My Mid-Term Bucket #FinancialFitness2018 #TheBucketStrategy

Over the last two weeks we talked about implementing the Bucket Strategy, and I discussed divesting from Bank of America in my first bucket; my checking and savings accounts. The next bucket is my mid-term bucket, and that is what I’m going to be focusing on today.

As a reminder, my mid-term bucket is savings that I won’t need access to for a few years. A lot of people, especially millennials, aren’t really using this bucket. They have money in their savings account and they‘re contributing to a retirement account, but that’s it. It’s time to take all the cash that you’ve saved up in your first bucket and move it over into the next one, the mid-term bucket. 

This was exactly my problem. I had accumulated too much money in my checking account. This sounds like a good problem to have, but it means that I’m making a mistake. By keeping so much money in cash, I am losing money to inflation and missing out on the returns I would get in the stock market. To resolve this, I figured out how much money I should keep in cash, and how much I was comfortable setting aside for 5 – 10 years. Then I opened a brokerage account with Pershing, and did an ACH transfer to move the money over.

I did this a couple weeks ago. I decided to buy some stock, but left the rest in cash while I waited to see how the market would perform. I am still watching the volatility, and when I feel comfortable with it, I am going to purchase a number of socially responsible mutual funds that fit my risk tolerance. It will likely be a 60/40 portfolio, or 60% equities and 40% bonds. Since I will need access to this money in the future, I don’t want to be as aggressive as I would in my longer term/retirement bucket.

As that time horizon gets shorter, I will pull back even more on equities, so that I have the funds available for when I need them.

And there you have it! My mid-term bucket.

Next week is a big week! We’re going to be talking about the retirement bucket. There will be a lot to cover, but this is one of the most important subjects, so stay tuned!

#FinancialFitness2018 #TheBucketStrategy