Splitting your money into different ‘buckets’ is a method of budgeting that has worked for a lot of people.
The idea is that your buckets represent your priorities – which could include anything from short-term goals, such as paying off debt or covering bills, to long-term goals, such as financial independence or buying a house. Then each time you’re faced with an expense, you’ll have enough in that bucket to cover it.
Here’s what we learned when we asked our Spaceship community about how we bucket our money.
1. Some of us have buckets for all of our money; others just for our savings.
James has a savings focus for his buckets, naming them:
- Future house
- Investment fund
- Opera career
While Chris has buckets for what seems like everything. He has roughly 12 main buckets called ‘kids’, ‘transport’, ‘work & study’, etc, and each has its own sub-buckets.
His ‘kids’ bucket, for example, is broken down into kids - childcare, kids - activities & entertainment, and kids - other.
“I think the way my money is ‘bucketed’ up will change with my life stages. The way I see it, it only makes sense to create a bucket that your transactions have a split for,” he said.
2. Some of us credit the bucket system with turning around our finances.
Katie said, “I definitely have a 'bucket' system to thank for having my finances in order. I began using separate bank accounts after starting my first adult job post-uni. I found that going from a poor uni student to a professional I was spending all my pay, until I read the Barefoot Investor and was inspired by his bucket system. I've tweaked it over the years, but currently have six accounts.”
3. Some of us are strategic about how we fund our buckets.
Here’s how Katie splits her buckets.
“1. Long Term Goals: 33% of my pay is direct debited between this account, Spaceship and another investment account.
2. Bills: I calculated the total amount I spend each year on bills, then divided this into how much I need to put aside each pay.
3. Emergency Savings: contains three months of living expenses.
4. Horse Feed Fund: 10% of my pay goes to cover my horses' large feed bill.
5. Rent: an account which my and my partner's weekly rent money goes into.
6. Everyday Spending: the rest of my pay goes to this account for groceries, fuel and treats etc.”
4. Some of us have buckets for our best and worst-case scenarios.
John said, “One of my account buckets is named ‘Early Mid Life Crisis’ where I am saving up for an EH Holden, which is something l have always wanted. The goal is quite difficult though having four children and also saving for a larger house.”
While Shaun said, “I have a Dream bucket. So this is my main savings for the Australian dream and one day I hope to achieve it and get a house.
(I also have an) OF Fund (Oh F**k Fund), because in life there may come a time when you go, "Oh F**k.” When this happens this is my safety net account to cover those costs so I don't have to dip into my major savings (Dream) account.”
5. Some of us keep it simple, others more complex.
Daniel named his buckets:
- Play money (weekly allowances).
- Stay money (house deposit).
- Runaway money (holiday fun).
While Dan (a different Dan) has 13 buckets, including a freelance income bucket, a tax savings bucket for his freelance business’ tax expenses, pharmacy costs, and costs for the medical equipment needed to manage his diabetes.
6. Some of us use our buckets to invest in ourselves and affirm our dreams.
May said, “I have six buckets, including one called ‘education/self’, that helps me keep focused on personal and professional development. I also have a ‘give’ bucket that means when I see the perfect treat for someone else, or want to support a cause, I’ve got money waiting for it.”
Christina said, “I name my buckets with words that represent the feeling that goes with the goal. I have a bucket for travel money and I named it ‘freedom’ because that’s what I want to feel when I travel.”
What should you have in your buckets?
The takeaway here is that personal finance really is personal – and your budget should reflect you as a person, with thought put toward your life right now, and the future you want to live.
It might take a few goes to figure out what works for you, but we believe you can do it – whether you use the bucket method of budgeting, or a different method entirely.
