The Future is NOW! A further explanation of Your 3 Financial Buckets

I always thought that saying was stupid. “The Future is Now!” That doesn’t make any sense. The future happens later, and right now you have creditors to pay. So you should take care of your old debt before considering the future, right? Those bills are sitting on your counter NOW! Those collectors are calling NOW! That other investing stuff comes later, right?

Absolutely wrong! The problem with this way of thinking is that it causes you to get defeated by upcoming obligations and financial “surprises”. You’re spending every dime you can spare on paying down debt, and then, BAM! You get hit with an unexpected car repair, an appliance that needs replacing, a medical emergency, etc. And you have no way of paying for it except to take on more debt. And all your hard work goes to waste – so why even bother…

A better approach is to understand that short-term expenses – those things happening in the next year – are going to happen in the next year. Your mid-term expenses – those things happening in the next 2-5 years – are going to happen in the next 2-5 years. Etc…

That’s Pretty Obvious…

Yes, it’s obvious. But those caught up in debt very often fail to believe it. You pay your extra money towards your debt, and your short-term expenses cause you to take on more debt this year. Then the mid-term expenses start hitting you, and you’re still reeling from the short-term expenses that you couldn’t afford.

And if you continue this cycle, pretty soon your long-term expenses are upon you, and you have absolutely no way to pay for them because you still have short-term and mid-term expenses that still aren’t paid for.

A Better Way of Thinking:

In the article, “The Half-n-Half Way to Improve Your Finances”, I suggested that you should begin dividing your “extra money” into two parts: Half-n-Half. (“Extra Money” is defined as money you save by reducing your spending, earning more money at work, or earning more money on-the-side.)

Use half of your “extra money” to pay down debt. Use the other half to fill your 3 Buckets. I’ll get in to more specifics on this in future articles. You still may be resisting the idea and it’ll be extremely easy to pull this savings out before it’s intended use comes around. But maybe it’ll be helpful to think of it this way:

Future Expenses = Future Debt

Your 3 Buckets are future expenses, i.e. future “debt”. So by setting aside half of your “extra money” to fund these future expenses, you’re not actually “Saving” anything. All you’re doing is paying off your future debt NOW. That “Future is NOW” thing kinda makes sense all of the sudden.

Again, half your “extra money” is paying down past debt and the other half is there to pay for future debt. So really, ALL your “extra money” is going towards debt this way. But the beauty of it is that your future debt will cost you far less this way, because you’ll be able to pay for it in cash without incurring a nickel’s worth of interest. And really, interest is the reason debt is so crippling and debilitating.

Related Articles:

• Your Short-Term Bucket
• Two Long-Term Bucket Vehicles to Start With
• The Long-Term Bucket
• How Do You Fill the 3 Buckets?
• S.P.F. Your Debt – A Formula to Pay Off Your Debts Without Getting Burned