Buckets Method

The Buckets method is a variation of what’s called “Envelope Budgeting.” I didn’t invent this method. I don’t even consider it an invented thing. It just seems like a logical thing to do with money. You could do this with physical envelopes or the Buckets app.

Steps¶

In essence, you do this every month:

1. Get a bucket
2. Make it rain!
3. Use it up
4. Adjust

Here’s each step in more detail. If it helps, imagine you have literal buckets filled with money.

1. Get a bucket¶

Write down all the kinds of things you buy. Be detailed or general—it’s up to you. Here’s an example list to get you started:

1. Charity
2. Groceries
3. Eating out
4. Rent/Mortgage
5. Health insurance
6. Health expenses
7. Clothing
8. Gas
9. Car insurance
10. Car repairs
11. Car registration
12. Car payment
13. Utilities
14. Fun
15. Trombone lessons
16. Tuition

Then write down things you want to save for:

1. Vacation
2. Retirement
3. A new car
4. A Costco sized jar of cashews

Now make a bucket for each thing on your lists.

A good rule of thumb is: if you know ahead of time how much an expense will be, make a separate bucket for it. For instance, I know that my rent is $1000 per month, so I have a Rent bucket. And I know that $5000 in tuition will be due in September so I make a Tuition bucket.

2. Make it rain!¶

At the beginning of each month fill up your buckets with what you expect to spend that month.

Regardless of how often you’re paid, many expenses happen on monthly or multiple of monthly cycles, so we budget monthly to prepare for those expenses.

3. Use it up¶

Throughout the month, as you spend money, take it out of the corresponding bucket.

4. Adjust¶

At the end of the month, move money between buckets so that none of the buckets have a negative balance.

Start the process over again by making any new buckets you need, kicking buckets you don’t, and filling them back up.