How Many Buckets of Money Should I Have?
How Many Buckets of Money Should I Have?
Hello blog readers. I hope everyone is safe and sound. We are living in some unprecedented times that is for sure. I thought I would touch on topic that comes up a lot in meetings with newly acquired clients. I will start with a case study a remember very well.
This gentlemen had $1 Million sitting in his 401k. He was telling me about when he retires all the things he going to do like travel and play more golf. We discussed how much income he would need in retirement after doing a cash flow analysis of their expenses. Then I realized something he needed to take into consideration. The word we all hate: taxes. He never took taxes into consideration. Is it a good idea to put all of your money in one basket?
As many of you know. I am a shoe enthusiast. Imagine if I owned 100 pairs of brown shoes. My life would be very boring. If I like to have different shoe colors and styles, would you not agree that my financial future is more important than shoes? Why do people buy 100 pairs of brown shoes financially? Most likely it is because they think they are doing the right thing. Are they? Would you like to own 100 pairs of the same colored shoe? Of course not! And that is why it is important to have a few buckets working for you. How many buckets should you have?
Well it depends on your financial circumstances and goals. If anyone has ever read “The Power of Zero” by David McKnight, they know that it is a good idea to have at least three buckets of money. I agree with his ideology because it makes sense from a tactical and tax perspective. He speaks about tax-deferred, tax-free, and taxable buckets. In my next blog, I will explain the difference between each bucket of money.
9159229DH_OCT28
