I am happy to introduce to you Annelise Bretthauer from RiseupFP. She is a certified financial planner. She also deals with chronic illness. She’s going to help us create a saving plan for the impact of chronic illness.
A saving plan for the impact of chronic illness is so important. A savings plan is just a fancy way to say a budget. When people think about the word budget they usually think they need to restrict, but the truth is, when done correctly, budgeting can be very freeing! Today, you will learn a budgeting technique that’s easy to use and simple to implement called the bucket system.
In its simplest form, the system has four buckets. The spending bucket, savings bucket, storage bucket, and health bucket. Each bucket has a purpose so keeping track of your spending doesn’t have to be overwhelming. Here is how each bucket works.
The Four Buckets
The Spending Bucket is used for day to day spending such as gas, phone, utilities, dining, groceries and ATM withdrawals.
The Savings Bucket is used for long term goals such as buying a house, retirement, expanding your family or starting a business.
The Storage Bucket is used for future spending that typically occurs within the year. For example, holiday spending, property taxes, home improvement projects, car maintenance, etc.
The Health Bucket is what makes chronic illness warriors spending plan slightly different. This bucket is for all things health. This includes copays and coinsurance for covered health expenses plus alternative care expenses that may not be covered by your insurance including medications and supplements.
Now that you know what each bucket is for, the next step is implementation. This part involves your bank. You will need four separate accounts. One for each bucket. Your savings bucket should be a savings account. Your spending bucket should be a checking account. If you don’t mind carrying around a couple of debit cards, I recommend checking accounts for your storage and health buckets as well.
The hardest part is knowing how much to fund each account. This may take some trial and error and that’s okay. For those who are salaried, once you are comfortable with your ratios, set up automatic transfers on the day you get paid to each account. For those of us who are self-employed with uneven income, this can be tough. If you are self-employed or have uneven income here are a couple of options for implementing your savings plan.
Option #1: Even though your income is uneven, you can build your savings ratios around the amount of income you can reasonably expect each month. Any additional income can be allocated at the end of the month.
Option #2: If your income is so uneven you really don’t know what to expect each month, set a financial planning meeting with yourself each week to determine how much you can afford to transfer cash from your spending account to your other buckets. My husband and I have implemented Financial Planning Saturday. A quick 15-minute conversation we have each week about our spending and savings goals. Doing this weekly allows you to adjust as you need to.
Although it does take a bit more diligence, using the savings bucket approach is totally doable even if your income is uneven. The contributions to your savings buckets may be uneven but your savings goals will remain just as if you were a salaried employee. The final step is simple. Use each account for its intended purpose. Release the stress that comes along with budgeting and enjoy the freedom of your spending plan!
About the Author
Annelise Bretthauer is a CERTIFIED FINANCIAL PLANNER™ professional and business owner who helps families navigate their world when facing chronic disease. She is a Crohn’s Disease warrior herself and is on a mission to further conversations about money and personal finance in the chronic disease community. Along with working one on one with clients, she is creating a number of free courses and a personal finance guide planner for our community. Join her tribe at www.RiseUpFP.com or follow her on Instagram @AnneliseBretthauer to be the first to know when these resources launch.
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