Getting ahead financially doesn’t have to be complicated. In fact, it can be as simple as setting up “buckets” for your various expense categories. This method works wonders for both personal and business finances, giving you clarity, control, and motivation to stay on track. Here’s how it works:
Personal Finances: Buckets for Everyday Life
When it comes to managing personal finances, think about the main areas of your life where you spend money. Then, create dedicated bank accounts for each category. Here are some common examples:
- Groceries: Know exactly how much you’re spending on food each week or month.
- Fun: Treat yourself guilt-free while staying within a set budget.
- Family: Allocate funds for activities, gifts, or essentials for loved ones.
- Health & Fitness: Prioritise your well-being with a dedicated account for gym memberships, supplements, or other wellness-related expenses.
- Travel: Save consistently for future holidays without scrambling for funds.
- Savings for Specific Goals: Whether it’s a new car, home renovations, or a big-ticket item, having a focused savings account can make achieving goals feel more tangible.
- Fixed Expenses: This is a game-changer. Create an account for regular direct debits, like rent, utilities, or subscriptions. This makes it super easy to see exactly what balance this account needs to be topped up at to cover your non-negotiable costs.
Organising your finances this way means you’ll naturally be more mindful about your spending without even trying. It’s incredibly motivating to see your progress, and it provides a clear view of exactly where your money is going. For instance, if your “Fun” bucket keeps draining quickly, you might notice you’re overspending on things like Uber Eats. Adjustments become easy and obvious—no spreadsheets or complicated tracking required.
Business Finances: Know What Money Is Truly Yours
When it comes to your business, creating buckets is just as powerful. It’s essential to have a clear understanding of what money belongs to you versus what’s needed to cover expenses and obligations. Consider setting up accounts for:
- GST: Keep all Goods and Services Tax funds here so you’re not caught short at BAS time.
- Tax Savings: Allocate for your business’s tax obligations, including tax on your own wage if you’re a company.
- Recurring Bills: Use this for ongoing expenses, such as software subscriptions or utilities.
- Wages Savings: Set aside funds for staff payroll so you’re never scrambling to meet pay day.
- Quarterly/Annual Expenses: If your business has significant recurring expenses like insurance premiums or licensing fees, create a bucket for these too.
- Profit: Inspired by Mike Michalowicz’s incredible book Profit First, this account is for locking away a percentage of every sale as profit. Michalowicz famously states, “If you can run your business on 100% of your income, you can run it on 99%, and move up from there.” This bucket not only ensures profitability but gives you undeniable proof that your business is thriving.
Why Buckets Work
The beauty of this system is its simplicity. By dividing your income into clear categories, you can see at a glance where your money is going and where adjustments might be needed. For example:
- Are you overspending on subscriptions in your business? Check your “Recurring Bills” account.
- Do you have enough set aside for your quarterly BAS? Look at your “GST” bucket.
The Results: Motivation, Control, and Financial Clarity
Whether it’s personal or business finances, this method transforms how you approach money management. You’ll feel motivated as you watch your savings grow, more in control because everything is organised, and clear about where every dollar is going.
Not Financial Advice—Just What Works for Me!
This approach has been a game-changer for me, both personally and professionally. While this isn’t formal financial advice, it’s a practical system that’s worth trying if you’re looking to take control of your money. Start small, tweak the buckets to suit your lifestyle or business, and see how much more manageable your finances become.
Creating buckets might just be the simple shift you need to get ahead financially—and stay ahead.
