Six-Bucket System in Practice

I have run versions of this system for founders, senior product leaders, and salaried families across economic cycles. The consistent outcome: when each rupee knows its job, people sleep better and stay invested through noise. Think of the buckets as operating departments in a company. Cash has to clear IB rounds before it reaches growth projects.

Why this lens works

• It gives you instant clarity during downturns. You know which pool can absorb a shock and which one must stay intact.
• It keeps splurges opt in. You only raid the fun pool after contingency and protection are funded.
• It helps frame conversations at home. Partners can argue less about equity vs debt and focus on which goal is underweight.

Bucket playbook

1. Contingency Reserve

Cover six to twelve months of core expenses. Salary volatility, variable bonus cycles, and medical surprises live here. Use bank savings, sweep FDs, or liquid funds from the top AMCs. Split across two institutions so an operational freeze never strands you. Review after every promotion or lifestyle jump.

2. Protection Layer

This is not an investment bucket but it keeps the rest intact. Term life equal to ten to fifteen times annual post tax cash flow. Family floater health cover of at least Rs 10 lakh, higher if you live in tier one cities. Add accidental and critical illness riders only after the basics are in place. Pay premiums from this bucket, not from lifestyle spend.

3. Short Term Goals (0 to 3 years)

No equity. High quality money market or low duration debt funds, recurring deposits, or target maturity debt that matches your spending date. Examples: school fees due next year, home down payment during the next 24 months, planned sabbatical. Keep paperwork ready so you can liquidate inside a week.

4. Medium Term Goals (3 to 7 years)

Blend growth and safety. Start with 30 to 40 percent equity and the rest in high grade debt. Tilt equity higher only if you have prior experience riding out a 20 percent drawdown. Set reminders every June and December to rebalance back to target weights. Align SIPs for these goals to the day you get paid.

5. Long Term Goals (7 to 15 plus years)

Treat this as the engine room. Equity between 60 and 80 percent, balance through short duration debt and up to 10 percent gold via ETFs or SGBs. Spread equity across 3 to 4 funds or PMS mandates so a single manager does not dominate the risk. Lock in term sheets for big spends like college abroad at least two years ahead, then begin gliding down equity in 5 to 10 percent chunks annually.

6. Aspirational Capital

Five to ten percent of annual savings that fuels experiments. Think angel deals, crypto tests, or the dream car booking amount. Label it clearly so you never confuse it with long term security. When a punt pays off, book half the gains into medium or long buckets before you celebrate.

Funding order that works in the field

1. Close any high interest debt. There is no point filling buckets while a credit card bill bleeds at 30 percent.
2. Build contingency to at least three months, then split new savings between contingency and protection until both are fully funded.
3. Route every rupee after that through buckets four, five, and six based on written goals. Decision fatigue drops sharply when you follow this queue.

Automation and housekeeping

• Set SIPs to trigger two to four days after salary credit. This keeps bank balances tidy and avoids second guessing.
• Increase SIP amounts by 8 to 12 percent every appraisal cycle. I track this in a simple spreadsheet that flags any plan that falls behind income growth.
• Divert bonuses and RSU vestings using a 50-30-20 rule: half to medium or long term goals, thirty percent to prepay high cost loans, twenty percent to aspirational plays.
• Rebalance annually or when an allocation drifts more than five percentage points. Do not wait for an advisor review if a bucket is clearly out of line.

Mistakes I still see

• Treating contingency money as idle cash and chasing returns. The first medical crisis usually wipes out the experiment.
• Buying oversized insurance policies bundled with investments. Separate the two and you pay far less.
• Running every goal through the same aggressive equity plan. Timelines matter more than headline returns.
• Ignoring documentation. Keep insurance copies, account mandates, and nominees mapped. When things go wrong, paperwork is the only lever your family has.

Tools and next checks

• Goal Planner: map each bucket to a target date, the expected cash need, and the mix that will get you there.
• Liquidity tracker: simple sheet listing bank, instrument, amount, and how many days to access it.
• Annual family review night: walk everyone through the buckets, confirm nominees, refresh net worth, and agree on upcoming spends.

Treat this system like a living operating manual. When life events shift, reassign a rupee from one bucket to another with intention. That discipline is what lets portfolios power through volatile markets while the family stays confident.