker 1: to News Talks ed B from nine am Saturday, or

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