The Wealth Code 2.0: How the Rich Stay Rich in Good Times and Bad

Chapter 5

Leaks in the Bucket

Imagine you’re in the desert. Your car has broken down, and you need to fill the radiator with water. Your family is getting hot sitting in the car but, fortunately, you see a gas station just a short walk away. You grab your handy bucket out of the trunk and head out to fill it with water.

After finding the water hose, you start to fill your bucket. Soon, you notice the water level in the bucket isn’t rising, although the water is flowing into the bucket. You then notice that your toes are starting to squish inside your shoes and that there are several small leaks in your bucket and the water is draining out as fast as it is pouring in.

Everyone has a bucket that represents his or her financial net worth. Everything you own—your income, liabilities, taxes, and investments—makes up your financial bucket. The benefit of a leak-proof financial bucket is to hold and preserve your wealth and hopefully to allow it to expand and grow.

It is an important goal of any financial plan to plug potential leaks. But leaks happen, and leaks prevent the bucket from serving its purpose. These leaks vary in size, but the result is the same. They prevent you from filling up your financial bucket efficiently. You could have three financial quarts poured in while one quart is leaking out. Or in too many instances, people’s financial buckets are more like three quarts in and four quarts out. Most people are going backward.

Common leaks in one’s financial bucket are caused ...