By: Jeff Bullock
A Bucket Approach For Your Money
During my decade-long tenure at J.P. Morgan Private Bank, I was fortunate enough to interact with many of the industry’s top professionals. One of these great professionals, a former colleague of mine, is Michael Liersch, who at the time was our Global Head of Wealth Planning & Advice. With a Ph.D. in Cognitive Psychology and a knack for wealth management, Michael led the behavioral finance and wealth planning strategy for the bank.
Michael’s research focused on the psychology of money to better understand how and why people make the decisions they do with their money. Michael published a piece a few years ago titled The Bucket List: How to organize your money with intent. In this piece, he lays out a framework for how to use ‘buckets’ to better organize your money. I’ve personally modified his buckets just slightly, but he suggests we should organize our money into four different buckets, as follows:
- Liquidity Bucket: Cash reserves and sleep-well-at-night money.
- Lifestyle Bucket: How you fund your day-to-day life, such as your paycheck or income from investments.
- Growth Bucket: Long-term savings and retirement assets.
- Legacy Bucket: Wealth to benefit future generations or philanthropy.
This framework is powerful because once your assets are mentally (and physically) placed in each bucket, the investment discussion becomes ‘bucket specific’, which almost always leads to better decisions. Furthermore, by organizing your wealth into buckets, you can better balance the amount of risk that should be taken with your assets.
Ultimately, an approach like this is intended to give you peace of mind with your money. As Michael wrote, “People across the globe can find it empowering to physically place their money in [these] four buckets…. In this way, they discover whether their money is organized – and utilized – in a way that supports their intentions.”
What is your framework for organizing your money? Could it be more intentional? Could you benefit from a better process?
This blog is general communication being provided for informational purposes only. This information is in no way a solicitation or offer to sell securities or investment advisory services. It is educational in nature and not to be taken as advice or a recommendation for any specific investment product or investment strategy. This does not contain sufficient information to support an investment decision. Any investment or investment strategy mentioned may not be suitable for all investors or in their best interest. Statistical information, quotes, charts, references to articles or any other quoted statement or statements regarding market or other financial information is obtained from sources which we believe reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. All rights are reserved. No part of this blog including text, graphics, et al, may be reproduced or copied in any format, electronic, print, et al, without written consent from Fidelis Wealth Advisors, LLC. Fidelis Wealth Advisors does not provide legal or tax advice. Please be advised to consult with your investment advisor, attorney or tax professional before making any investment decisions.