Bulletproof Investing

CHAPTER 8How to spend less than you earn

The lessons I learned from reading The Richest Man in Babylon were only the first small taste of managing my finances, but they led me to that ‘a-ha’ moment of understanding that I had 100 per cent control over where I chose to spend my money.

To gain control of my finances, I followed in Arkad’s — the richest man in Babylon’s — steps. I reverse-engineered a budget, starting with my net pay of $1200 per week. I put aside 10 per cent as savings to invest in my future, channelling it into a savings account. I set up an automated transfer: on payday, $120 was transferred into that account. It was paid every second Friday, the morning after my fortnightly pay was deposited into my bank account.

$1200 per week

less $120

= $1080

That left me with $1080 a week to spend on what I needed. My most pressing need was paying off what I considered to be my bad debt — the $307-per-week student loan repayment. So, I set up another automated transfer — out it went, the day after I was paid.

$1080 per week

less $307

= $773

That left me with a balance of $773 to spend each week. My next needs were groceries, petrol and mobile phone. I needed to eat, get to and from work and, in this day and age, communicate with people. I calculated these costs at $170 per week but didn't set them up as an automatic transfer because most would be paid using my debit card (or direct debited from my account).

$773 per week

less $170

= $603

I was living with my uncle ...