Use Lots of Buckets! | Series 6.3

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Welcome to the EnjoyMore30s Family Finance

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podcast. The only podcast dedicated to making life more

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enjoyable for young families by hitting on the financial topics

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that tend to weigh on us, stress us out, and distract our focus

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from simply enjoying life.

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Hello, and welcome to the 3rd episode of our new

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year's series Set Your Compass for the New Year. Today, we have

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one of really my favorite concepts that deals with how to

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better organize where you're saving to make goals easier to

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see and even more importantly, easier to achieve.

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As always, if you like what you're hearing, please make sure

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to subscribe or follow us on Apple podcasts or wherever you

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may listen. Clicking that star, leaving the review like I always

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share really helps us reach literally the millions of other

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young families out there just like you. So far this season,

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we've covered setting your compass with your spouse, so

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joint goal setting and then last week, we discussed the

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importance of actually paying yourself first, giving some of

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that money that you know you work really hard for every

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single day to yourself to reach those goals that would actually

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make you happy. So if you haven't checked out those

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episodes yet, definitely do that soon.

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Today's episode is titled Use Lots of Buckets exclamation

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point, where we are going to cover how separating out where

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you are saving for your goals can actually add a lot of

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clarity to the situation and help you better organize and

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achieve them. So if you walk away from this episode, saying,

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I now know better how I should organize my house, vacation,

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wedding, college, or any other goals that you may have by

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account, then you would have achieved the goal for this

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episode. If you think to how you organize your clothes, you

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probably have some kind of a system. I'm guessing you just

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don't have all of your dress pants and shirts and sweatshirts

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all just you know, thrown into random drawers around your room.

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You probably group things like a normal human being together with

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other like things in spots, it makes sense to find them and

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know what you actually have. The same thing goes when it comes to

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us saving to best build this ship that we want to take us to

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our goals. If we have just one giant, 'I want to build a ship

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bucket', it's hard to see where all that money's actually going

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to go for the various elements that we're going to need. Some

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of it we may need right away some of it we may not need until

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the ship is built. Some of it is to refuel maybe when we actually

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get there. So by breaking this up into different buckets, we

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can better see what we have for each specific purpose that we

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need.

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To start us off, there are three general types of buckets: a

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short term bucket, an intermediate term bucket, and a

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long term bucket. A short term bucket is for things that you're

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going to need over the next 1 to 3 years, say somewhere in that

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range. This type of bucket uses bank accounts, because that time

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period is really too short for even a more conservative leaning

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investment in my opinion. The goal for this bucket is to keep

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what you have more than anything else, including growth or

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interest. So growth and interest are not the primary driver for

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money in this bucket. It's to keep what you already have.

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The next bucket is an intermediate term bucket. And

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for young people, this is generally a what you would call

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a general or non-retirement investment account. So it's a

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flexible account. It's something we've referred to before as a

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buffer account. So this bucket is for anything from say 4 to 10

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years really even longer out as we're you know younger families.

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So enough time where an actual investment would likely be

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appropriate, as there should be time to recover from any

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temporary downs that may occur. Now, if it's say, to buy a new

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home, and maybe 5 years down the road, maybe this account is

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moderate or even moderately conservative, where if it's for

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a second home 10 years from now, the account really can be very

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much on the aggressive side from a time horizon standpoint.

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Overall, though, like I said, this is a very flexible account

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that covers a lot of potential goals. And so this can be great,

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especially for younger families, where there are a lot of years

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that we aren't quite sure of, you know, where we may end up or

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how our goals are gonna change.

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The last bucket is your longer term bucket, which often

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includes things such as retirement, which may be

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401(k)s, IRAs, things like that 529 plans for college savings

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specifically. So things along those lines. These for younger

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families tend to be very, very long term, so they certainly can

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be more aggressive leaning from a time horizon standpoint.

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So now that we have these three general types of buckets, what

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we want to do is fit our goals within them. So let's say I have

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goals of buying a car next year, let's say, annual vacations, a

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second home maybe 10 years down the road, along with the normal

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you know retirement and college goals for my kids, things of

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that nature. The car and annual vacations are short term. So for

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those I would set up separate bank accounts specifically for

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those goals. For the second home that would fall into that

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intermediate term general investment account. And since it

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is 10 years out, it would be more aggressive for me. For

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retirement, I might use my 401(k), taking advantage of the

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company match. For college, perhaps I would use separate 529

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plans. But you know, you may see where I'm going with this,

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separate buckets, separate accounts for each one of my

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major goals. So I can actually see what track I was on for each

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of them. If I just have one account for all those things,

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you know, one drawer for all my clothes, how would I have any

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idea if I was going in the right direction? How would I have any

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idea if I had enough or too much or somewhere in between? The

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separate buckets will make sure I have a stable account, some

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money was there for my next car for the next year, make sure I

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take those important annual vacations that are really

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important to stop and breathe and have fun with every year.

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Hence, use lots of buckets.

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Overall, thanks for tuning in today and join us for next

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week's episode, which is almost part two of today's

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conversation. I thought about putting it together with today

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but decided to separate it out. So next week's episode is called

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Money Blocking for Fun, where we're going to break down just

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how you can use some of these same separation techniques, not

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just for the larger goals by using separate accounts, but

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also for smaller everyday type occurrences to increase your

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happiness on a daily lifestyle basis as well.

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Overall, if you're able to implement what we cover today,

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that's fantastic, less to worry about than before and you could

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focus more on just enjoying life. If you're wanting help

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with these things or you have questions that you need help

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clarifying, check out that Ask Joe section on my website

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www.enjoymore30s.com. That's enjoymore30s.com. Until next

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week. Thanks for joining me today and I look forward to

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connecting with you again soon.

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The conversations on this show are

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Joe's opinions and provided for general information purposes

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only. They do not constitute accounting, legal, tax, or other

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professional advice for your specific situation. You should

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always seek appropriate advice from a financial advisor,

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accountant, lawyer, or other professional before acting upon

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any content or information found here first. Joe is affiliated

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with New Horizons Wealth Management LLC, a branch office

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of TFS Securities, Inc., and TFS Advisory Services an SEC

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Registered Investment Advisor, Member FINRA/SIPC.