Investing Buckets – You Can’t Miss What You Never Had


Let’s face it…saving money is hard. It’s so easy to go online where our credit cards are already saved to our account and buy stuff we don’t really need with money we don’t have to impress people we don’t care about. As millennials, this is how we are conditioned.

But if you want to invest your money efficiently then there is no escaping the fact that saving is a crucial part of the equation.

My wife and I have implemented a method of saving that works really well for us and I want to break it down for you in this post. It’s not complicated, we definitely aren’t the first couple to do this, but I have seen it work wonders for us.

Put your money in different buckets

Start thinking about your investments as buckets. We know that in order for us to fill up our buckets with our targeted funds we need to have two things happen.

  • That money needs to be automatically invested
  • It can’t hit our joint checking account

The truth of the matter is if there is money in our joint checking account (we will spend it). We have decided that is our disposable income. This is money we eat out with, buy groceries with, and treat ourselves with.

Everything else that we invest goes into our buckets. You have to have the money go in there the same day as your paycheck. Some employers will even let you split your paycheck, if they do allow this, take advantage of it.

You can’t miss what you never had. To make things even more efficient consider doing this when you get a raise. When most millennials get a raise they want to buy a new car or pay off their student loans. Everyone’s situation is different but the last two raises I got went into my investment buckets. We are fortunate that we can live off a portion of our paychecks and everything else goes into our future.

Example of my buckets

I currently have 4 main buckets. This might change or it might not. But for now, this is where I am putting my extra income.

Bucket #1 – Company matched 401k. If your company matches you dollar for dollar up to a certain point then you should focus your attention here. Try and put as much as you can into your 401k because that match money is…FREE money. It also is a great habit to always contribute to some sort of retirement plan. You should just assume you will only see 70% or less of your paycheck.

Bucket #2 – ETFs. I am a pretty big fan of exchange traded funds. They trade like stocks where you can buy a share for a price, but they are built like mutual funds where they are a collection of stocks. The fund is generally built around an objective like modeling the S&P 500. If you want a good ETF to research and start looking into then I recommend VTI (Vanguard Total Stock Market ETF). You can go directly to Vanguard and buy the ETF (which isn’t a bad idea because their fees are low). But I buy this ETF through Betterment.com and some other specific stocks with the Robinhood app.

Bucket #3Prosper.com is a peer to peer lending platform that allows you to buy part of a note. Generally speaking, you buy a part of a loan. There are two sides to Prosper, people who want to borrow money and people who want to lend their money. I lend people the money at an interest rate determined by Prosper. I am acting like a bank and getting in on interest payments. They are small (you can fund a loan for as little as $25) but the idea is that you buy enough notes to be diversified and make more than you would if you money was just sitting in a savings account.

Bucket #4 – A regular old savings account. Conventional wisdom states that you should have at least 1-3 months of your living expenses in savings. For most millennials, this is extremely difficult with student loan payments. But even saving $50-$100 a month is a great habit. I love having money in savings for a couple reasons. The main reason is that it’s liquid, I can access it if I need it and it’s peace of mind that I know I can pay for something that comes up if I absolutely have to.

Your bucket strategy

I can’t tell you how much to put into invest or even which types of investments are best for you. But I can tell you that if you think you are going to have the discipline to move money once it comes into your every day checking account you are wrong.

But what I can do is give you a couple example strategies that might help.

Situation #1 – You have $500/mo to invest. I would put the first 4 payments into your savings account (hide the account on your mobile app). With the last 8 (assuming you do this all year) I would put in your company sponsored 401k or a self-directed IRA.

Situation #2 – You have $750/mo to invest.  I would put 75% of that into a 401k and 25% into savings. That would give you $6,700+ in your 401k. This should get you close to your match, if not then adjust the 75% up to where it would.

Situation #3 – You have $1,000/mo to invest. I would put 60% into your company 401k, 20% into a savings account, and 20% into a Betterment or Robinhood account so you can start doing your own research and building your investing knowledge. You might have to find some value stocks but it will teach you how to value a stock and make your knowledge of what is in your 401k well rounded.

Situation #4 – You have $2,000/mo to invest. You have some tough decisions to make. You can max out your 401k (but I am not a fan of that). You can spread your money out into a 401k, stocks, and some other stuff like I showed above. Or if you wanted to use some leverage you could start looking at getting into real estate. I will have a post on real estate at a later date. But if real estate is an option you are open to I would say a bigger savings account is wise to give you the capital to get into an investment property.

Wrapping it up

At the end of the day, the most important thing you can do with your money is to hide it from yourself. Turn auto pay on and pay your accounts like clockwork. Being a millennial means you probably have more liabilities than assets so I know it can be frustrating if you don’t have extra money laying around to invest. Don’t stress it. Anything you can save is better then nothing at all. Most Americans don’t have anything saved for retirement so the fact you are worrying about this at a younger age is a great thing.

Find an investment you understand and can clearly explain to yourself and others why you are investing in it and how it is going to help your each your financial goals.


About The Author – Alex

I am on a journey of personal growth. I love learning about investing strategies and ways to actively improve my life. Follow along and connect with me if you are looking for a path to financial freedom and becoming the best version of yourself.

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