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Chapter 1: What financial foundations should I establish for success?
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One of the most important things to get sorted early in your journey is understanding what bank accounts, what tools you need to get the job done. Just like approaching a job at home or on a building site, you need to have tools to get the thing done. We're talking about bank accounts and we're talking about budgeting, which is the strategy and how you use those tools.
So Kate, this episode is all about those two things, right? We've got which bank accounts you should be considering and we'll give a framework for that and then budgeting.
Yeah. And I would estimate that every single listener is going to have some bank account somewhere. They need to get paid. They need to spend money. And so really it's the foundations. And that's why it's really our first part of this starter pack series. And we're going to give you the lowdown on how it all works, what you need to know and how to put a system in place that works for you.
Yeah. And so we're going to name some banks. If we do name some banks in this episode, just remember that at the time of recording, we think these banks are some banks that you can consider that doesn't necessarily mean they're right for you. So go out there, do the research that we speak of and make sure you consider if they are the right banks for yourself.
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Chapter 2: Which types of bank accounts are essential for budgeting?
George. Kate, so that's savings accounts. Savings accounts are what you would use to put money aside for things.
Yeah, for your financial goals.
Yeah. What's a transaction account then?
So, a transaction account is probably what you're familiar with where you've got a debit card linked. If you're using Apple Pay, you've probably got a transaction account. And that's just that everyday spending. You're paying your rent out of there. You're paying your water bills. You're paying your coffee, water. whatever you're spending is coming out of that.
Online transactions.
Yeah. Yeah. And so coming out of that everyday transaction account. So you just, most of them in Australia now have no fees. They don't have any requirements. So just something that's easy to use. Even like for me, I found that having Apple Pay on my phone really helps. You don't have to go and find your card details every day.
time but maybe that adds a bit of friction that takes away the friction like we were talking about saving money if you make it too easy by having Apple Pay or that quick checkout because you've linked your card up to all of the checkouts it can make you spend a bit more money so I find that with Amazon right if you go into Amazon you click the button buy it like add to cart or just pay straight away and oftentimes I just go pay straight away yeah which means that I spend more often and I spend more so sometimes friction is important and yeah
And sometimes it's good to separate, use a different banking provider for your savings account and a different one for your transaction account. So you can't just move, like if you're saving up for a holiday, you don't want to be able to easily access $1,000 of that on a night out because it might put you back when you're working towards your goals. So sometimes you can separate it.
And it's so easy to transfer money between accounts nowadays. And there's PayID, which makes it even easier to pay your friends with just a mobile number and email. And even something like BeamIt, which a couple of the big banks came together to create a couple of years ago where you can just pay instantly your friends and family.
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Chapter 3: How can I effectively segregate my savings for different goals?
Though for freelancers and people in the gig economy, that does become a little bit more challenging. It does, yeah. But you've worked out what's coming in. So it's really going through and working out how much do you spend each month. There's a lot of apps now like Frollo, Pocketbook, Pocketsmith. Even Up has tools for this to actually work out what categories you're spending your money in.
So just getting an idea of that, have a look at the past three months to work out sort of the average figures because just taking one month, it might be really high or really low and sort of warp your calculations. Look at the average spending patterns for you on the last three months and try and work out where do you normally spend the money? How much comes in?
Are you spending more or less than you earn each month? And just sort of doing a self-audit because really you have to be the financial officer of your own life.
Yeah, you do.
Unless you have an accountant or someone telling you what to do, what not to do. It's really like taking control. I know Scott Pape talks about it. It's like having those money date nights. But just take yourself out for coffee, go through your transactions, use some of the softwares out there that are free and accessible. And just look at what have you been spending on in the last month?
What categories? Are there categories that you're spending a lot more on than you previously?
thought you were spending on um maybe there's areas you want to spend less on and just go through and write down those rough figures and then you have an idea at this point if you're spending more or less than you earn and you might work out oh i've actually got some money but so you need to work this out before you get to all the fun stuff like investing
Yeah, this is basically putting a wedge between what you earn and what you spend. Typically, what happens is if you've spent a lot of money, you spent outside your means, what typically happens is you end up with debt. So that could be a car loan, it could be a TV, you bought on finance, it could be an after pay balance, it could be a credit card, it could be any of those things.
That's a telltale sign that you're spending beyond your means. Now, that's okay. A lot of people find themselves in that situation. The key thing here, as Kate said, is just to break down and understand where your money is going. If you're in the situation where you do have debt, it's going to be incredibly anxious for you. This is going to be a really tough time, but that's okay.
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