A lot of times clients will ask how I invest money for my family. That’s a great question, and one I will always take the time to answer and expand on as I pride myself on being completely transparent. The first thing I start with and end with is, be consistent! Consistency is key in anything I do in life and investing carries the same weight. I follow these simple rules and they are by no means anything fancy, but it takes consistency and discipline. 50/15/5
- 50% is living day to day with some fun mixed in.
- 15% in a retirement bucket.
- 5% in a taxable savings bucket.
- 30% goes to Uncle Sam.
Day to day bucket- My family and I try to be consistent (that word again) and live off 50% of our income. Now of course there are instances when we spend beyond that, but we do try to stay dedicated to our 50% rule. If we don’t spend the full 50%, we will transfer the remaining funds over to savings until we need it, or possibly invest it.
Retirement Bucket- We put at least 15% into our retirement plan at a bare minimum. At this time, we are using the Roth 401(K) plans as taxes are at a historical low, but this could change if taxes readjust in the future “I recommend that you always speak with a financial advisor or CPA before making any changes”. We don’t utilize the company match within the plan. I feel that money can be better used to invest into the company and ourselves. The investments we use are typically chosen through cost and performance. This typically leads us to ETF’s and active mutual funds for the trickier sides of the markets.
- DGRO is an example, we also look at REITS and alternative investments “alternative investments are not for everyone and you must be an accredited investor”.
We love utilizing our HSA, as it has massive benefits for our long term plan.
Taxable Savings Bucket- We will put at least 5% of income into this bucket. We might be a little different for this category, as we like to invest and not leave excess cash in non-investment accounts. I know the current environment has higher yield savings, but we try to keep this bucket as growth and not focus on yield or dividends. We look at growth, an example would be QQQ or IMCG. Markets will fluctuate. When you see your taxable savings going down it can be stressful. However, try to remember this, on the way down it is a great way to buy sound companies at a discount.
Lastly, and possibly my wife’s favorite bucket, is our Donor Advisor Fund. We donate every year to this fund for charitable contributions.
Uncle Sam always gets their cut as Ben Franklin said, “the only constant in life is death and taxes”.
I know this strategy isn’t for everyone, but that’s why it’s important to build a personal financial plan with a financial planner you trust. That’s the beauty of life, everyone is different and every situation is different. Choose to be consistent with your finances, you’ll be amazed at how far it can take you.
– Chris Heisten
“This blog post is not a substitute for personal financial or investment advice. Your situation may vary, possibly materially, from the details contained in this article. Readers are encouraged to speak with a financial advisor to discuss their particular circumstance and planning needs”