The Secret of the Golden Buckets, Part II

As I said, the purpose of your investing bucket is to grow your wealth. This is the bucket you will use to fund all future, long-term expenditures. By “long-term,” I mean more than seven years.

If you are young, you may use this bucket to put aside money for your children’s college expenses. But for the most part, the money in this bucket will be for your retirement. And when you look at investment returns from a long-range perspective like that, even a few percentage points can make a huge difference.

I won’t spend any time here talking about how you should manage your investing, because [Publisher] Tom [Dyson] and his team do that in the Palm Beach Letter. But I will say this: The kind of stocks they recommend are the only kind that appeal to me. Every other stock-investing strategy I’ve encountered (and I’ve been in the financial publishing business for more than 30 years) makes me uncomfortable.

The recommendations that you get every month from Tom and his team in the Palm Beach Letter are designed to give you an average, long-term return of 10%-15%.

This might seem paltry to people who dream of doubling and tripling their money in the market every year, but those kinds of investors almost always end up broke. And making 10%-15% on your money over the long term will give you terrific results.

I hope you can see that the investing bucket is the most important bucket of the three. It’s what can give you the retirement lifestyle you so desperately want.

But – and this is a very big but – you won’t get wealthy unless you invest enough money.

In other words, investing alone can’t make you rich. So if you can afford to invest only a few thousand dollars per year, you will not get rich, even if you make 15% per year for 40 years.

To fill your investing bucket, you need to invest more than that – and if you can’t invest more than that right now, you need to generate more income so you can.

That brings us back to the metaphorical well that represents your yearly income – the well you’re going to use to fill all three of your buckets.

Your Golden Well

If your income isn’t sufficient to fill all three buckets, you have only two options: You must increase the flow from the well you have, and/or you must dig some new wells.

You can increase the income from your primary well – your job – by becoming a more valuable employee. I have written on this subject in several of the books I published under the pen name Michael Masterson. The one I recommend is Automatic Wealth for Grads… and Anyone Else Just Starting Out.

If you can become a more valuable employee, you should. But you may also want to create other streams of income.

One possibility would be to invest in rental real estate. If you decide to do that, it will become – after you have paid down the mortgages – its own well, pumping liquid gold to you every year thereafter.

Another option would be to start a side business and let your spouse or a relative run it. If you are interested in doing that, I recommend Ready, Fire, Aim, another book I wrote as Michael Masterson.

Our Palm Beach Current Income program could also be another well for you in the future.

Here’s the point: If the income you are earning is insufficient to achieve your wealth-building goals, you should NOT try to get there by taking on more risk with your stocks.

Instead, work hard to create more income.

The Only Strategy You Need

This simple system for managing money and building wealth can work for you if you commit yourself to it. As I said, it’s the system I used to build a net worth of more than $50 million – and it’s still working for me and everyone else I know who has tried it.

So today, spend the time it takes to establish your own approach to “living rich” now… and in the future. Make the hole in your spending bucket big enough to allow you to enjoy your life now, but small enough to enable you to fill up your saving and investing buckets quickly.

You don’t need to try any other wealth-building strategy. This one is infallible. The day you have your saving and investing buckets filled… you will have no reason to worry about money ever again.

You already know that it will work. You know it will work because it is so simple. It is based on our two fundamental rules for building wealth: Never, ever lose money… and become richer every day.

If you are over 40, you have no doubt experienced how wrong 99% of the investment schemes out there are. You tried them and discovered they made you poorer, not richer. You are ready for something simple and true, a strategy you know will work.

When Tom and I started the Palm Beach Letter, we made a solemn promise. We vowed to tell the truth about building wealth, rather than exciting our readers with the myths and lies that dominate the investment media.

We are proud of what we are doing and confident that it will help you become wealthier. Our goal is not – and never will be – to make you a “clever” investor. We simply want to teach you how to become wealthy. If that’s what you want, you are in good company.

[Ed Note: Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Palm Beach Letter. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.]
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  • Renaud Gagné

    Question: If someone is in debt, should he use his investing bucket to eradicate the debt first and then redirect it towards investing?