In the 39th episode of 'Retire Early, Retire Now,' host Hunter Kelly from Palm Valley Wealth Management discusses the 'Three Buckets Strategy' to help attorneys and physicians achieve career longevity and flexibility. Hunter addresses how to build financial resilience through three key financial buckets: emergency savings, long-term retirement accounts, and a flexible brokerage account for large purchases or time off. He emphasizes the importance of taking periodic breaks to prevent burnout and offers practical advice on managing finances for a better work-life balance. The episode is designed to guide professionals in making informed financial decisions to improve their quality of life and career satisfaction.
Check out the Palm Valley Wealth Management Website PalmValleywm.com
In the 39th episode of 'Retire Early, Retire Now,' host Hunter Kelly from Palm Valley Wealth Management discusses the 'Three Buckets Strategy' to help attorneys and physicians achieve career longevity and flexibility. Hunter addresses how to build financial resilience through three key financial buckets: emergency savings, long-term retirement accounts, and a flexible brokerage account for large purchases or time off. He emphasizes the importance of taking periodic breaks to prevent burnout and offers practical advice on managing finances for a better work-life balance. The episode is designed to guide professionals in making informed financial decisions to improve their quality of life and career satisfaction.
Check out the Palm Valley Wealth Management Website PalmValleywm.com
The three buckets Chaterjee maximizes your flexibility and longevity in your career. And we're going to talk about how on today's episode of retire early retire now. And welcome to the 39th episode of retire early retire. Now I'm your host hunter Kelly owner of Palm valley wealth management. And I do these podcasts every Tuesday morning. To help attorneys and physicians either retire early or retire now. If you've been liking these episodes, go ahead and leave a five star review on your favorite podcasting app. Or share it with a friend as it may help them through their financial journey as well. And so today we're going to talk about all things, uh, three buckets strategy. What kind of prompted this idea? Um, I'm actually heading out on a family vacation, uh, later this week and thought that. Uh, what better way to kind of. Um, get that kicked off then to make a podcast about how to one, take more vacations, give you more flexibility. Because often when I meet with clients that are in. The physician or a attorney profession. They often say things like. Uh, I don't want to practice law for the rest of my life. I want to go in house somewhere. Uh, rather than being a partner at this big law firm, the hours are crazy. Uh, same thing with physicians. I don't want to practice medicine. At this rate. I either want to go PRN. Maybe I want to go teach somewhere. And so, uh, my goal is to help them have a little bit more flexibility, but also have more longevity in their career because if they're a really good attorney or they're really good physician, um, then those clients and those patients would miss out on potentially. Uh, getting their advice. Uh, and getting, uh, their, their medical advice to, get the help that they need. And so, uh, I want to make sure that we can keep these physicians and attorneys and practice for as long as they are willing to stay in practice. Um, but have a better quality. Uh, of life. Uh, throughout their career as a physician or attorney. And so, um, one of the ways that. That I help with that is I create that three bucket strategy. And so, um, we've talked about this before, on previous episode earlier this year. the first one is, uh, fairly basic, but, uh, it is Uber important to make sure that you continue to have flexibility. Uh, throughout your life and your career. And so that's making sure that you have that three to six months worth of expenses, so that. If for whatever reason you can't work. Uh, you decide not to work. Maybe the hospitals shuts down. your law firm, whatever the case may be. Um, that you're financially stable, at least for the short term. As you go out. And fine. A new job. Um, or maybe that you just have a series of unfortunate events where you have some extra expenses that you weren't necessarily. I'm expecting whether that be medical related. Card shovel home. Whatever that may be right. And so, uh, that first bucket, we want to make sure we have enough cash, use a high yield savings account. And so this is another area where people maybe. Don't maximize their dollar, obviously within the last year or so with interest rates. Not skyrocketing, but definitely increasing the high yield savings have become more fruitful. Um, so getting four or 5% on your money, um, is obviously a lot better than. Two three years ago where you're essentially getting nothing right. So, uh, make sure you, um, Take advantage of that. And so one great place to go would be a bank rate.com. They, you can look up all the high yield savings CDs. Um, things of that nature mortgage rates. So they have a bunch of different things on that particular website, but you can look and see and shop out. Uh, those high yield savings accounts to see. Okay. Well, I have. 50 60, a hundred thousand dollars saved up to cover my three to six months of expenses. I don't want to leave in my checking or savings and essentially perceive nothing for it. Um, so let's go get three, four, 5% on that money. Um, which could turn into a few hundred dollars a month. Uh, in your pocket as, as it grows. So. Uh, make sure you take care of that bucket first, obviously. And then the next one. Uh, that most people think about. Um, that isn't forgotten whether they are forced to, to save into it. Um, or, uh, they just make it a priority. And that is that long-term bucket. And generally I say this is bucket three, because it is more long-term, but this would be like your Roth IRAs, traditional IRAs 401ks 4 57 BS. Things of that nature of the things that you're getting your employer match on. And so, uh, we want to make sure that we're maxing at the very least maximizing the employer match. Um, but with physicians and attorneys making, um, Enough to be in those higher tax brackets. We probably want to be Maxine maximizing some of those things out for tax advantages, uh, and making sure that we're, we're trying to, uh, keep our tax bracket as low as possible. Right. And so generally that's pretty individualized, obviously talk to. An advisor or, um, some sort of tax professional. Um, to help you kind of work through that, but if you're in your higher earning years, Uh, you would definitely want to take advantage of more of that pre-tax but if you have some room to grow, maybe that Roth. Um, component would, would make more sense for you. And so I just want her to go over those two buckets really quickly. Uh, and, and really focus on what I call the middle bucket. Your flexibility bucket. Um, sometimes called the large purchase bucket, whatever that may be. so for the attorneys and physicians, I work with. Generally it is your flexibility or longevity bucket. And what I mean by that is. This is going to be a brokerage account that you're going to contribute to each and every year. And you're going to earmark. Um, let's call it five. 10% of your income, depending on a few factors that we'll talk about here in a second, to making sure that you are. Um, resetting taking vacations, taking time off. So that you can come back and be the best attorney or best physician that you can be for your practice. What prompted this is again, I'm going on a family vacation. I was like, ah, how often do I really take a long weekend? And, um, sometimes I feel burnt out. Maybe I don't work as many hours as some attorneys or some physicians, but. Being a solo practitioner. I wear many hats. And so that can be stressful in itself. Um, whether it be business development, um, back office operations, compliance, all the things that, that need to be done to help run. Um, my firm can be stressful at times. And so. Um, being able to kind of turn that off for a few days. A week, whatever that may be. Um, can really help and does really help me. Uh, come back refreshed with new ideas on whether that be business development, uh, how I'm going to better serve my current clients. Um, give me a new perspective on, uh, compliance and things that I need to do for that. Helping me stay on track because some of those mundane task. Um, get left behind sometimes, especially when you're stressed about other parts of the business. And so being able to take a few days off and, and reset. Can certainly help. And so, um, what we see a lot or what I at least see in my practice with working with physicians and attorneys, I see sort of the same thing. Is they go months and months and months, potentially years. Without necessarily unplugging. Um, because they're just so deep in their practice, whether that be medicine or law. And, and so they just don't take the time or maybe they don't feel like they can take the time. To take a week off or a long weekend here and there to reset. And so. You have to ask yourself. What do I need to be the best attorney or physician? Uh, possible. And so some people can get away with working, uh, Months on end. Uh, without necessarily need to take time off, but if you're one of those people that are like, ah, I don't know that I necessarily want to practice law. It's a lot of long hours. Um, same thing with medicine. And so maybe all you need. Is taking a long weekend each quarter, each month, or maybe a more extended period of time once or twice a year. Where you can cut everything off. And say, okay. I'm not going to think about my job for X amount of days. And so how do we plan around this one? Uh, I think the first thing, especially in these types of, uh, professions where it's kind of expected that you're always on, you're always working. Um, be open with your employer and say, Hey, this is what I need. I want to continue working here. I enjoy working here. Um, but I'm feeling burnt out, right? Um, and so what we've seen at least in the medical profession is that some hospitals are becoming, um, more aware of this and they're offering more time off, or they may offer the same amount, but they don't roll those hours over. So it basically forces you to take that each year. And so, uh, Basically making you take some time off so that one, you can have a better quality of life. Um, and then two, you can show up and be a better doctor because you're not as burnt out. Um, as traditionally, um, some physicians may be. And so be open with your employer. Hey. I need some time off each year to go. Um, do whatever I like to do, whether it's hobbies, spend time with family travel. Um, whatever that may be for you. And so then you want to understand, all right. What is that that I need? Is it just time with the family at home? Uh, is it, uh, going on a vacation across the country? Uh, getting somewhere, maybe you don't even have a cell phone service. Uh, those are my favorite. Uh, where you just, you don't have any cell phone service for days on end. Um, and you necessarily have to make yourself shut off because sometimes I go on vacations and I have cell phone service and I can't can't shut it off because I still have my email. The official texting me or calling me. So, so it may be tough to, to shut it off. And so, um, when I can get away and not have cell phones, that's usually the best. Best time. For me to reset. Um, and then thinking about the goal, what's the end goal. Um, do you want to continue practicing for a significant in period of time? Or are you, uh, in a. Headspace where I want to save. And retire as soon as possible. And so once you figure that out and you understand, okay, well this, this is how much time I need off each here. Then it's time to allocate toward that bucket. And so sometimes what you're contributing to that middle bucket. May exceed what you need as far as the amount taking towards your vacations for time off. And so you can allocate the rest of that toward maybe a lot more long-term goal, again, retiring early or giving you flexibility to. Slow down later on. But. Generally speaking, what I would tell people. Uh, especially if you're on the lower end of debt to income ratio. So if the amount of income going to debt. This less say less than let's call it 15%. Then we can put somewhere between five and 10% of our income toward, uh, Uh, vacation each year. And so that could be multiple vacations. That could be one. Uh, more extended or a lavish vacation, if you will. Um, and it really just depends on. Uh, what you need and what you want to accomplish. And so. Um, Now if you're on a higher end, maybe you're a newer physician or a newer attorney. You still have a lot of student loan debt. Um, or you're starting a family and you have a home and mortgage and this and that, and maybe your debt to income ratio is closer to that. 25 or 30%. And I would say we need a back down on, um, how much we're putting toward our vacations or even our middle bucket each year. Um, so that we can make a priority of pain noun. Um, some of these debts that. Uh, or taken away from our income. Cause what we don't want to do is have a 30% debt to income ratio. Uh, still try to save for retirement. And then if we're trying to go on a vacation there, the numbers just don't work out as well. And so. Um, we just need to be sensitive on, well, how much should we really be allocating to the things that are important to us? So. Again, if debt is really important to you, then you may put zero to vacation for a few years so that you can. Pay off student loan dad's car loans, whatever. Your particular situation calls for. Or if going on vacations is important to you. Maybe you allocate just a smaller amount so that you can go once or twice a year or two. Whatever your favorite place is, um, or do your favorite thing? But also, still make progress toward, um, getting some of that debt off and becoming more financially independent. Right. Um, And then that, that money that would go in that. Uh, middle bucket. And this middle bucket generally is a brokerage account. So, um, so when we're funding these accounts, If the vacation is fairly eminent, let's say within a year or so. Uh, we would want to keep this in a money market fund. So if you open up like a brokerage account at fidelity, Or my custodian sci. Vanguard. They all have. Um, some sort of, uh, Cash holding mutual fund or money market where you can get a fairly good yield. Now, if you start saving over and above what you need for the, uh, more imminent. Vacations, then we can start looking at. Maybe taking advantage of some investments, some. ETFs or, um, some more equities where we can get some growth for longterm. And so. What that can turn into is one, a larger vacation bucket, but to the ability to be more flexible. So let's say you get to a point where you're just really not happy with your firm. Or your hospital, wherever you may be working. Well, this flexibility account will allow you to not have to find another job immediately before you leave that other firm. You can. Leave your firm and you have this brokerage account that maybe has several hundred thousand dollars on it. And you can take some time off maybe because you need it. Or you just didn't like the firm that you were at and you're just like, Hey, I need to get out of there. Um, and you can use this middle bucket. That is not tied to retirement. It's just a brokerage account that has, uh, potentially, uh, mutual funds, ETF stocks, bonds, cash, whatever. Uh, that your particular time horizon risk tolerance, however you want to invest it. Right. Um, but you can take that money out. And so, um, obviously the taxes would not be deferred like in a 401k or an IRA, but, um, You do get a little bit of tax advantage. If you've held those investments for longer than a year. And they do have some sort of gain. You would pay the capital gains rate versus your income rate? Which generally is lower for most people. And so you would have a little bit of Vader's there. Um, but you're not paying a 10% penalty or ordinary income tax, things of that nature. So this middle bucket. Um, I think again, as the most overlooked account, this brokerage account. Uh, most people focus on maximizing their 401ks for three BS. Higher raise things of that nature. But they often forget to just open up a brokerage account and start siphoning money there each, each month or each paycheck. And so that they can start building this up and give you more flexibility. Um, and so this is one thing that I work on with clients, especially, um, ones that want to retire early, or want a little bit more flexibility to be able to go on vacations. Purchase a home or vacation home, whatever that may be for them. Rental properties. Things of that nature. Right. And so. What this is going to do. Is it one going to give you more peace of mind knowing that you can do these things? Uh, maybe it is leave the employer a little bit earlier than expected. Um, Uh, or go on more vacations. And so that's going to give you a little bit of clarity, and then when you do take these vacations, you're going to get that sense of rejuvenation. And be refreshed and have again. You're going to have a career that is more sustainable. Um, and so when I talk about longevity, I don't necessarily mean working 10, 15, more years. I'm talking about the years that you do work. You are, you have more energy. You want to be there. You want to give the best effort that you have versus being burnt out because you work years and years and years without taking vacations, um, or you feel like you need to be there all the time or on call, whatever the case may be. And so, um, that, that career is going to be, uh, more enjoyable than you're going to be able to. Work harder, essentially. Um, and so, uh, I often compare it. It's not a sort of sprint. It's a marathon as cheesy or cliche as that is. Um, you're not working for a year, you're working for a career. And so, um, understanding what you need, how much time off you need. Um, so that you don't become. Burnt out. And, and want to quit. Um, because again, the jobs that you guys have being an attorney, being a physician is super important to the clients and the patients that you serve. So. If you're not able to do that, then you're technically doing them. Uh, an injustice to me. And so, especially if you want to practice now, if you don't want the practice, you just don't like the career. That's, that's a different story, but, um, if you want to be there, but you're just burnt out. Um, we got to find a way to help you not be burnt out. Right. And so, um, that'll wrap it up for today. Uh, I hope everybody has a great week. And if you liked this podcast, or if we know someone that would benefit from listening to something like this, give them some ideas on, uh, how do I take this vacation? What should I fund it with? Um, how do I fund future vacations? I think this would be a great, great start to that conversation. Um, so go ahead and share this podcast with that friend. Uh, and if you liked this podcast, go ahead and leave a five star review on your favorite podcast. You know? And we will see you in the next one. This podcast is for educational purposes only. It's not meant to be financial or investment advice. Please consider speaking with a tax legal, financial or insurance professional about your and your specific situation. Uh, before making any decisions. Please keep Palm valley. Wealth management in mind when making those considerations.
