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Perhaps you’re familiar with various stories, both in real life and in fiction, where somebody is kidnapped, and the kidnappers demand that they be paid in return for letting the person go, ideally alive and unharmed. There are multiple examples I could list here, including the movie Ransom (1996), the John Paul Getty III kidnapping in 1973, and the kidnapping of King Richard I in 1192.
Even the real-life examples here have been made into movies. It goes to show that ransoms and rescues can be very dramatic. Your life is no different.
What if I told you that you’ve been kidnapped and sold into slavery and that you need to pay a ransom for your freedom?
Well, you have, and you do. Like me, you’re likely living far below your potential and caught in slavery, such as debt slavery or wage slavery.
As you gain your freedom from slavery, you’re in a much better position to purchase other people’s freedom.
You are built for freedom and to have a greater amount of control over your life. You don’t have to wait for someone to rescue you. You can go ahead and improve your situation. You can go ahead and get liberating yourself.
Unlike the examples above, raising your ransom and buying your freedom is up to you. It’s time to get to work. There will be some calculations involved, and it might help to use a spreadsheet. Don’t worry. It’s less painful than you think. Besides, isn’t your freedom worth the effort?
What’s your ransom? Find out now. Buy your freedom.
Raising Your Ransom: The 7 Buckets Money System
The money organization system that I’ll describe — and recommend you follow — is something I learned from “Life’s Golden Buckets: The Budgeting Habits of the Super Rich” by Kieron Sweeney. In the book, Sweeney went into more detail than in his TED Talk about this topic. Sweeney also covers Life’s Golden Buckets in his book “Buy Back Your Life: How to Get Rich Without Losing Your Soul.”
Sweeney calls the system Life’s Golden Buckets. I call it the 7 Buckets Money System. It doesn’t matter what you call it, as long as you use it. My life has improved whenever I follow the system, and my life has gone into chaos whenever I haven’t followed it.
The 7 Buckets Money System, as you can tell from its name, has seven buckets. Each bucket has its own purpose for the money placed in it. For this analogy about ransom, I will refer to each bucket as being a ransom demand in the section titles. The buckets are Income Tax, Investing, Spending, Education, Play, Giving, and Necessities.
Meeting each ransom demand can give you a full life as you’re buying your freedom from slavery, whatever slavery you are currently caught in.
When you gain your freedom, and even as you gain your freedom, you can liberate others.
“The best way to help the poor is to not be one of them.” – Bob Harrington
Your capacity expands as you grow in freedom.
Each of the seven buckets can be a physical bucket or a bank account. I prefer bank accounts rather than having to divide exact amounts of physical money into each bucket.
You can use a chequing account for the Necessities bucket, and from there, you can divide the amounts for the other buckets into savings accounts. A nice thing about online banking is that you can also give each account a nickname, which can be the bucket’s name. You could divide the amounts into the buckets as often as once a week. Perhaps a particular day each week. You can schedule a time for that and keep to your schedule.
Now it’s time to start with the first bucket, the first ransom demand.
Ransom Demand #1: Income Tax
I’m not a lawyer, an accountant, or a financial adviser. Please consult with your lawyer, accountant, and financial adviser before applying anything you read here. I am not legally responsible for whatever actions you take and for whatever results you get. I’m simply sharing what I have found to be helpful.
Here are spreadsheet templates you can download and use to calculate your ransom. No sign-up is required.
The same principles apply when using Microsoft Excel, Google Sheets, Apple’s Numbers, or some other spreadsheet program. Start with an amount at the top and work your way down through each of the buckets/demands in the same order described in this post.
The first bucket is Income Tax. If you’re an employee, you can skip this bucket because it’s already taken care of by being deducted from your paycheque.
This information might be helpful if you have to take care of your income tax directly. It’s something I wish I had known before I was self-employed.
The percentage for Income Tax comes from Sweeney’s books, not his TED Talk. Put 20% of your gross income into your Income Tax bucket. Why 20%?
“If you’re paying more than 20% in taxes, you’re not paying your accountant enough money!” – Kieron Sweeney
As an employee, you’re subject to whatever income tax bracket you are in with your annual income. You don’t get to claim much in terms of deductions and expenses, especially compared to being self-employed.
As a self-employed person, you can claim deductions and expenses, which help reduce your taxable income. You have a lot more that you can claim than if you’re an employee.
There’s something else worth mentioning here. You could handle all of your expenses through your company. Personal tax rates are higher than corporate tax rates. In other words, the money a person earns is taxed at a higher rate than the money a business earns. Corporate tax rates can be as low as 12% – 15%.
You might even handle all your finances through your company and have a low enough personal income that you don’t have to pay any income tax on your personal income. It’s something worth talking to your accountant about.
One change like that can save you many thousands of dollars every year and millions of dollars over the course of your lifetime, especially when you factor in that you’ll get a much greater return on your investments when you handle income taxes and other taxes a lot differently than the vast majority of other people do.
Something else that you can look into is tax shelters. There are certain countries or states where you might not have to pay any tax. If you go this route, please let your money grow for the good of others. Please use your wealth wisely and help however you can. Be the greatest philanthropist you can be.
For Income Tax, typically, you would only have to pay it once a year before its annual due date. For Americans, that’s April 15. For Canadians, that’s April 30. In the meantime, you could stockpile the money for your Income Tax throughout the rest of the year and maybe earn interest on it. Why not? You might as well get paid for that money before you pay it to the government.
Once you’ve put 20% of your gross income into your Income Tax bucket, the rest of your money is your net income, your after-tax income.
Alternatively, you could put 10% of your gross income into your Income Tax bucket and 10% of your gross income into your Investing bucket, then the rest of your money is now your net income, your after-tax income. I learned about this strategy where you apply 10% of your gross income to your Investing from “Rich Habits: The Daily Success Habits of Wealthy Individuals” by Thomas C. Corley. The key is ensuring that the 10% for Income Tax is still enough.
Now that you’ve taken care of your Income Tax bucket, you’ll be dividing 100% of your net income — which is the rest of the money left over — into the following six buckets.
Ransom Demand #2: Investing
You’ll notice that you no longer spend all your money when you follow the 7 Buckets Money System. You’re keeping something for yourself and expanding your life each month.
The Investing bucket is where you pay yourself first. Put a minimum of 10% of your net income into this bucket. Ideally, you’ll work your way up to 20%. Your investments would grow much faster once you put in double the amount.
Let this money grow. Keep the principal amount invested.
I’ve used a written plan for steadily increasing the investing amount of my net income from 10% up to 20%. I recommend that you do the same. Don’t make the same mistake I did. Keep your steady increases sustainable. Keep them gradual enough and also tied to any increases you have in income. If you simplify your expenses, that is an excellent time to increase your investing.
For the Investing bucket, there are many resources you can go to for more details on what to do in your Investing bucket so that you can grow your money. These resources include two of Tony Robbins’ books, “Money: Master the Game — 7 Simple Steps to Financial Freedom” and “Unshakeable: Your Financial Freedom Playbook — Creating Peace of Mind in a World of Volatility.”
Robbins indicates the importance of meeting with a fiduciary, a financial adviser who can give you helpful advice without ulterior motives. Both books have many excellent, practical concepts that are well worth learning and applying.
And yes, certain investments reduce your taxable income and even help ensure you get an Income Tax refund.
That said, I’m not an investing wizard. I’ve had savings and some investments before but foolishly used them up. But you don’t have to make the same mistakes I have.
You don’t have to build up some money and then waste it over and over again like I have. You can apply a winning system consistently for the rest of your life. You can apply wisdom and watch your life soar.
I’m rebuilding my life. Sharing what I’ve learned and my progress in applying powerful systems like the 7 Buckets Money System is part of what I can do to help prevent others from making the same or similar blunders that I have.
Onward and upward.
Ransom Demand #3: Spending
The next bucket is for Spending. Put 10% of your net income into this bucket. It’s so you can save up for bigger purchases such as vehicles and electronics. Only buy any of those items once you have the (cash) money available for them.
Proper use of this bucket helps you avoid going into debt over major purchases. You can also use this bucket to help you pay off any debt you already have.
There are specific effective strategies you can apply to get out of debt and stay out of debt. Using the 7 Buckets Money System properly helps you accomplish both things.
You can start by paying off the debts that have the highest interest. You could combine that with paying as much as possible at a time on whichever debt could be paid off the soonest and making only the minimum payments on all your other debts. Once the debt with the lowest amount is paid off, you can move on to the next one with the lowest amount. Rinse and repeat as many times as necessary, and you have the snowball effect until all your debt is paid off.
Or you could make a consumer proposal like I did many years ago. It’s better than bankruptcy in the sense that it’s a step above, and I was responsible enough to pay off some of my debts rather than not paying anything.
I got to pay off my debts at a reduced amount and without any interest. It was better to pay off the debt in 3 years rather than who knows how long it would have taken otherwise. It wasn’t one of the best moments of my life, but it could have been so much worse.
The key is to avoid repeating the mistakes that got me into that mess.
I’ve been a financial idiot for so much of my life, and the 7 Buckets Money System has been an excellent guide to steer me through tough times. I chose to write about it because I’ve started using it again and can already see my life being much better organized. I’m giving myself the chance to pay my ransom, too.
Ransom Demand #4: Education
“Good judgment comes from experience. Experience comes from bad judgment.” – Steve Siebold
“Gaining wisdom can also be a preventative strategy. No matter how old you are, you will always need to be learning something.” – Kieron Sweeney
The Education bucket acknowledges the necessity of being a lifelong learner. Besides colleges and universities, education is available everywhere, including online and in person. There are books, audios, videos, courses, programs, seminars, mastermind groups, and so much more. Put 10% of your net income into the Education bucket and use it.
Learning is one of my greatest pleasures. I’ve read the biographies of many successful people, and one thing they had in common was that they made sure to learn however they could.
In many cases, I’ve learned too much and haven’t applied enough of what I’ve learned. So, learn for the fun of learning. However, do make sure to apply whatever you can. All the education in the world does us no good unless we apply it.
I’m looking back to what I’ve learned and seeing what I can apply. Granted, I keep learning new things, too. Wisdom is found somewhere in the balance.
As long as whatever you learn improves your daily habits, you’re really on to something.
“We first make our habits, and then our habits make us.” – John Dryden
Ransom Demand #5: Play
Isn’t it great that one of the ransom demands is for you to have fun?
Reward yourself by using the Play bucket. Put 10% of your net income into this bucket and spend it all, ideally every month. If you need to save up longer for certain Play expenditures, spend all the money in your Play bucket every three months.
“Make sure this is money you really enjoy spending!” – Kieron Sweeney
Play covers a wide variety of things, such as restaurants, fun activities, and travel. This is money that you ought to look forward to spending. Get creative!
Ransom Demand #6: Giving
“Fully experience the joy of sharing your income every month. It can be the same recipient each time, or it could change or rotate.” – Kieron Sweeney
We live in a loving universe, even though it sometimes doesn’t look that way. Everything is working out for our higher good, and you get to be a very important part of that. You can be a source of transformation through your money, effort, and however else you can. The only limit is your imagination.
“Giving away money regularly sends a powerful message of affluence to the universe.” – Kieron Sweeney
You could consider the Giving bucket as being flexible. The usual recommendation is to put 10% of your net income into the Giving bucket.
You could also put 5% of your net income into the Giving bucket and volunteer 5% of your time. There are 24 hours in a day and 168 hours in a week. 5% of each day is 1 hour and 12 minutes. 5% of each week is 8 hours, 24 minutes.
Napoleon Hill provided a sample schedule in his book “How to Sell Your Way Through Life.” The schedule accounts for all 24 hours in a day. It’s from the first page of chapter 19, “How to Budget Your Time.” There are “8 hours for sleep, 8 hours for one’s vocation, 4 hours for recreation and health, 2 hours for study and preparation, and 2 hours for extra service for the benefit of others, without pay.”
While “2 hours for extra service for the benefit of others, without pay” might sound like a lot, it’s close to the 1 hour and 12 minutes amount, which is 5% of each day.
“If you really feel you can’t spare the money right now, then give your time to a cause. … There are many ways to give back.” – Kieron Sweeney
You can grow rich in giving. You could give to charities and receive charitable receipts, reducing your taxable income. Or you could give more directly to those in need.
You could volunteer your time and show yourself that even your time is abundant. You have enough to share so that others may benefit from your service. Sometimes, the work is its own reward.
I see creating this website as a labor of love. In these early days, not many people know about it. I’m working for free, but I’m not doing this for the money. I know that this work will find its audience, and its audience will find it. I’ll keep following the step-by-step system that I’m learning. And who knows where things will go from here? The key is consistency and continued effort. Keep on going. Keep on giving.
Ransom Demand #7: Necessities
So, what’s left? The Necessities bucket. Depending on what percentage you used for the other buckets, that will determine what percentage is left over for this bucket.
For example, putting 10% of your net income into each of the previous five buckets (Investing, Spending, Education, Play, and Giving) leaves 50% for Necessities. That needs to be enough to cover your living expenses, mortgage or rent, utilities, food, phone bill, other bills, transportation costs such as transit or car expenses, debt payments, clothing, and anything else that fits in here.
If you need more than 50% for your Necessities, you can adjust the percentages in certain buckets to free up the space. That could be any bucket except for Income Taxes and Investing.
“If you currently are spending more than 60% of your income on the necessities for your daily existence, it’s time for you to look at downgrading your lifestyle.” – Kieron Sweeney
Simplifying your lifestyle allows you to free up money that will help you drastically improve your life. You’ll be investing in yourself, a worthy investment.
Speaking of investment, if you scale up your Investing bucket from 10% to 20% of your net income, then it could still be 10% for Spending, 10% for Education, 10% for Play, and 10% for Giving, but it could now be 40% for Necessities. Imagine covering your various living expenses with only 40% of your net income!
To a certain extent, you can adjust the percentages in the various buckets however you need to. Not all of these percentages are set in stone. Some are adjustable based on your current condition and how much you can improve your life. You are the architect of your own life. The 7 Buckets Money System is an excellent tool for intentional life creation. Use it.
“Begin as soon as possible.” – Kieron Sweeney
I’ve known about this system for years, and I still have to remind myself what each of the buckets is and what percentages go into each of them. I realize that’s because I haven’t used the 7 Buckets Money System consistently enough. My life has been much more organized and clearer when I have used it.
Here’s a quick recap of the seven ransom demands/buckets, along with the recommended percentages, before I send you off to apply this system:
- 20% for Income Tax. Once you’ve set that amount aside, everything else is your net income. Divide 100% of your net income into the following six buckets.
- 10% for Investing. Ideally 20%, but we’ve all gotta start somewhere. Let this money grow. Keep the principal amount invested.
- 10% for Spending. This is where you save up money for larger purchases so that you can buy them without going into debt. This is also a bucket you can use to pay off your debt.
- 10% for Education. Embrace being a lifelong learner with this bucket. Expand yourself.
- 10% for Play. Pay yourself to have fun. Reward yourself.
- 10% for Giving. You are already wealthy beyond your wildest dreams. Prove it through your generosity.
- 50% for Necessities. Take care of your living expenses here.
For other guidelines, refer back to the Ransom Demand sections above. You have what you need to get started with buying your freedom.
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Until next time,