~ Chapter Three: The Five Buckets ~ What:
Liquid Assets Bucket
The first bucket is “liquid assets”, which includes your savings accounts, your marketable
securities (stocks and bonds) and this is where you would deposit your monthly paycheck. For the most part it is assumed that the tax basis of these assets is close to fair market value, and if you
wanted to spend some or take “sand” out of this bucket there would not be a large tax cost. It is also
the bucket where your annual earnings from wages, interest and dividends, family gifts and the like are added and your annual expenditures for all aspects of your family’s expense are spent.
Timeline/Time Span:
This bucket starts out empty and by developing a long-term savings and investing plan it grows to be a major
portion of your net worth. This is also the bucket where most people empty other buckets into, thus filling it up quicker.
How Bucket is Used:
Cash Flows: The best way to think about this bucket is to consider the various types of funds that will be used to
fill it up over time as well as the various types of expenses that will be incurred, emptying the bucket over time. The chart below shows one’s life over a long period of time broken down into five age groups. Obviously everyone will
Five Buckets, Four Shovels, a Beach and a Map | 23
