Managing finances can feel like a juggling act—how do you enjoy life now while ensuring your financial future is secure? At Three Kings Wealth Management, we believe achieving this balance is possible through lifestyle planning. Use practical strategies to take control of your financial journey. Use modern tools and embrace a shift in mindset. In this way, you can still enjoy the moments that matter most.
This blog draws insights from our free e-books: Finding Your Financial Balance with Lifestyle Planning and The Cornerstone of Financial Success: Budgeting and Cash Flow System. Together, they offer a roadmap to achieving harmony between present enjoyment and long-term financial stability.
What is Lifestyle Planning?
Lifestyle planning is more than just budgeting. It’s a personalised approach to managing finances, ensuring you can live for today while preparing for tomorrow. At its core, lifestyle planning aligns your financial decisions with your values, enabling you to focus on what truly matters.
Key Principles of Lifestyle Planning
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- Define Priorities: Decide what matters most to you—travel, family, or pursuing hobbies—and focus your resources there.
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- Balance Spending and Saving: Avoid over-saving at the expense of your happiness or overspending that jeopardises your future. Read here for 10 Proven Tactics to Boost your Savings without Sacrifice.
- Build Sustainable Habits: Automate savings and periodically review your financial plan to stay aligned with your goals.
The Rich Life Philosophy by Ramit Sethi
Ramit Sethi’s Rich Life philosophy complements lifestyle planning by focusing on conscious spending. It encourages people to spend extravagantly on what they love while cutting costs on things that don’t add value.
“Spending $5,000 on something you love and that changes your life is a great use of money, while spending $20 on something you couldn’t care less about is a waste.”
This approach helps avoid the scarcity mindset, which focuses solely on cutting expenses, often limiting opportunities. Instead, filling your spending plan with fulfilling experiences opens the door to an abundance mindset and greater opportunities.
“There’s a limit to how much we can cut, but no limit to what we can earn.”
By embracing this, you position yourself for growth and financial freedom. Discover more tips on aligning your mindset with financial goals in our blog, How to Build a Successful Money Mindset.
The Bucket Strategy: Breaking Down Your Finances for Clarity and Success
The bucket strategy is a structured way to manage your income and expenses. It involves dividing them into distinct categories or “buckets.” This approach simplifies cash flow management while ensuring your financial needs are met efficiently and effectively. Here’s how it works:
1. Income Bucket
Your income bucket is the starting point. All your income, regardless of the source (salary, investments, or side hustles), flows into this bucket. By treating all income as one consolidated pool, you have a clear understanding of your financial position before distribution.
2. The HUB Account Bucket
This bucket is the backbone of your financial plan. It handles all necessary expenses and should be as automated as possible to streamline your financial management.
What It Covers:
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- Rent or mortgage payments
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- Utility bills
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- Groceries
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- Insurance premiums
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- Transportation costs
Key Goals:
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- Keep expenses under 60% of your income, aiming for closer to 40% if possible.
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- If expenses exceed 60%, reassess your lifestyle or focus on increasing your income to avoid living beyond your means.
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- Keep one month’s worth of expenses in this account as a buffer for unexpected events.
Extra Tip: For homeowners, this account can double as a mortgage offset account. It helps reduce interest on your home loan.
The HUB account is where all income is received. It is then distributed to the other buckets. This creates a seamless flow for your financial plan.
3. Wealth Account Bucket
Arguably the most important bucket, the wealth account is your gateway to financial growth and security.
What It Covers:
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- Automated savings
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- Investments (superannuation, shares, ETFs, bonds)
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- Extra mortgage repayments
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- Emergency buffer (3–6 months of living expenses)
Key Goals:
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- Assign at least 20% of your income to this bucket, increasing to 40% or more if your circumstances allow.
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- Store these funds in a high-interest savings account or mortgage offset account to maximise returns and reduce debt.
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- Make sure this account has no card access to avoid impulsive spending.
This bucket is about building long-term wealth and achieving financial independence. Do you want to know more about superannuation? Read here.
4. Big Luxuries Bucket
This bucket is designed for your aspirational goals—those big-ticket items that make life enjoyable.
What It Covers:
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- Annual holidays
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- Home renovations
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- A new car or major buy
Key Goals:
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- Assign 10% of your income to this bucket.
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- If you have a mortgage, consider using an offset account for this bucket to reduce interest payments.
Having a dedicated bucket for big luxuries lets you plan for these goals without sacrificing your day-to-day financial stability.
5. Small Luxuries Bucket
The small luxuries bucket is your guilt-free spending fund. It’s for the little things that bring joy and make life feel indulgent.
What It Covers:
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- Dining out
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- Coffee runs
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- Shopping sprees
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- Hobbies or personal indulgences
Key Goals:
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- Assign 10% of your income to this bucket.
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- Set up a separate card for this account to easily track your discretionary spending.
Relationship Tip: For couples, consider splitting this bucket into two separate accounts. This allows each partner to have financial independence for personal spending while still maintaining joint goals.
For a practical approach, download our Budget Planner Template to organise your buckets effectively.
Steps to Achieve Financial Balance
1. Assess Your Financial Health
Start by evaluating your current financial situation. Pinpoint income stability, areas of overspending, and existing savings or investments. Use our Prioritisation Document to clarify your financial goals.
2. Create a Balanced Budget
Implement the 50/30/20 Rule:
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- 50% Essentials (Hub Account): Rent, groceries, utilities.
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- 30% Lifestyle (Small Luxuries Bucket): Entertainment, hobbies, dining out.
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- 20% Savings (Wealth Account Bucket): Emergency funds and investments.
3. Adopt Conscious Spending
Focus on spending money in ways that enhance your life. Ramit Sethi emphasises:
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- “Spending money on what you love can transform your life.”
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- Cut out expenses that don’t align with your values or bring you joy.
4. Use the Prioritisation Document
Our Prioritisation Document is a practical tool to rank financial goals and assign resources efficiently. Whether you’re saving for travel or buying a home, this tool helps clarify your focus.
5. Review and Adjust Regularly
Life is dynamic, and so should your financial plan. Conduct annual reviews or adjust after major milestones like job changes or family growth.
Overcoming Financial Challenges
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- Breaking Free from the Scarcity Mindset: A scarcity mindset limits opportunities. Instead, create an abundance mindset by enjoying your money within reason and focusing on growth.
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- Avoiding Overspending: Emotional spending can derail plans. Set boundaries, automate savings, and track expenses to avoid pitfalls.
FAQs About Lifestyle Planning
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- What is lifestyle planning? It’s a strategy that balances current enjoyment with future security by aligning spending and saving habits with personal goals.
- What is the Bucket Strategy? It’s a cash flow management system that categorises income and expenses into distinct buckets for effective financial planning.
- How often should I review my financial plan? Annual reviews or adjustments after major life changes are ideal to guarantee your plan stays aligned with your goals.
- What tools can help with lifestyle planning? Use our Budget Planner Template and Prioritisation Document for practical guidance.
Conclusion: Achieve Financial Balance with Three Kings
Lifestyle planning isn’t just about money—it’s about creating a life where you can enjoy the moment while securing your future. Implement strategies like the Bucket Strategy. Adopt Ramit Sethi’s Rich Life philosophy. These steps help you take control of your finances.
They allow you to live a life aligned with your values. At Three Kings Wealth Management, we specialise in helping clients navigate their financial journeys with clarity and confidence.
Ready to take the next step? Book a Discovery Session today.
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