103: How to Prioritize Saving for Now, the Future, and In-Between - a podcast by Danielle G. Nava, CFP® and Dustin R. Granger, CFP®

What’s the most important part of your financial strategy? Creating an emergency fund? Saving and investing? Understanding what money goals you need to set for your priorities? Trick question, it’s kind of all three.

In this week’s episode, we’re revisiting an old friend who you may have heard a lot about on this show: the bucket strategy. That’s right, folks. But this time, we’re paying special attention to the middle child of the strategy, the intermediate-term bucket. 

We talk about why you may have been neglecting that middle bucket, as well as how you should be using our bucket strategy overall, in this episode.

WHAT YOU’LL LEARN

• • [00:40] Why we’re diving into the intermediate-term bucket in this episode

  • [05:22] Reviewing the bucket strategy

  • [06:46] Accounts you might have for each bucket category

  • [10:51] Why the focus is all on retirement

  • [12:27] Why you might be neglecting your intermediate bucket

  • [13:29] The number one asset you have in investing (hint: we talk about it a lot)

  • [14:25] Be the conductor of your own money (we get nostalgic for a minute)

  • [16:17] Problems with the financial industry

  • [19:49] How to make your bucket strategy work for you

  • [23:11] Fill your buckets according to your priorities

Accounts on your bucket list (pun intended)

First up: let’s talk about the accounts you might use for each bucket. Remember that each “bucket” is a category, not an account itself. You may have multiple accounts to fill each bucket, and you need at least one account to start. 

Your short-term bucket includes money you need between now and the next two years. That might include your regular checking account and a separate emergency fund account, which should be three to six months of living expenses saved. 

On the other end of the strategy, you have your long-term bucket which you’ll use to save for retirement or revivement. This includes your retirement accounts: Roth IRAs, 401k, and so on. You may even have a separate investment account if you want to save more than the maximum in a retirement account, or if you’re planning to retire early. (More on that in a bit.)

That leaves us with the intermediate-term bucket, which you’ll use for mid-range goals you hope to achieve in two to ten years. A down payment for a house, paying for college, or buying a new car are common mid-range goals. A lot of us don’t spend enough time tending to this bucket, probably because the focus in the finance industry and the media is all on savings and retirement in your long-term bucket. 

How to make your bucket strategy work for you

The first step in your bucket strategy? Y’all know this: create an emergency fund with at least three months of living expenses. And at the same time, if you have a 401k, start getting your matching so you can get that free money! Reaching both of these goals is important for your first step. No 401k? No problem. Focus your energy on hitting that emergency fund amount as soon as possible, especially if you have kids.

Next, you’ll want to pay some attention to the other two buckets. If you don’t have a 401k, you’ll want to start contributing to a long-term investment account. Planning on retiring traditionally around 60 to 65 years old? Begin contributing to an IRA or a Roth IRA. Hoping to buy a house within the next few years? Set aside money for your down payment. Look at your goals and budget, and decide where your money needs to go. Once you know, set up payments automatically so you don’t have to think about it. It’s just ready and waiting when the time comes.

Let’s say you’re one of those cool kids who wants to enter retirement, or revivement, at a younger age. Props to you. To make that happen, you’ll want to contribute to an additional non-retirement account that doesn’t have any restrictions. Why? Without this account, you’ll have to pay penalties to dip into those retirement accounts early, when you’re ready to retire at 50 years old. And that’s no fun. 

Be the magic conductor

Remember that scene in Fantasia where Mickey Mouse waves his magic wand and makes all the brooms start cleaning the castle for him? Mickey found a way to work smarter, not harder. That’s how your relationship with your money should be. You’re the conductor, and you’re in charge. Make your money work for you. It takes some time to set up at first, but once you do, you’re golden.

Don’t miss out on that. Be Mickey.

 

This material is for general information only and is not intended to provide specific advice or recommendations for any individual.

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