In this three-dimensional world, the FORTH DIMENTION is TIME⌚, which always moves forward and can NEVER be reversed.
An Individuals financial Journey is also bounded by TIME⌚. It has been observed that the priority for investing towards Retirement comes last for an Individual as the time span of 30-35 years seems very long.
FOR YOU, may be the retirement is years away, ⏳But believe me Time moves on at a great speed and thus you need to prepare yourself from now onwards because of the fact that your earnings will be negligible during your retirement phase but your expenses will continue ever after.
If you want to save for your retirement, Mindset holds the key.
🎯Visualize your financial goals with clarity, as this helps your mind to focus on what you want to achieve.
📌The Three bucket strategy, also commonly referred to as the “Retirement bucket strategy”, provides a practical framework to navigate & enjoy a steady source of income especially during retirement phase by balancing short-term needs with long-term growth, offering stability, income, and growth potential throughout one's retired life.
Key factors to consider while building retirement buckets are -
👉 How much of corpus is required for retirement?
👉 How much will be required for monthly expenses?
👉 Can we handle unexpected expenses?
👉 How tax-efficient are these investments?
👉 Who will manage the buckets? Ourselves? A professional or a family member.
The Three Bucket Strategy is a simple yet effective approach for managing your finances. In this strategy, your investment portfolio is divided into three different "buckets," each earmarked for specific purposes and timeframes to ensure steady income while managing risk.
🔑👉 Bucket One: Its the most important bucket as I call it the INCOME GENERATION BUCKET. This bucket holds funds for day today expenses, for immediate living expenses and short-term needs.
To create the first bucket, we need to calculate our budget for monthly living expenses and then add in extra cash for an emergency fund in case we encounter a surprise expense.
So, Create a projection of your expenses during the next several years, factoring in inflation. Therefore i always tell you to TRACK & write your expenses.
You need to start by having a minimum of 12 months of living expenses saved ...
Bank Deposits or Post office schemes like MIS, Senior Citizen Saving Schemes can be used for covering living expenses. Some percentage of Funds can also be invested in SWP Systematic withdrawl Plan offered by Mutual Funds. Its the reverse of SIP.
Another system which I religiously follow is called a LADDER SYSTEM. Its a very simple system but its too difficult to execute as its all a MINDSET GAME.
To build this risk free system, For me It took 120 continous months of dedicated savings without any break (2011 to 2021). Its a sort of LIFE LONG PENSION PLAN💰.
In a ladder system, Estimating & evaluating your future requirement is very important & accordingly you deposit an xyz amount every month. Keep on depositing the amount religiously with absolutely no withdrawls. Let me repeat DO NOT withdraw any amount from this account. This is a CORPUS that you are creating for yourself. Its a MINDSET GAME. Eventually After the end of 10th Year, your invested amount gets matured every month.
Now you Withdraw the interest amount & re-invest the principal amount again. It acts like a LIFE LONG PENSION💰. The interest amount gets accumalated in the 1st bucket & The principle amount gets transferred to the 2nd Bucket. This becomes a never ending process. This is known as a LADDER SYSTEM.
MUTUAL FUNDS SIP is another good option but it needs to be continued for atleast 15 to 20 years and can be used as the 2nd or 3rd bucket for young Investors.
Lets move on to the 2nd BUCKET.
🔑👉 2nd BUCKET is
Designed for medium-term needs.
Again this bucket includes long term Govt invedtment schemes like PPF, investments like Banks or 10 years Kisan Vikas Patra. These investments will help you to refill the short-term bucket as & when it gets depleted.
Also, the second bucket is the time when you should redeem your Mutual Fund SIPs. Create a CORPUS out of this and start a SWP systematic Withdrawl Plan offered by Mutual Funds.
If any surplus fund is available, then invest the same in the third bucket in the form of equities or Mutual fund schemes based on your risk profile.
Continue if possible with your Mutual Funds SIP investment, which can be a great tool to fill the 3rd Bucket.
The main purpose to invest in Mutual Funds SIP is CAPITAL APPRECIATION.
This leads to our 3rd bucket.
🔑👉 3rd BUCKET has an allocation designed for long term needs & helps you to grow your portfolio.
This bucket is for absolute long-term growth and typically consists PPF, KVP or equities or equity Mutual funds.
It's aimed at sustaining and growing wealth over the long run to replenish the other buckets during retirement phase.
While equities carry higher risk due to market fluctuations, it has the potential for higher returns over an extended period of time.
The idea behind putting certain types of assets into each bucket is that it allows you to put more aggressive assets in your long-term bucket with the risk tolerance to ride out market ups and downs. By having other buckets to cover your near-term expenses, you hopefully don't need to worry about being pressured to sell some long-term investments from the third bucket in case of a market downturn because you won't need to tap into them for several more years.
💡Benefits of three Bucket Strategy:
1. Regular Income: Provides a structured approach to generating a steady income stream throughout retirement.
2. Flexibility: Allows for adjustments based on changing market conditions, lifestyle needs, or unexpected expenses.
3. Risk Management: Helps manage market volatility by separating funds based on time horizons and goals, reducing the impact of market fluctuations on short-term needs.
4. Psychological Comfort: Offers peace of mind knowing that immediate expenses are covered while long-term growth opportunities are still in place.
Always remember, "Investing is not gambling. It's about putting your money to work for you. There are many different ways to invest, so it's important to do your research and find an investment strategy that's right for you."
Be aware of the fact that the world of finance is full of deception and manipulation as there are many myths and misconceptions about money that are perpetuated by the industry which confuses individuals from taking informed decisions about their finances.
Give a KIS to your investments....
KIS means KEEP IT SIMPLE.
Keep your Investments as Simple as possible...
Dont get mesmerised by the financial Jargons used by financial sales specialists.
Invest in what you understand. Don't invest in complex financial products you don't fully understand. Embrace continuous improvement by regularly reassessing your priorities and eliminate financial products as per your goals.
Life is a journey🚣, not a destination. Take time to appreciate the process of pursuing your goals. Find joy in the small steps along the way.
Be a life long Longer & Keep Learning...
An Individuals financial Journey is also bounded by TIME⌚. It has been observed that the priority for investing towards Retirement comes last for an Individual as the time span of 30-35 years seems very long.
FOR YOU, may be the retirement is years away, ⏳But believe me Time moves on at a great speed and thus you need to prepare yourself from now onwards because of the fact that your earnings will be negligible during your retirement phase but your expenses will continue ever after.
If you want to save for your retirement, Mindset holds the key.
🎯Visualize your financial goals with clarity, as this helps your mind to focus on what you want to achieve.
📌The Three bucket strategy, also commonly referred to as the “Retirement bucket strategy”, provides a practical framework to navigate & enjoy a steady source of income especially during retirement phase by balancing short-term needs with long-term growth, offering stability, income, and growth potential throughout one's retired life.
Key factors to consider while building retirement buckets are -
👉 How much of corpus is required for retirement?
👉 How much will be required for monthly expenses?
👉 Can we handle unexpected expenses?
👉 How tax-efficient are these investments?
👉 Who will manage the buckets? Ourselves? A professional or a family member.
The Three Bucket Strategy is a simple yet effective approach for managing your finances. In this strategy, your investment portfolio is divided into three different "buckets," each earmarked for specific purposes and timeframes to ensure steady income while managing risk.
🔑👉 Bucket One: Its the most important bucket as I call it the INCOME GENERATION BUCKET. This bucket holds funds for day today expenses, for immediate living expenses and short-term needs.
To create the first bucket, we need to calculate our budget for monthly living expenses and then add in extra cash for an emergency fund in case we encounter a surprise expense.
So, Create a projection of your expenses during the next several years, factoring in inflation. Therefore i always tell you to TRACK & write your expenses.
You need to start by having a minimum of 12 months of living expenses saved ...
Bank Deposits or Post office schemes like MIS, Senior Citizen Saving Schemes can be used for covering living expenses. Some percentage of Funds can also be invested in SWP Systematic withdrawl Plan offered by Mutual Funds. Its the reverse of SIP.
Another system which I religiously follow is called a LADDER SYSTEM. Its a very simple system but its too difficult to execute as its all a MINDSET GAME.
To build this risk free system, For me It took 120 continous months of dedicated savings without any break (2009-10 to 2019-20). Its a sort of LIFE LONG PENSION PLAN💰.
In a ladder system, Estimating & evaluating your future requirement is very important & accordingly you deposit an xyz amount every month. Keep on depositing the amount religiously with absolutely no withdrawls. Let me repeat DO NOT withdraw any amount from this account. This is a CORPUS that you are creating for yourself. Its a MINDSET GAME. Eventually After the end of 10th Year, your invested amount gets matured every month.
Now you Withdraw the interest amount & re-invest the principal amount again. It acts like a LIFE LONG PENSION💰. The interest amount gets accumalated in the 1st bucket & The principle amount gets transferred to the 2nd Bucket. This becomes a never ending process. This is known as a LADDER SYSTEM.
MUTUAL FUNDS SIP is another good option but it needs to be continued for atleast 15 to 20 years and can be used as the 2nd or 3rd bucket for young Investors.
Lets move on to the 2nd BUCKET.
🔑👉 2nd BUCKET is
Designed for medium-term needs.
Again this bucket includes long term Govt invedtment schemes like PPF, investments like Banks or 10 years Kisan Vikas Patra. These investments will help you to refill the short-term bucket as & when it gets depleted.
Also, the second bucket is the time when you should redeem your Mutual Fund SIPs. Create a CORPUS out of this and start a SWP systematic Withdrawl Plan offered by Mutual Funds.
If any surplus fund is available, then invest the same in the third bucket in the form of equities or Mutual fund schemes based on your risk profile.
Continue if possible with your Mutual Funds SIP investment, which can be a great tool to fill the 3rd Bucket.
The main purpose to invest in Mutual Funds SIP is CAPITAL APPRECIATION.
This leads to our 3rd bucket.
🔑👉 3rd BUCKET has an allocation designed for long term needs & helps you to grow your portfolio.
This bucket is for absolute long-term growth and typically consists PPF, KVP or equities or equity Mutual funds.
It's aimed at sustaining and growing wealth over the long run to replenish the other buckets during retirement phase.
While equities carry higher risk due to market fluctuations, it has the potential for higher returns over an extended period of time.
The idea behind putting certain types of assets into each bucket is that it allows you to put more aggressive assets in your long-term bucket with the risk tolerance to ride out market ups and downs. By having other buckets to cover your near-term expenses, you hopefully don't need to worry about being pressured to sell some long-term investments from the third bucket in case of a market downturn because you won't need to tap into them for several more years.
💡Benefits of three Bucket Strategy:
1. Regular Income: Provides a structured approach to generating a steady income stream throughout retirement.
2. Flexibility: Allows for adjustments based on changing market conditions, lifestyle needs, or unexpected expenses.
3. Risk Management: Helps manage market volatility by separating funds based on time horizons and goals, reducing the impact of market fluctuations on short-term needs.
4. Psychological Comfort: Offers peace of mind knowing that immediate expenses are covered while long-term growth opportunities are still in place.
Always remember, "Investing is not gambling. It's about putting your money to work for you. There are many different ways to invest, so it's important to do your research and find an investment strategy that's right for you."
Be aware of the fact that the world of finance is full of deception and manipulation as there are many myths and misconceptions about money that are perpetuated by the industry which confuses individuals from taking informed decisions about their finances.
Give a KIS to your investments....
KIS means KEEP IT SIMPLE.
Keep your Investments as Simple as possible...
Dont get mesmerised by the financial Jargons used by financial sales specialists.
Invest in what you understand. Don't invest in complex financial products you don't fully understand. Embrace continuous improvement by regularly reassessing your priorities and eliminate financial products as per your goals.
Life is a journey🚣, not a destination. Take time to appreciate the process of pursuing your goals. Find joy in the small steps along the way.
Be a life long Longer & Keep Learning...
This is Biswajit Roy, signing off for Today, in case you have doubts do connect with me @ 9246271167. Happy Investing.
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