Maybe you’ve never heard of the “golden buckets”.  Keep reading, and I’ll fill you in.

The Secret of the Golden Buckets is a great analogy to help you understand your financial situation, and what you need to do to improve it.

It was made popular by Mark Morgan Ford, an author and entrepreneur who has learned many times over how to become (and stay) wealthy.


The Challenge of the Well

There is a well with a sign on it:

My water flows at such a pace
Can’t speed it up — it’s not a race.
Fill three buckets with my water
It looks easy — but it’s harder.
One of them leaks like a sieve
But no hints to you I’ll give.
Fill three buckets to the brim
If you can do it — then you win!

Challenge accepted!

Hang on, this bucket is leaking a lot…  Dang, I could fill it up before it drains out if the well would pump faster…  Why do I have to fill all of these, anyway?


A Metaphor, Explained

You may have figured out what this challenge represents.

The well is your income — for most people, that means the salary from their job.  Money comes in at a consistent rate, and that’s what you use to fill the three buckets:  Spending, Savings, and Investing.

But the Spending bucket is full of holes — holes that you can’t repair.  Even if you plug one up, it seems to spring a new leak to replace it.  This represents your mortgage, tuition, bills, groceries, etc.

The Savings bucket is where you put money for large purchases, or your emergency funds.  This is money that you plan to use in the next few years, with the exception of the emergency funds (you hope never to use that, but you’re very glad to have it available when you need it).

The Investing bucket is separate because that is money for the future.  Money that you want to grow — for kids’ college funds, or for retirement.  You don’t plan on using it for a while.

Because of the leaky spending bucket, it’s hard to keep all three buckets full.  So what can you do?


There are Three Options

The first option is to plug up as many holes in the Spending bucket as possible.  This is the option most people choose when they are trying to improve their financial situation.

You can make smarter buying decisions, be good about following a budget, and use the leftover to help fill your Savings or Investing bucket.  But you can never plug all of the holes, so you can’t only rely on this option.

The second option is to try and increase the flow from the well.  You can do this by working overtime, on weekends, and even by becoming a more valuable employee and getting a raise.  This helps keep the Spending bucket from draining so quickly, which means there’s more money to save and invest.  (Good read for this option:  Automatic Wealth for Grads… and Anyone Else Just Starting Out)

The third option is one that many people don’t consider, though it seems obvious when you look at it in terms of this analogy:  Dig another well.

Yes, that means adding another income stream!  The best way to do that is to start your own business.  Something you can do on the side and build up over time to augment the flow of water coming into your buckets. (Good read for this option: Ready, Fire, Aim)


Where There’s A Well, There’s A Way

Like it or not, our economy has been increasingly rocky over the last decade.  There has been a fundamental shift toward individual entrepreneurship since the recent stock market slumps and crashes.  If you don’t want to get left behind, the best way forward is to make your own way forward.

Starting a business can take many forms.  It might mean you sell things on Amazon, it might mean you create a website with study materials for an exam, it could mean renting out real estate, or even creating your own nutrition bar.

If you feel intimidated about starting a business, don’t worry.  It’s easier than ever with the amount of online tools and mentors available.

You don’t have to do it all on your own.  There are plenty of resources out there (did you know you can get a free website from Google?).   And if you aren’t sure where to start, hit me up on Google Plus and I’ll help you find whatever you’re looking for.


Now, go fill those golden buckets!