On July 11, my daughter begged me to take her to 7-Eleven. Apparently, every year the store gives customers free slushies on “7-11 Day.” And ever since she heard that they did, “7-11 Day” has been on her “bucket list.”
My first thought was, that’s what’s on your bucket list?!
She quickly explained that she had other things on the list too – road trip with friends, going on a helicopter ride one day, etc.—but that free slushies on 7/11 Day also made the cut. Why not, she said, it’s fun!
She was right, of course. Bucket lists are meant for just that. Things that you think would be fun and personally significant, no matter how big or small.
When it comes to personal finances, you can also use the analogy of “buckets” to help make sure your finances address all the things you think would be “fun and personally significant – no matter how big or small.” They help you to prioritize and categorize your income, expenses and savings.
Here are some typical “financial” buckets:
Cashflow “Bucket” – For your every day expenses that include necessary expenses, such as mortgage or rent payments, food, etc. as well as discretionary items that fit into your budget, such as cable and dining out. This is generally your checking account and requires special attention.
Note (!): If some of the other buckets below are not being filled, you may want to take a closer look at this account and see where you can cut or reduce any discretionary expenses so you can add more to the other buckets. Having a very clear idea of your necessary versus your discretionary costs is essential for good planning.
Emergency “Bucket” – For those just-in-case moments that may happen, such as unexpected unemployment, illness, change in marital status, etc. where you may need additional funds other than what is coming in. The general rule of thumb is 6-8 months worth of current monthly expenses.
Wealth Accumulation “Bucket” – For long-term savings, such as retirement and college funding. Generally these buckets include a fully diversified investment portfolio for long-term growth that can withstand the market volatility, and takes into account your own risk tolerance and objectives.
Bucket List “Bucket” – For the slushies and helicopter rides on your list…. If possible, set aside some money each month for things on your bucket list!
While you want to ensure that the other buckets are getting filled first, having a special savings bucket just for these items may give you extra motivation, either to earn more or to save more. Suddenly, it may make more sense to eat dinner at home so you can shift the extra dollars for that family vacation that you’ve been dying to take before the kids get too old.
And, as my daughter reminded me, these items don’t have to cost a lot either (in fact, in this case, it was free!), but they add to your quality of life and brings a sense of mindfulness and purpose to your spending and savings.
So start thinking about your various “bucket” lists today and how budgeting, investing and mindful spending can help you cross items off your list sooner!
~Jennifer Faherty is a Certified Life Coach, specializing in helping women find their passion and develop a healthy relationship with money. She can be found at www.jenniferfaherty.com or on Twitter @jenniferfaherty.