What’s In Your Buckets?
Now that you have the general idea of what Jamie McIntyre’s “Baby Bucket” strategy entails, let’s talk about what goes into each of these buckets.
Security Bucket
The security bucket is your security net. This is not a foreign concept to most people, but it is one that is largely ignored. This is your physical cash and savings, as well as anything else that lends you security—insurance, retirement accounts, annuation…
Don’t expect to make big returns on the investments in your security bucket. You should see some small percentage returns, but keep this money as fall-back money. This bucket gives you the security to afford larger, riskier investments that will net better returns.
Growth Bucket
Your next wealth creation bucket is earmarked for growth. Fill this bucket with the things that will grow your investments—the things that are a bit more risky than those in your security bucket.
Your growth bucket might be filled with things like companies (good quality companies), residential properties, share renting, etc.
Momentum Bucket
The momentum bucket would be filled with monies that will continue to support your investments—money that makes money. This is the place for the big risks. You may put a smaller percentage of your money into this bucket, but it has the potential to net the biggest returns, and so can perform as well or better than any other. Each gain in this bucket will snowball to even bigger and better wealth, but you have to take care not to fill this bucket first and not to place everything in this bucket, or you will be wiped out—you’ll defeat the whole purpose of the bucket concept.
Lifestyle Bucket
Creating wealth is really about creating the means to support the lifestyle you want, yes? It makes sense then that one of your buckets should be a lifestyle bucket—an investment that may make a meager return, could possibly be turned into a more modest return, and that meanwhile helps you achieve the lifestyle you want.
Your lifestyle bucket might include a farm or ranch property, winter retreat, restaurant, inn, and so forth.
You have to take care filling your lifestyle bucket, though. This is sort of like when we talked about the appearance of money—just owning a lifestyle investment does not make you rich. Don’t jump into filling your lifestyle bucket too quickly. Start small, and first make sure you fill the financial bucket that can support that kind of a lifestyle property.
I hope you are starting to get the idea and starting to see how this type of diversification can create a firm financial foundation for your wealth creation plan. Attending to each part of the wealth creation puzzle will ensure that you have the things you want, the money you want and need, and the investments to back them.
Sean Rasmussen
Wealth Creation Blog
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