Bucket #2: Why Your Plan Needs “Safe Growth” Assets

Every financial plan needs a place where money can enjoy safe protected growth, preferably with contractual guarantees, without putting your future at risk.

Recently, we’ve been explaining our Three Bucket Strategy. I’ve heard some great feedback from readers who are grateful for the simplicity of the system. Of course, this doesn’t represent the entire financial plan. Estate planning, tax planning, and many other aspects are required to create a comprehensive financial plan.

If you missed our last article covering the basics of Bucket #1, you can read it here.  Bucket #1 is for your liquid cash so you can 1) handle emergencies (without credit cards or other loans) and 2) take advantage of opportunities when they arise.

I personally keep my Bucket #1 filled up with six months of gross income at all times. And when I use money from Bucket #1, I always prioritize topping it off ASAP.

This is the first layer of protection in any solid financial plan.

In today’s article, I want to turn to Bucket #2, which we call the “safe growth” bucket.

This goal of this bucket is simple: Protect the money. Grow it steadily. Keep it insulated from the ups and downs of the market with contractual guarantees,

This is your “sleep well at night” bucket.

When markets get noisy, your “safe growth” bucket stays quiet and when the market volatility surges, this bucket holds its value without incurring losses.

Of course, not all of your money should be in Bucket #2, especially when you in your early working years. But as you get closer to your retirement years, it can be wise to increase the amount of money in this bucket. .

Just a few examples of safe growth assets include CDs, cash-value life insurance, fixed indexed annuities, and inflation-protected securities (TIPS).

These are obviously not “sexy” assets, but that is the point.

These are protected growth assets that come with contractual guarantees.

Again, Bucket #2 assets are not designed to create wealth but to protect it.

In my opinion, a strong financial plan blends liquidity (Bucket #1), safe growth assets (Bucket #2), and risk growth assets (Bucket #3).

Some people have too much money in Bucket #3 and not enough in Bucker #2, for their age.

Others, who may be too conservative, may have too much in Bucket #2 and not enough in Bucket #3.

Others may have an empty Bucket #1.

My greater point is this: All of us would do well to think about our assets using this simple 3 Bucket Strategy as proper balance is key to long-term success.

Next time, we’ll look closer at Bucket #3, which is focused entirely on non-guaranteed “risk growth” assets. Stay tuned!

Blessings!

Related Resources

• Introducing the Three-Bucket Strategy: A Simple Way to Bring Clarity to Your Finances
• Bucket #1: Building Your Financial Foundation With Liquid Assets
• Bucket #2: Why Your Plan Needs “Safe Growth” Assets
• Bucket #3: Understanding the “Risk Growth” Bucket
• Five Levels of Financial Freedom

incoming searches: Bucket 2 safe growth, three bucket strategy safe growth

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