Max Phelps is the founder of Golden Eggs, author of the Amazon best seller Getting Your Money $hit Together and mastermind behind the Five-2 Money Diet. He has helped countless Aussies put themselves on a track to achieve financial freedom by ditching traditional bank account structures.
“If your pay comes into an account that you can access with a card, or worse, access it before you have even earned it with a credit card, you are very likely to lose track of your spending and spend more than you would otherwise,” Phelps said.
“Like most Australians, I once was set up with one bank account, one savings account and one credit card. What I worked out later is that this is just about the worst set up to have from a psychology perspective. I used that method for 11 years and I am $1.1 million poorer because of it.”
According to Phelps, the Five-2 Money Diet is based on psychology instead of maths, as well as the money journey he has shared with his wife over the last 30 years.
“I grew up in a family of nine kids, playing Monopoly and dreaming of not being poor after years of bullying about the clothes I wore. After completing university I took the most secure and high paying job I could find. However, my biggest downfall was that my wife and myself were terrible at saving,” Phelps explained.
“Then something amazing happened. I was posted to Thailand with the company I was working for, and was getting paid part of my salary back in Australia and some of it in Thailand. We actually found that the amount of money I was receiving in Thailand was enough to live on and it just honestly seemed like too much of a hassle to move money from Australia to Thailand.
“We became amazing at saving over the four years we spent in Asia, and that is where the initial concept for the Five-2 Money Diet was born.”
According to Phelps, after 15 years working for a multi-national, he realised it did not sit well with him that he was helping this company make more money from ordinary people, so he took a redundancy and became a teacher in the United Kingdom for two years. When he returned to Australia and discovered his teaching qualifications weren’t valid in New South Wales, he fell into mortgage broking.
“During this time, I quickly understood that most people spend much more than they realised, and that my teaching skills would be better used to coach adults how to manage money,” Phelps said.
“Since then, I have attained a Diploma in Financial Planning and started coaching people how to manage money with five bank accounts across two banks to stay on track and save more – hence the name the Five-2 Money Diet.”
Phelps now has over 11 years of experience in finance, and qualifications in mortgage broking and financial planning. His mission at Golden Eggs is to eliminate money worries for their clients and to help young people on the path to financial freedom with their unique money coaching system.
According to Phelps, there are five key steps people should take in order to improve their saving capabilities and build a property portfolio that helps them retire young, go on great holidays every year, and to enjoy spending their fun money, guilt-free.
1. Stop getting paid into an account you can access
“The first step in dismantling the classic Australian system of one bank account that handles all of your everyday spending and bills, is to restructure your accounts. Getting paid into an account that a card is not attached to and is dedicated to bills is a guaranteed way to fix any overspending habits,” Phelps said.
“Bills are quite fixed and predictable, which makes them significantly easier to calculate over a year than a pay cycle.”
2. Drip feed into your everyday spending account weekly
According to Phelps, most of us work on a weekly schedule no matter what your pay cycle is.
“Groceries, gym memberships, coffees and nights out are all everyday expenses that can be calculated week-to-week. By drip feeding money from your bills account each week you will be able to determine an allowance for that period of time with the assurance that you still have more money where it came from that you can access the next week,” Phelps outlined.
3. Split up your savings
“I wholeheartedly believe that separating your savings into three accounts – future, holidays and fun – will change so many people’s lives,” Phelps added.
“Like so many, I too once had one big savings account that everything was slumped into. However, this meant that I was always dipping in and out of this account when different expenses popped up.
“I recommend creating automated future and holiday accounts that are in line with your pay cycle, and then developing an account you top up monthly – calculated similarly to your everyday spending – for your fun like clothing, special occasions and weekends away.”
4. Prioritise your holidays
Phelps believes, the beauty of creating a specific bank account for holidays is two-fold.
“Let’s say you have $50 thousand in one savings account, the risk is you may either be tempted to dramatically overspend on a holiday or choose not to take one at all because you need that money for your future – and that is not good either.
“Giving yourself permission to spend is a good thing – especially on holidays. Instead of having $50 thousand in one account, you can have $45 thousand in your future account and $5 thousand in a holiday account, which sets a budget for you to enjoy your time away guilt-free.”
5. Use two banks
According to Phelps, his number one piece of advice for avoiding dipping back into your savings accounts is to separate your accounts into two different banks.
“I recommend keeping your bills, future and holiday accounts with one bank, and your everyday and fun accounts with an entirely different institution. With this system you do not need to have any guilt if you spend every last cent in your everyday and fun accounts because you know you are not going to miss a direct debit that are linked to your other accounts,” Phelps said.
“Studies have shown that people spend 30 percent more when they’re using a credit card rather than a debit card. That is where psychology comes into play, and is the reason why I have developed the Five-2 Money Diet so that people can have complete control of their finances without the invitation to overspend.”
Golden Eggs is a network of mortgage brokers with a difference. Their mission is to eliminate money worries for their clients and to help young people on the path to financial freedom. Golden Eggs’ growing team offers mortgage broking, income protection insurance and money coaching services. Their Sydney based office means local clients can engage face-to-face, however they also offer flexible options for virtual meetings during business hours, evenings and weekends. Golden Eggs has taken the one percent Pledge, donating one percent of all revenue through B1G1 to support education in developing countries.