5 Buckets, 4 Shovels, a Beach and a Map A Guide to Financial Security
Stephen D. Mayer
~ Table of Contents ~ Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Format of the Book . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Part One: Something for Everyone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Chapter One: Introducing the Buckets, Shovels, Beach and Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Chapter Two: The Beach and the Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Chapter Three: The Five Buckets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Liquid Assets Bucket . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Insurance Bucket . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Retirement Assets Bucket . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Personal Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Investment Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Chapter Four: The Shovels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Part Two: The Story of Steve and Patty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Part Three: Building Your Own Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Copyright © 2018 by Stephen D. Mayer All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher, except in the case of brief quotations embodied in critical reviews and certain other noncommercial uses permitted by copyright law. For permission requests, write to the publisher, addressed “Attention: Permissions Coordinator,” at the address below. SD Mayer & Associates LLP 235 Montgomery Street, 30th Floor San Francisco, CA 94104 (415) 691-4040 www.sdmayer.com Ordering Information: Quantity sales. Special discounts are available on quantity purchases by corporations, associations, and others. For details, contact the publisher at the address above. Orders by U.S. trade bookstores and wholesalers. Please contact the publisher at the address above. Printed in the United States of America DISCLAIMER: All calculations and data presented within SD Mayer & Associates LLP publications and digital marketing and media including but not limited to websites, brochures, presentations and return models are deemed to be accurate, but accuracy is not guaranteed. The projected pro forma returns on investment are intended for the purpose of illustrative projections to facilitate analysis and are not guaranteed by SD Mayer & Associates LLP or its affiliates and subsidiaries. Past performance is not an indicator of future results. The information provided herein is not intended to replace or serve as a substitute for any legal, real estate, tax, or other professional advice, consultation or service. INVESTMENT RISKS: All investments, including real estate, is speculative in nature and involves substantial risk of loss. We encourage our investors to invest carefully. We also encourage investors to get personal advice from your professional investment advisor and to make independent investigations before acting on information that we publish. Much of our information is derived directly from information published by companies or submitted to governmental agencies on which we believe are reliable, but are without our independent verification. Therefore, we cannot assure you that the information is accurate or complete. We do not in any way warrant or guarantee the success of any action you take in reliance on our statements or recommendations. Past performance is not necessarily indicative of future results. All investments carry risk and all investment decisions of an individual remain the responsibility of that individual. There is no guarantee that systems, indicators, or signals will result in profits or that they will not result in losses. All investors are advised to fully understand all risks associated with any kind of investing they choose to do. Hypothetical or simulated performance is not indicative of future results. Unless specifically noted otherwise, all return examples provided in our websites and publications are based on hypothetical or simulated investing. We make no representations or warranties that any investor will, or is likely to, achieve profits similar to those shown, because hypothetical or simulated performance is not necessarily indicative of future results. Don’t enter any investment without fully understanding the worst-case scenarios of that investment.
~ Introduction ~ I have been a practicing CPA since 1976 and started my career as an auditor for Coopers & Lybrand (now Pricewater-
houseCoopers) in San Francisco. After ten years of working for Coopers, I left and cofounded my first firm, Burr Pilger & Mayer (BPM), which we started with a small group of five people. By the time I left, 25 years later, BPM had
grown into a large regional firm with over 400 people and multiple offices around the globe. In early 2013, I started a new firm, SD Mayer & Associates, focused not just on accounting, but on an individual’s complete financial se-
curity. Within five years, SD Mayer had grown from a core group of seven people to nearly 40 individuals focused on providing accounting, business advisory, outsourcing, wealth management and retirement plans services.
I have always considered myself to be more than just a CPA. It was extremely important to me, as a professional,
to become a “trusted advisor” for my clients. I pushed myself to be more than an auditor, and over the years I added tax, consulting, technology, wealth management, bankruptcy and turnaround work, along with mergers and acqui-
sitions, to my skill set. This experience gave me many of the tools needed to best serve clients, but I’ve always felt that something was missing.
As I watched my clients grow older, I noticed that they were more and more focused on their financial security and often wondered if they had enough money to retire and enjoy life. They were also confused about where to start, the right type of insurance to purchase, how to invest their money wisely, how to create the right estate plan, as
well as other related issues. If they were wealthy, and had substantial liquid assets, they often had many professionals available to help them manage their money and handle their financial needs. However, for those without a lot of wealth, they often struggled to assemble the right team of experts to help them figure out their financial future and plan for their retirement.
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Over a two-year period, I asked about 1000 people, over the age of 30, the following question, “At least every 48
hours, do you wonder if you will have enough money for retirement and/or are your financial affairs organized correctly?” It turned out that over 80% of the people had wondered about this every couple of days. Even more eye opening, though, was that if the person was over the age of 40, the number grew to over 90%.
As an accountant and advisor, I found this striking and thought if I could develop a simple solution to help people manage their finances in a comprehensive manner it could make a meaningful impact on their lives.
I also thought most professionals who were helping their clients with overall wealth management were one di-
mensional. The accounting firms focused on tax returns and year-end tax planning. The estate-planning attorneys
focused their energy on the estate plan. For insurance professionals, their focus was solely on insurance, while the investment advisors focused mostly on asset allocation. I felt that no one was taking a holistic approach and di-
recting their efforts on helping the client achieve financial security. For me, financial security was a combination of
tax and tax planning, investment advice, insurance, estate planning, retirement planning, and budgeting cash flow on an annual basis. Not taking a complete approach in helping their clients was neglectful by these professionals. However, the profession was only half the problem. The other half of the problem—the people who knew they
should do something but could not get started. Most individuals had a hard time deciding to move forward with almost anything other than getting their tax returns done because the process seemed so complicated.
As I was preparing to launch SD Mayer & Associates, I vowed to “change the status quo” and create something
unique, easy to understand, and simple to use to help people set goals to reach their financial security using all of the tools and knowledge I had gained over my career.
2 | Five Buckets, Four Shovels, a Beach and a Map
Early in my career, I had developed the framework for a financial strategy called “The Five Buckets” and used it in my personal life, in addition to utilizing it with a couple of clients.
While on a backpacking trip, where I do some of my best thinking, I put together an outline for this book. I expanded the concept of “Five Buckets” to include advisors that I called “Four Shovels” and a metaphor for one’s life, which I called “The Beach”, and a road map I called “The Map”. Finally, I threw in “Sand” to represent money.
I spent the next two years working with clients to test and improve the concepts. While at lunch with a long-term friend, John Legnitto, I explained the entire concept of “Five Buckets” and he encouraged me to write a book.*
From that day on, I was committed to putting the concept into a book that was easy to read and understand, but had powerful concepts that could change someone’s life and get them motivated enough to focus on their fi-
nancial security. I wanted the book to be visual, with illustrations and charts that would not intimidate those who
are unfamiliar or uncomfortable with financial planning. I also wanted the book to be a tool that parents and even grandparents could use to help the next generation start their financial plan at an early age.
With help from my family, friends and Rich Sigberman, an artist, “Five Buckets, Four Shovels, a Beach and a Map: A Guide to Financial Security” was created.
As I was developing the concepts for the book, I reached out to my friends and colleagues in the financial planning world to ask for their help and guidance. The people I chose to help were picked because of their practical experience and their ability to explain difficult concepts in easy to understand language. I also asked my children, who *Unfortunately, John recently passed away from pancreatic cancer, but I am grateful for his encouragement. I shared an early draft of this book with his family and they told me that, “John would have been proud.”
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are 21 and 24, to help edit and make sure the concepts were easy for a 20- to 25-year-old to understand. I asked for help from people that I have known for more than 20 years, mainly because we have all shared life
experiences together. I also chose professionals whose target market is middle class Americans, mainly because it is that market that has the most difficult time finding help, since most professionals are looking for larger, wealthier clients who can pay larger fees. I also wanted to reach out to clients that I have helped over the years to see if the practical advice that I gave them paid off. I hired an artist, Rich Sigberman, to do the illustrations and make them fun and easy to understand. Though I like to write, my grammar and sentence structure is not the best, so I have worked with a team of editors to advise and proofread as necessary. Finally, I wanted those professionals who, over the years, have helped my family and I achieve our goals.
Therefore, I would like to thank two of my own shovels, Bill Weseloh and Rick Hillsbery; my family, Dylan, Kenzie, Nicola and Patty Mayer; and many others, including Therese Hjelm, Adam Herrera, Kathy Wright, Jeff Stephens, Lloyd Wiborg, Michael Mayer, Michael Tucker, Rich Sigberman, along with too many others to mention. If any of
you are reading this book, please know that you were instrumental in helping me solidify the content of this book.
e Speaking of financial security, 100% of the profits from this book will be contributed to “The 5 Buckets, 4 Shovels
Foundation� which will distribute the book to high schools and colleges to invest in the financial knowledge of the
younger generation. The Foundation will also be contributing to benefit medical research and youth activities. As I
have been lucky in creating my financial security, I want to pass on my knowledge and expertise and make sure the financial profit is used to help others achieve their own financial security.
4 | Five Buckets, Four Shovels, a Beach and a Map
~ Format of the Book ~ The book is divided into three Parts that are woven together.
Part One explains the concepts behind the Five Buckets, the Four Shovels, a Beach and a Map. This includes many of the illustrations, charts and graphs meant to take a complex subject and simplify it.
Part Two is a quasi-real-life story of my family using the concepts in this book over our lifetime to build a financial
plan. I’ve taken editorial license with a few minor details, like my job as an engineer instead of a CPA, or the fact that my wife doesn’t really own a design firm, and that we actually got married when I was 38, but most of the
story is pretty much true and all of the financial planning ideas and tools that are discussed have been used in my own life. The changes to my life story were made in order to allow me to present examples of real life experiences many of our clients have experienced.
Part Three is a call to action with a practical approach to use the concepts and build your own plan depending on how old you are and the types of assets you already have accumulated.
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