Juggling various priorities can make money management seem difficult. For example, you may be preparing for a home purchase in Sydney, looking forward to a vacation in Bali, and establishing your emergency fund all at the same time. Bucketing is a useful way to organise your finances. With the bucketing strategy, you divide your money into separate pots. It will give you a clear view of your finances and enable you to reach your targets sooner than ever.
Understanding Your Financial Goals
This strategy requires a comprehensive analysis of your personal finance. Make a list of your short-, medium- and long-term goals. In most cases, short-term goals are related to covering your daily necessities and paying bills or saving up for something small. Medium-term goals include purchasing a new car, planning a wedding or saving money on an apartment renovation. On the other hand, long-term goals are usually focused on property investments, superannuation or saving for retirement.
After outlining your financial aims, you should assign them to different buckets. Most people choose three main accounts. The first one is responsible for handling your everyday finances. The second account can be used to store money that you can use to cover expenses during unexpected situations or when going on vacation. Finally, your third pot is your future – it should help you grow your wealth.
Implementing the Strategy
In order to put this strategy into action, you will need to open three bank accounts. Many banks in Australia offer multiple accounts with free of charge monthly account keeping fees, such as ING Australia. Give each account a proper name to avoid the risk of transferring the savings designated for a specific goal to your regular expenses account.
Secondly, automate your cash flow. Calculate how much money from your paycheck goes to each pot. Create automated transfers to distribute your income accordingly. As for the exact numbers, you can direct sixty percent of two thousand dollars per paycheck toward your everyday expenses, twenty percent toward your short-term savings and twenty percent toward your investments.
Managing Your Financial Buckets
As your finances and income may change over time, you should monitor them constantly and adjust them according to your needs. You can do it by setting aside some time for checking the status of each of your accounts twice a year. Firstly, check whether you have saved enough for an unexpected expense or a vacation. After reaching the target amount for one bucket, start transferring more money to your investment account.
On the contrary, if you have noticed the price growth of such necessities as groceries or utilities, reallocate your money appropriately. It will help you to cover your expenses even without touching your savings.
Enjoy Your Financial Freedom
Money management is not always easy and does not require extensive calculations and maths. With this effective strategy, you will be able to clearly understand where your money goes. Additionally, with bucketing, you will be aware of how much money you save monthly. So, grab this opportunity to get control over your finances and organise them properly!
