The Barefoot Investor strategy, popularized by Australian financial guru Scott Pape, is not just a budget; it’s a simple, step-by-step formula designed to automate your financial life and achieve wealth without stress. The core of the plan involves setting up a system of “buckets” (bank accounts) and following eight sequential steps, turning your finances into a “set-and-forget” machine.
If spreadsheets and complex budgets have failed you, the Barefoot method, which can reportedly be summarized on the back of a serviette, might be your path to freedom.
1. The Foundation: The Barefoot Buckets (The Serviette Strategy)
The entire system relies on dividing your income into three main buckets, which are then executed using five separate bank accounts. This strategy ensures you always save, invest, and spend guilt-free.
| Bucket | Purpose | Allocation | Accounts Used |
| Blow | Spending & Saving for Goals | 100% of income lands here first, then allocated out. | Daily Expenses, Splurge, Fire Extinguisher, Smile |
| Mojo | Emergency Safety Net | Dedicated Savings Account. Funded via the Fire Extinguisher. | Mojo Account (High-Interest Savings) |
| Grow | Long-Term Wealth | Investments/Retirement. Funded via the Fire Extinguisher overflow. | Investment Account (Superannuation/Shares) |
The Percentage Breakdown (Applied to After-Tax Income)
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60% to Daily Expenses (Rent, utilities, food, minimum debt payments).
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10% to Splurge (Guilt-free fun: movies, dining out, clothes).
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10% to Smile (Mid-term savings goals: holiday, new TV, car deposit).
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20% to Fire Extinguisher (The engine of the plan; used to pay off debt or save for big goals).
2. The Barefoot Steps: Your 8-Step Path to Freedom
The true power of the Barefoot Investor plan lies in the sequencing. You must complete each step before moving on to the next, using the 20% Fire Extinguisher money to fund the current goal.
Step 1: Set Up the Barefoot Date Night
Schedule a monthly Barefoot Date Night with your partner (or yourself). Use this time to review your accounts, track your progress, and make any necessary adjustments to your spending. This is where the work gets done, consistently.
Step 2: Set Up Your Buckets
Immediately open the five necessary bank accounts and automate the transfer of the 60/10/10/20 percentages the day you get paid. This ensures you Pay Yourself First.
Step 3: Boost Your Mojo to $2,000 (Your Starter Emergency Fund)
Your first financial fire to extinguish is an immediate emergency fund. Use the 20% Fire Extinguisher money to build your Mojo Account up to $2,000. This small buffer prevents you from relying on debt when minor financial mishaps occur.
Step 4: Domino Your Debts
Once you have $2,000 Mojo, shift the 20% Fire Extinguisher money toward debt repayment. Use the Debt Domino Strategy (similar to the Debt Snowball):
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List all non-mortgage debts (credit cards, personal loans) from smallest balance to largest.
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Pay the minimum on all debts.
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Throw the maximum possible amount (the 20% Fire Extinguisher) at the smallest debt until it is gone.
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Roll the payment from the first debt onto the next smallest, gaining momentum.
Step 5: Boost Your Super to 15% (Start Investing for Retirement)
Once your consumer debts are gone, start investing. Increase your Superannuation (the Australian equivalent of a 401(k) or pension) contributions up to 15% of your income. This is a tax-efficient way to build long-term wealth that you cannot easily touch.
Step 6: Boost Your Mojo to Three Months
Now, focus on securing your safety net. Use the 20% Fire Extinguisher to boost your Mojo Account until it holds three months of living expenses (the 60% Daily Expenses amount). This is the key to true financial security.
Step 7: Get the Banker Off Your Back (Tackle the Mortgage)
Once your three-month Mojo is full, the 20% Fire Extinguisher is directed to aggressively pay down your mortgage (or save for a home deposit if you rent). The goal is to get the bank “off your back” as quickly as possible.
Step 8: Nail Your Retirement Number & Leave a Legacy
With the home secured and paid down, the 20% is now permanently focused on Wealth Building. You continue to invest and save, setting a retirement target using simple, low-cost index funds, and planning how you want to leave a lasting financial legacy.
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