If you’re already a skilled saver or you’re looking for some tips on how to budget and plan, then ‘bucketing’ is an easy way to reduce debt and manage your weekly income by saving for different priorities in your day to day life or even planning ahead for the future.

What is bucketing?

Budgeting your money is a great way to track how much you spend and helps prepare for upcoming expenses. But if filling in spreadsheets or budgeting apps aren't your cup of tea, then bucketing your money in your bank account is a simple and effective method.

The idea of bucketing is to split your income into sub accounts, or in this case, 'buckets'. Each bucket is labelled with a different purpose and could be for everyday things such as bills, entertainment and dining out or even for bigger goals such as a holiday or retirement.

As an example, each time you dine out, pay a bill or go to the movies, you'll take the money from its relevant 'bucket' account. When that bucket of money runs out, you'll need to decide whether to cover the difference from a different bucket, or whether you'll wait until your next pay cycle when the bucket is topped up again.

How to get started

The first thing to remember is you may not got your buckets right the first time. With a little planning, you can estimate what buckets you need to create and how much should be going into each after you get paid.

Start by going through your last month of transactions. You may have regular expenses such as your rent or mortgage, groceries and bills (don't forget those direct debit subscriptions as well such as Netflix and Spotify). You may also have other things that are just as important, but a bit harder to track such as social catch-ups, a daily coffee or a frequent hobby.

Once you've worked out what you spend your money on, you can start by deciding what's important to you and your goals.

Do you want to pay off debt? Save for a new car or a holiday? Or maybe you just want to grow your savings?

What you spend your money on and what you hope to save for should guide you on your bucket names and how many you need.

The following bucket categories might help get you started. Remember, you can always add more buckets if you need.

Daily expenses: This should be your main account that is linked to a Visa Debit Card. As a rule of thumb, 60% of your regular income should stay in this account to cover things you need such as groceries, bills, transport fees and your rent or mortgage. The remaining 40% should be divided between your other buckets.

Spending account: Think of this as you 'fun' money. 10% of your income should be allocated here to splurge on the things you want, rather than need such as dining out and weekend entertainment.

Saving account: You may want to have several saving accounts depending on your goals, just make sure to give each of them a name so you can easily track your progress on that dream home, new boat, or that special item you've had your eye on. As a guide, 10-20% of your income should going into savings.

Emergencies: Sometimes life can throw a curveball at us, and for those unexpected days having an emergency fund can be crucial. While we don't like to think that we would need this money, it's important to save 10-20% of your income to cover unforeseen events.

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This information provides general advice only. We do not provide advice about this product based on any consideration of your personal objectives, needs or circumstances.

Published: Tuesday, 01 Mar 2022

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