3 buckets

When I started my career in 1991, I started as a 22 year old financial advisor in Minneapolis. I had moved to the city knowing no one, and the business was very different then. I achieved a modest level of success early on, and as a result I was encouraged to pursue a “leadership” track which would result in me being in a management position at a relatively young age. I subsequently abandoned that track when Diane and I decided to move to Maine to be closer to her family and start a practice together.

Looking back, the best thing about my time in management, along with the people I met and worked with, was the leadership training I was exposed to. There are things I carry with me today that I feel like have always been with me, but when I think about it were things I learned there. Leadership principles can be applied in many facets of life, whether that be in our small practice, or even with my kids or self-management. One of the simplest concepts I learned and still use regularly, even unconsciously, are the “3 buckets”. I’ll discuss this principal here and how we can try to apply them to financial planning.

Bucket 1 consists of things that are under our direct control. You and you alone determine them. Bucket 1 is by far the smallest bucket, because nearly everything is at least influenced by other factors. They might be things like the clothes you wear today, or the food that you eat or the time you leave for work in the morning. In parenting of young children, a whole bunch of stuff falls in this area. Importantly, how we choose to respond (not how we feel) to a stimulus is also in bucket 1.

Bucket 2 are things over which you have influence, but not control. This is a much larger bucket than bucket 1. These can involve interpersonal relationships with friends, family, coworkers, things that involve other people’s decisions but over which you do have influence. In the parenting example this might involve how we end up interacting with our young (or old) adult children.

Bucket 3 involves everything else, things over which we have NO control. This is by far the largest bucket and includes politics, sports, traffic, what other people post on social media, world events, etc.

The concept is, to be an effective leader (or to self-manage), we should try to as much as possible limit the amount of time we spend in bucket 3, the by far largest bucket. By doing this, we free up our mental space to focus on buckets 1 and 2, which are far more effective levers for us to achieve what we want. For most people, especially in our social media world, this is a very difficult proposition. It’s so easy to focus on bucket 3, and so hard to focus on the other 2.

In financial planning we see this all the time.

Bucket 3 includes the market, something completely unpredictable and out of our control. It also includes things like recessions, geopolitics, elections, etc. Neither you as the client or me as the advisor has any control of these and we should spend as little mental energy as possible here. We should of course consider that these factors exist in our planning but recognize they are out of our control.

Bucket 2 for you might include the risk level you choose to take, discussed in another article, and how you communicate with me. With respect to goal achievement, you have influence for example by how much you apply towards goals and how you invest but you don’t have complete control. For me this would include how I interact and communicate with clients in maintaining relationships, and the investments I choose for clients for their desired goal and risk level.

Bucket 1 for you involves some of the things from the “Markets are up/Markets are down” articles, actions that you take in response to events. How much you choose to save, how much you spend, when you choose to retire (though this can be influenced by health). For me it’s being consistent with my responsiveness to clients (returning calls, emails, etc.), how disciplined I am with things like rebalancing, the time I spend on investment research, the daily choices I make. I’m fortunate as a business owner to have a much larger bucket 1 than a lot of people have.

It's human nature to want to control things that are out of our control, we don’t always take responsibility for the things that are in our control, and we are often afraid to act on things that are within our influence. Next time you find yourself focusing on bucket 3, recognize that letting go of bucket 3 can be really liberating, allowing us more energy to focus on the much more productive and smaller buckets 1 and 2.