No matter who you are or what your financial state, we can all agree that life brings unexpected events. Even when you are cautious, setbacks can occur that could deter your efforts to build True Wealth and stay on track with your financial goals. For your financial goals that have a time horizon longer than twelve months we have long-term buckets; items like planning for retirement, college savings, or long-term care in a nursing home. What we’re addressing today is building a short-term bucket for the minor unforeseen scenarios such as car repair, home repair after minor damage, or maybe an unexpected illness.
All though long-term and intermediate-term buckets are vital parts of your financial plan, the short-term bucket is the first step in beginning to plan for your True Wealth goals.
Long Term Vs. Short Term Buckets: How different are they?
These investment buckets serve the same purpose: to help you stay on track while striving for True Wealth. The main difference is the size they are brought to and the time horizon for the investments. The intermediate-term bucket covers goals from two to five years. The long-term bucket is invested on a larger scale to accommodate goals with a time horizon of five years and beyond. The short-term bucket is built for the expenses that are bound to happen in life.
For example, in Illinois, we have volatile weather during the winter. An automobile expense is inevitable as a result of this. With the possibility of going in a ditch and needing a tow, hitting a patch of ice and tapping the back of another driver, or just getting rusted out by the constantly varying weather conditions a lot of repair expenses are bound to happen. By having the foresight and building a short-term financial bucket, one can avoid some of the pain of those expected expenses to cause a detour in their journey towards True Wealth.
Building Your Short-Term Bucket
First, assess the things you know will cause expenses. You’ll also want to build up 3-6 months salary in this bucket in addition to the emergency funds for unexpected expenses. This total is how much you will need in your short-term bucket to accommodate the financial downfalls that can occur. Saving for the short-term bucket doesn’t have to be in large amounts. You can set aside as little as 25 or 50 dollars a month and over time that can build up to help save you from dipping into other savings. Just remember, your savings method for the short-term bucket should be easily accessible. Accounts such as a savings account or a money market are best; some investment accounts or certificates of deposit can take a while to access. So however much you need to save, and however quickly you save it, accumulate it in an easily accessible account. After dipping into your bucket, always replenish it so you’re ready for the next challenge life throws at you. Whether saving for an inevitable car repair or a soggy basement flood remember to build a solid short-term bucket. This will ultimately keep you from getting off track when Building True Wealth.
Creekmur Wealth Advisors may be reached at 309-925-2043 or Info@CreekmurWealth.com.
Contributions by Connor Creekmur
Securities offered through Madison Avenue Securities, LLC (MAS), member FINRA/SIPC. Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM), a Registered Investment Adviser. MAS and Creekmur Wealth Advisors are not affiliated companies. AEWM and Creekmur Wealth Advisors are not affiliated companies. Investing involves risk, including the potential loss of principal. 596536