The “bucket” budgeting method that saves 30% of our income each month


  • I hate the idea of ​​budgeting, but I’ve found a way called “bucketing” that works much better for me.
  • Basically my husband and I have many different purpose accounts that we allocate money to.
  • This helps us save 30% of our income each month and fully fund all of our retirement accounts.
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I don’t like the word “budget”. It sounds restrictive and reminds me of saving receipts and using spreadsheets, which neither appeals to me. I To do like the idea of ​​organizing my finances and knowing where my money is going so that I can reach my financial goals, however.

So my husband and I came up with a system that I like to call “bucketing” rather than “budgeting”.

This means that we spread our money across multiple bank accounts each payday, with each account having a specific purpose. It works for us because it gets the job done without requiring us to keep track of every dollar – an idea I hate and know I wouldn’t stick to.

Some financial goals that my husband and I have already achieved with this method include paying off our mortgage early and saving at least 30% of our total income each year for early retirement.

With our savings, we are able to fully fund my husband’s Savings Plan (TSP) and our two Roth IRAs each year. We also make monthly contributions to our daughters’ 529 education savings plans and can pay for major household purchases in cash. For example, we just paid cash for the construction of a new garage this year and we bought a used car lightly.

How we landed on this approach

Our approach dates back over a decade, when we first bought our home and realized we had a cash flow problem. Every time we paid all of our bills at once, we ran out of money for groceries or gas until the next payday. Our mortgage was by far our biggest bill, and it seemed like we were emptying our account whenever it was due in the middle of the month.

Soon after, my husband had an idea after looking at our mortgage statement. Like most lenders, our bank set up an escrow account for us to cover our landlord’s home insurance and property tax bills. Each month we would fund our escrow account for the full payment for our house and then the bank would pay our insurance and tax bills for us when they were due.

We decided to create our own escrow account to improve our cash flow problem. We estimated all of our regular annual household expenses, then divided them by 12, knowing that we had to put that amount of money into our escrow account every month.

The bills we pay from our escrow account include gas, electricity, water, internet, cell phones, and all of our insurance including health, dental, life and car. We used to make our house, car and child care payments from this account as well, but luckily we no longer have those expenses.

This system worked so well for us that we eventually added our monthly investment contributions to our escrow account as well. These include our Roth IRA and 529 education savings contributions.

This helps us treat our investment accounts like bills we can’t miss, rather than resorting to saving only what is left at the end of the month.

Our other buckets of money

In addition to our “escrow” account, we have created these other compartmentalized accounts to help us organize our money each month.

Common current account: This is our main account on which we buy gasoline, groceries and pay other day-to-day expenses. The money we put in this account must last us until the next payday.

My personal current account: This account is for my personal expenses. You could call it “fun money”. I use it to pay for entertainment, clothes or whatever is for me and not for the family.

My husband’s personal current account: Same stipulations as my current account, above.

Short-term savings account: It’s for irregular expenses like car repairs, gifts, charitable contributions, and our children’s activities.

Long-term savings account: This bucket account is for big projects, like home renovations or vacations.

How we allocate our money through the buckets

To figure out how much we’re going to put into each account each month, we calculate how much we need to pay our bills (escrow account) and how much we typically spend on groceries and regular purchases (common checking account). Then we subtract that from our monthly take-home pay.

After that, we count our investments and then divide the balance between the rest of our sub-fund accounts based on our current goals. Sometimes this process forces us to rethink our priorities or reduce our spending.

To make sure we’re on the right track, we’ll re-estimate our bills and recalculate the amount we need to put in our escrow account once or twice a year. I was worried we were running out of money in our escrow account, but we never did. If we did run into this problem, however, we would have the savings to cover it.

As long as we use each account as intended, the pooling method works well for us. Is it perfect? No, but bucketing works for us and has helped us achieve our financial goals.


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