While most of our clients are preparing for or nearing retirement age, some folks are just beginning their careers and want to know how to best set themselves up for success in the future. We’ve all heard the phrase “time in the market” beats “timing the market,” and that holds true to form, especially for younger savers. Getting started with a game plan early and sticking to it, no matter the dollar amount, gives new investors the best chance at reaching their long-term objectives.

Most people don’t know where to start. They’ll search “How much should I be saving?” on the internet and a bevy of answers will pour in with differing opinions. After a while, the investor gets fatigued or worse, discouraged from the information that they find. There are very general rules of thumb that should be considered, and every situation is very different, but I wanted to share a format that we’ve come up with to help people visualize how they should save and invest.


The image above shows one large bucket with 4 sections: Checking, Savings, High Interest Savings, and Investment. Visualize a bucket filling up with water being poured in from the top. Of course, the bottom fills up first, then the second section, then third and so on. That water is income. Now imagine a hole in the bottom of the bucket… the water that leaks out is spending. The idea is to fill up each rung one by one and ideally fill up the bucket much faster than the leak. Now, let me break down each section one-by-one:

Checking Account
This is where the bills get paid. Credit cards, utilities, food, entertainment, and any other fixed or semi-fixed expense should be covered what is in this account. My recommendation is to come up with the cost of all fixed expenses, then add a cushion. Let’s say your monthly expenses are $4,000 – keep $5,000 in the checking account

Savings Account
This is the savings account at your bank (usually a second account at the same bank as the checking account). I consider this “immediate emergency savings.” The rule of thumb is for emergency savings to be 3-6 months of fixed expenses. That’s a good place to start, but income and spending habits are different for everyone. This includes unexpected costs that are on a time crunch. For example, your car needs $2,000 worth of work done or you need to pay the A.C. repairman in the middle of the summer.

High Interest Savings
This one isn’t so obvious. In 2020-2021, there were very few opportunities for savers to make any interest on their savings accounts. That has since changed with the increase in interest rates. Today, money market funds can earn over 3.00% and are daily liquid, meaning if you need the cash, you can sell it and the funds would be available in the next 1-2 days. This is unlike a CD, which is backed by the FDIC, but has a lockup period associated with it.

Investment Account
The top of the food chain is the investment account. When you’ve filled up all the bands of the buckets and have set the dollar figure for each, keep pouring money into a long-term investment account. This account should be liquid, but the intention should be not to touch the money (and keep adding to it) unless a dire financial situation renders it necessary. Please note that this is separate from saving in your retirement plan… That’s a different discussion (but at least put away what your employer matches!).

The goal is to come up with a figure in each bucket that you feel comfortable with. Some people like $2,000 in their checking account and others like $50,000. If you know you can meet your expenses, use good judgement, or ask someone that does it professionally for guidance. Anything above the limits that you have set for each band should go to investments. If a major expense causes you to go below your limit on one or all of the bands – move money down to get you to square one.

Life happens. We all have unexpected expenses. The most important thing here is to stick to your game plan and revisit this at least annually to adjust for new income and expenses. That way, when the day a large, unplanned expense rears its ugly head, YOU’RE PREPARED.

Any opinions are those of author and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. An investment in a money market fund is neither insured nor guaranteed by the FDIC or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Investors should consider the investment objective, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other important information, is available from your Financial Advisor and should be read carefully before investing.