Prevailing wisdom claims the best way to get what you want in life–whether it be to get into better shape, build a successful business, or save more money–is to be specific and set actionable goals.

This is how I used to approach my personal finances too. Each pay, I had a savings goal to be reached. I succeeded some months and failed in others.

Eventually, I realised the result had little to do with the goal and everything to do with systems. Here’s why:

Goal setting has survivorship bias: We concentrate on people who end up meeting their goals and assume the goal was what led to their success, overlooking everyone who had the same objective who didn’t make it.

Achieving a goal is a momentary change: Imagine you want to save $100 this week, you summon up the willpower and do it. What about next week?

You’re losing until you win: With goals, you’ve either achieved your goal and are successful or you failed and are disappointed. Fall in love with the process, not the product.

Goals are like yo-yos: Many people save for months, then stop once they meet their financial goal. Systems are the long-term approach.

I’m not saying goals are useless. They’re great for planning progress and systems are good for making progress.

With that in mind, this is my guide to building an automated system for personal finance.

Note: I don’t have a mortgage, kids, shared bank account, high-interest student loans, or debt. This is what works for me and my financial life.YMMV. This is not intended to be general or personal advice, or any advice at all. As with anything financial, you should do your own research, come to your own conclusions and consult professionals where required.

That said, the principles outlined below can help you start to build your own automated money management system.

The personal finance system

The Sankey diagram below is exactly what happens automatically each time I get paid. Pretty simple right.

Personal finance is easy once you build a system that automatically moves money around for you when you get paid.

It’s about removing optionality.

My personal finance system uses technology to remove decision making. Passively managing my bills, savings and investments. And since it’s a system, it’s flexible enough so you can tweak it to your specific situation.

The axioms of the system are:

Pay off high-interest debt first

Build an emergency fund

Use mental accounting to your advantage and automate bill pay

Invest in tax-advantaged retirement accounts (superannuation)

Invest outside of superannuation

Focus on developing skills to make money rather than optimising for cash back rewards or frequent flyer points

With the system outlined, let’s dive into the nuts and bolts of how to get it set up for yourself.

Step 1: Set up required accounts

I have three accounts I use as part of my system, namely:

A bank account An investment account A superannuation account

Personally, I use Up for my bank, Spaceship Voyager for my investments and Sunsuper for my superannuation.

You should be able to use whatever accounts you want/have.

Why I use Up

Up is a mobile-first bank designed to help you organise your money and simplify your life.

And for me, it does just that.

Use my sign up code GOD or click here to sign up to Up and we’ll both get $5.

The primary reasons I use Up are:

Automated salary splitting: Pay comes in and it’s split into my five buckets (checking account, buffer, splurge, short term, long term).

1.85% interest rate on multiple savers: Up to $50,000 unlike other banks who generally apply their bonus rate to one savings account. This means the buffer, splurge, short term and long term buckets outlined below can all earn interest. Note you must make 5 card purchases each month to qualify.

No monthly fees: Up account is free for most standard use, excluding withdrawals from non-major bank ATMs.

Upcoming payments: Up detects recurring payments and pops them into their own section in-app with a summary of how much is expected to come out over the next month.

Identified payments: Up shows you the names of the businesses you spend at, their location and even the logo for the majority of Australia. Additionally, you can tap on the transaction and see a summary of how much you’ve spent at a location or merchant over time.

Great support and attention to detail: I messaged their support about a minor UI bug on a single webpage on Friday at 4:59pm, it was fixed on Saturday at 8:01am.

Fast iteration and transparent product roadmap: Their product and engineering teams ship legitimate features fast and they have a fantastic public product roadmap.

No fees on overseas purchases (online or in person): Up uses the standard Mastercard exchange rate of international purchases.

There are a bunch of other nice features but those are the main things to call out. You can read more about Up here and get the latest information about their fees and interest rate here.

If you need a shared account or aren’t comfortable banking solely on your phone, you’ll need to wait for them to release shared accounts/a web app or use a different banking service.

Either way, the principles will work with or without Up, it might just be a little more work.

You can read more about Up here.

Why I use Spaceship Voyager

Spaceship Voyager is an investment app designed to make it easy to start investing.

Use my referral code S8N6ERGNC7 during sign up and we’ll both get $5 invested in our accounts when you invest at least $5 within 90 days of signing up.

The primary reasons I use Spaceship Voyager are:

No minimum investment and no brokerage fees: This allows me to dollar-cost average into the market on a weekly basis without brokerage fees eating away at my returns.

The first $5,000 is invested fee-free: Minus potential negative returns

It’s low-cost: Spaceship Voyager has two portfolios, Universe and Index which both have low fees, at 0.10% p.a. or 0.05% p.a. of your balance above $5,000 respectively.

It’s 100% equities: I want to maximise my equity exposure while I’m young, am investing for the long-term, and personally don’t mind market fluctuations.

Personally, I invest in Universe, which is made up of 50 Australian and 50 international equities. You can read more about the Spaceship Universe Portfolio here.

If you’re more of an index investor, Spaceship Index Portfolio may be of interested to you.

Like any investment, you should do your research and see if it meets your risk tolerance and investment needs. You can read Universe’s PDS here.

There are a lot of great investment options available outside of Spaceship Voyager too.

Disclaimer: I used to work at Spaceship and have good friends that still do. This may be biasing my choice of investment product. There are hundreds of good alternatives, such as a Vanguard ETF, Raiz, Stockspot, Six Park, Clover or QuietGrowth just to name a few.

Why I use Sunsuper

Sunsuper is an industry fund with >$70 billion in FUM.

I use Sunsuper for my superannuation account because it allows me to invest in a fund that seeks to match the performance of MSCI World ex-Australia Investable Market Index (IMI).

I personally allocate 100% of my superannuation to the Sunsuper International Shares Index (Unhedged) investment option with no insurance.

At the time of writing, this set up costs me $78 + 0.20% p.a.

I think this is one of the cheapest investment options in Australia and it suits my preference to invest outside of the Australian equity market.

As with any investment option, you should do your own research and determine what investment option meets your risk tolerance and investment goals. If you are interested in Sunsuper, you should read the PDS which will always contain the latest information about fees and costs.

This is something that is worth doing research on, superannuation is real money and often, a large percentage of your overall net worth.

Step 2: Create your buckets

I don’t budget. I use mental accounting to my advantage and create buckets (different savings accounts), hat tip Barefoot Investor.

For the uninitiated, mental accounting refers to a concept found by behavioural economist Richard Thaler. The idea is people tend to place a different value on money, based on largely subjective criteria.

This means that while money is technically fungible (meaning it is the same regardless of its origin or intended use), we tend to treat money differently based on how we allocate it among different accounts.

Whether that be a savings account, discretionary spending account or an investment account.

Think about when you were younger and had a piggy bank you would never touch but when you were given money for something else you’d spend it right away, that’s mental accounting.

Yes, I’m aware that mental accounting is generally used to talk about irrational spending but bear with me :)

To take advantage of this phenomena, I classify my pay into different buckets and trick myself into saving and investing.

The five buckets I use are:

Transaction: 10% of my income goes here on pay day to cover any expenses or bills that might come out of my account on the following day. I try to keep a few hundred dollars in here max, so I can maximise the amount of interest my savers get. Buffer: 50% of income goes here and I transfer from my buffer account to my transaction account on an as needed basis. This covers rent, food, my Spaceship Voyager investment and any other daily expenses. Splurge: 10% is for guilt-free spending, think AirPod Pros, Apple Watch or a Lululemon addiction. Short term: 10% is for short term rewards like holidays, flights or any larger purchases. Long term: 20% goes here to build my six month emergency fund. I plan to reallocate this cash flow to my superannuation as a voluntary contribution and/or my Spaceship Voyager account once I get to six months of expenses.

Note: If I had any high-interest debt, e.g. a credit card, I would personally funnel as much money as I could bear to paying that off first. It’s next to impossible to out invest a 15% annual percentage rate (APR). Remember, we want to use mental accounting for good not for bad.

It’s time to create buckets. There’s no need to create a transaction bucket as that’s done for you when you sign up to a bank.

How you create these buckets will depend on your bank.

To create your first bucket in Up, slide across to the Savers tab and:

Tap the + in the bottom right hand corner Name your saver, e.g. Buffer Choose an emoji for your saver, e.g. 💸 Choose an amount you would like to save or skip Set up auto transfers or skip Tap Create Saver

If pictures are more your thing…

I then repeat these steps until I set up my four buckets.

Step 3: Split pay into your buckets

Now that I’ve set up my buckets, it’s time to split my salary across my buckets.

Note: This step relies on Up’s Pay Day feature, if you don’t use Up your bank may have a similar feature!

Up identifies my salary and lets me automatically split my pay across different Up accounts. This allows you to automatically split your pay whether you get paid every month, fortnight, or week.

To set up Pay Day, I head to the payments tab and click on my company’s name. I see a message that says “Payments from this contact can be automatically split between your Up Spending account and one or more of your Savers.” and tap that.

Then I see a screen titled “Split payments” with a description “Automatically split any incoming payments between your main Up account and one or more of your savers. Estimates are based on the last payment you received.”

I tap the pill to enable payment splitting and use the sliders to set up my buckets, this is what I use:

10% to Up account

50% to Buffer

10% to Splurge

10% to Short Term

20% to Long Term

That’s the savings and superannuation part of my personal finance system. I use my checking account (Up account) for paying bills and any other daily expenses, when it gets low I top it up from my Buffer account. Where possible, I use automatic bill payments to ensure bills are paid on their due date.

Now it’s time to automate my investments.

Step 4: Automate your investments

Personally, I invest roughly 9.5% of my post-tax pay as a recurring investment each week.

As I said, I use Spaceship Voyager to automate my investments. You can use any product you like.

Here’s how you do it with Spaceship Voyager. You download the app, sign up and during onboarding you’ll be prompted to setup a recurring investment on a weekly, fortnightly or monthly schedule.

Once you’ve done that, you’re done with this step. Other providers likely have a similar feature!

If you’re using Spaceship Voyager and didn’t set up a recurring investment during the onboarding or want to change the amount/frequency, tap on the “Account” tab and scroll down until you see “Investment plan”.

If you haven’t got a plan, you’ll be greeted with a screen titled “Investment plan” and a description that says “You don’t have an investment plan. If you’d like to set one up, press ‘Set up plan.’”.

Tap set up plan. The next screen will have a pill with weekly, fortnightly or monthly options. Tap on whichever frequency works for you, then change the amount and first investment date as you see fit and tap “Save investment plan”.

Personally, I have my investments come out on Fridays because I get paid on Thursdays, twice a month.

That’s it. I started off with an amount I could easily afford and went from there. It was more important to build the habit of investing.

That’s it

Remember, this is supposed to be a system.

This is meant to be an illustrative example of one way to automate personal finance in Australia, not the only way.

Do your own research, it’s your money.

You don’t need to use the buckets system nor have an investment account, this is a guide to help you build your own system, not clone mine.

For example, you could start off with two accounts, a transaction account and a long term account, with a 90%/10% split respectively and then invest $1 a week from your transaction account into Spaceship Voyager.

I think it’s better to start building a habit of saving and investing rather than worry about amounts.

As I got more comfortable saving and I began to earn more I started to save and invest more. This trend will likely continue, e.g. once I hit six months of expenses in my long term account, I plan to push that 20% into my Super or Voyager account.

You might decide you want to more money in your splurge account instead, upping the amount from 10% to 30%.

That’s the benefit of a systems-based approach.

It’s all about building a system of small habits that can compound over time. Your personal finances, much like your life, is a sum of your habits.

Don’t underestimate the value of consistently saving and investing for even a small amount over decades.

Additional resources

For more on the topic of wealth building I recommend:

For more on the topic of habit building, behaviour change and system design, I recommend reading:

As always, you can find my complete reading list here.

Thanks

Thanks to Jordan Hughes, Guy Proops, Anna Cheng and Jack Walsh for providing feedback and reviewing this.

Disclaimer

This is not intended to be general or personal advice, or any advice at all. All information is intended only as a general information guide.

It’s meant to be an illustrative example of how you can build your own automated financial system, with whatever financial products you decide for yourself!

I don’t know your specific circumstances and you should consider whether everything in this post is appropriate for your needs, and where appropriate, seek professional advice from a financial adviser.

Although I tried to verify the accuracy of the information contained in this page, I disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained on this page or any loss or damage suffered by any person directly or indirectly through relying on this information.

Please don’t just take this and run with it. Do your own research!