It’s time to put your money on autopilot

I’ve created a simple spreadsheet I use once a month that tells me where I should put my extra money, based on money flowing to different “buckets”. I find it pretty useful, and you might too.

Here is the spreadsheet

Who this is for:

• those who want to think less about money
• those that want to be financially secure
• the bucket recommendations are geared toward U.S. residents

What this requires:

• Consistently earning more than you spend each month
• Knowing your monthly expenses
• Putting your income automatically in bucket 1 (usually a checking account, but more on that later)

Here’s how it works. Each month:

1. Put in the current balance of your accounts
2. Do what the spreadsheet says

The Bucket Finance System — How it Works

Think of where you put your money as buckets. Your checking account is a bucket. Your savings account is a bucket. Your retirement account is a bucket, your credit card is a bucket.

You fill (or drain, in the case of debts) a bucket to a desired level, and then you fill (or drain) the next bucket with what you have left. The money flows from one account to another.

From the excess of one, the next is filled

The spreadsheet will tell you if a bucket is overflowing, and where to put the excess money you have.

Example bucket system. You’ll create your own based on your financial picture and preferences.

The first step to using this system is to create your buckets.

Each bucket should have:

1. A name
2. A current amount (AKA account balance)
3. A desired amount ($0 for debt)

Setting Up the Spreadsheet

1. Put the Bucket Name in column B.
2. Put the Current Amount in column C.
3. Put the Desired Amount in column D.

Using the Spreadsheet

Each month, put in a new current amount for each bucket. This process is made easier if you consolidate your financial information using a service like www.mint.com.

Look at the “Money Moves” column and transfer the money as specified.

Occasionally reassess your buckets (once or twice a year) to make sure they still align with your financial goals.

I hope you find this tool useful. I’d love to hear feedback in the comments section.

Bucket Recommendations

I relied heavily on this flowchart from the subreddit r/personalfinance to create my buckets. Here is my recommendation for your buckets, but you can do what you want.

Not everyone will have or need all of these buckets. Assess which are right for you.

Bucket 0: Contribute up to your employers match automatically for any employer-sponsored retirement accounts (like a 401k)

• Don’t leave money on the table

Bucket 1: Checking account. Desired amount: twice your monthly expenses

• Twice your monthly expenses gives you a nice cushion for any unusual spending patterns, so you feel secure in automatically deducting your expenses

Bucket 2: Emergency savings account. Desired amount: 1 month of expenses (to start)

Buckets 3, 4, 5…: High interest debts. Desired amount: $0

• Any debt over 10% interest rate, with the 3rd bucket being the highest interest (AKA the avalanche method), the 4th being the next highest, etc…

In the spreadsheet. The desired amount for “debt” buckets will always be $0, and the current amount will be shown with a negative sign. Ex: $1234 in credit card debt will be depicted as -$1234.

Debts are depicted as negatives and the desired amount is zero.

Bucket 2.5: Emergency savings account. Desired amount: 3 - 6 months of expenses

• Go back to your emergency savings account and increase your desired amount to 3 - 6 months of expenses

The next bucket is listed as Bucket 4, but it would just be 1 more than whatever is next after high interest debt.

Buckets 4 ,5,6… : Moderate interest debts. Desired amount: $0

• Any remaining debts with over 4% interest rate, with the higher interest first (just like with high interest debts)

Bucket 5: Roth or Traditional IRA. Desired amount: maximum limit

• Contribute up to the maximum yearly limit for a Roth or Traditional IRA. Resets to $0 for the next year
• I like the Vanguard Target Retirement Funds as an investment for how straightforward they are

Bucket 6: Required, large upcoming purchases. Desired amount: cost of purchases

• College, professional certifications, a car so you can get to work, etc…
• Set aside in a separate savings account

Bucket 7: Company retirement plan (usually a 401k). Desired amount: 15% pre-tax income

• You want your total yearly retirement savings contribution to be at least 15% of your current income at this point (including your IRA contributions)
• Desired amount is the amount contributed in that year, as it resets each year

Bucket 8: Health Savings Account (if eligible). Desired amount: maximum contributions allowed

• Desired amount is the amount contributed in that year, as it resets each year

Bucket 9: 529 Education Plan. Desired amount: up to maximum tax credit

• Desired amount is the amount contributed in that year, as it resets each year

Bucket 10, 11, 12…: Low interest debts. Desired amount: $0

• Any remaining debts with the higher interest first (just like with high and moderate interest debts)

Bucket 11: Other savings goals. Desired amount: customized to goal

• Vacation fund, saving for vehicle, down payment, etc…
• Recommend putting this in a second savings account than your emergency savings to avoid confusion

Bucket 7.5: Company retirement plan. Desired amount: maximum contributions allowed

• Look into any other tax-advantaged accounts you can
• At this point, start researching the FIRE movement and see if this is something for you

Bucket 12: Taxed Investments. Desired amount: to infinity and beyond

• I’m partial to the Vanguard Total Stock Market Index Fund (VTSAX) but you do you.

tl:dr

Use this spreadsheet to help decide where to put your extra money once a month. Use minus for debts, and check out this flowchart from Reddit to get some inspiration for your buckets. I found this useful, hope you do too!