Uncharted | February | Guide to Allocating Cash Flow, Safest and Most Dangerous National Parks, and More...

Welcome back to Uncharted! Before we dig in...

If you live in or have been to Montana recently (specifically around Bozeman & Missoula), I'd love to hear your recommendations for hiking and mountain biking!

My wife, Julia, and I are planning to spend ~1 month there this summer and want to make sure we get our fill of hiking and mountain biking (more on this below).

Personal Finance Corner

A Simple Guide to Allocating Your Cash Flow

A common question I receive from families is - “How should we be allocating our cash flow on a month-to-month basis?” Said another way, they’re wondering which accounts should be used and what’s the best place to park their money.

The answer is about more than just accounts and numbers; it’s about understanding what you’re working toward and what kind of life you want to lead.

Most folks make decisions about where to park their money based on rules of thumb and what others are doing.

Remember though, it’s totally fine to do something different than what others are doing. Especially if you’ve got a non-traditional goal (i.e. early retirement, nomadic living, taking a sabbatical, etc.).

Sometimes your decisions may not be the most efficient decision (in the context of rules of thumb); that's ok though!

What's most important is making decisions that make the most sense for YOUR situation.

In this short article I'll cover the process you can use to make better decisions with how to allocate your cash flow.

Get Really Clear on What's Most Important

As you start this process, ask yourself:

• What are your dreams?
• What lifestyle do you want?
• What risks come with that lifestyle?
• When will you need access to your money?

If you’ve got this big dream of retiring early or traveling the country, your savings plan is going to look totally different than someone aiming for a traditional retirement or a sabbatical.

Bring your values into this thought process too. I like to use this simple and short exercise with clients to help them prioritize their family's values.

Time Bucketing

Next, I recommend going a step further and organizing things using a “time bucketing” approach (a concept from the book Die With Zero). Time bucketing essentially aims to loosely map out your life in 5-10 year buckets; filling each bucket with things that you hope to do or accomplish in that part of your life.

In building these buckets you start to visualize the major things you want to do and it helps provide a timeline of when money may be needed.

Here's an example of what time buckets may look like:

As a side note: as you go through this exercise, you may want to take it a step further and thoughtfully organize your goals based on health and interests.

What I mean by this is if, for example, you would love to do a big thru hike or climb a mountain, these are things you probably won’t be doing in your 60s or 70s (or, if you do, they may not be the most enjoyable). Alternatively, a cross country road trip is something that could be done later in life (somewhat dependent on health) so maybe you choose to prioritize other things before this.

Whatever your goals are, try to prioritize any physical activities in earlier years and plan around them accordingly.

Be very intentional with your time bucketing as this is going to give you a clear map of the optimal way you should be allocating your cash flow.

Not everything in your buckets will require money. But we can easily identify the things that DO require money. We can also work on any lifestyle adjustments that would lead to a greater potential to meet other future goals. This could include things like downsizing a home as you age or relocating to a new state.

Overall, this bucketing approach gives you an easier way to make decisions about where and how you should allocate your cash flow.

This is such a simple concept but incredibly powerful for cutting through the noise and highlighting the best way to allocate your cash.

Closing Thoughts

Having well-defined time buckets tells you exactly where and when you'll need money available. Obviously, goals and interests change, so it's totally fine if you want to revise this throughout the future.

The main goal here to is to be more intentional about designing your ideal life and allocating your money in a way that supports that. Rules of thumb are great for getting you pointed in the right direction, but this exercise is going to 100% personalize your journey.

In essence, shorter term goals should generally prioritize flexibility. Long-term goals can be addressed through a variety of different accounts and strategies so it gets muddy. Here are things to ask yourself when allocating cash for longer term goals:

• Does it make sense to prioritize accounts that offer tax deductions today?
• What sort of needs will I have in the future? e.g. will I need health insurance if I retire before 65?
• Do I have an appropriate mix of account types to allow me to manage my taxable income in the future? If not, what account type(s) would build more future flexibility?

Knowing what you hope to accomplish and what you're working towards, we'll also be able to make better decisions about how to treat debt within your financial plan.

From here, we can start matching cash flow to accounts/investments within your plan.

If your plan requires more flexibility then allocating cash flow to things like taxable brokerage accounts, paying down debt, high-yield savings, Roth IRAs, etc. will help to build a tremendous amount of flexibility in your life.

Knowing when/how money will be used is also going to allow you to be more thoughtful with optimizing your taxes. It's important to not solely focus on your tax bill today. Think about your tax situation today; what might it look like in the future, or when you're retired?

Focus on optimizing your lifetime tax bill. Try not to make tax decisions based on what's happening today or what happened last year. Consider how allocating cash to certain accounts will affect your lifetime tax bill and optimize things accordingly.

All of this being said, the most fundamental part of every plan is to have a well established emergency fund (regardless of whether you're in your 20s or within a few years of retirement). At a minimum, make sure you are well prepared for emergencies that could arise during your journey.

If you need some help or if you'd like to talk through some things, feel free to hop on my calendar!

Outdoor Content

Safest (and Most Dangerous) National Parks

KUHL released an interesting study about the safest and most dangerous national parks. They ranked the national parks by looking at things like total deaths, number of missing persons, search and rescue missions, number of visitors, and more. A lot of the data examined was from 2007 - 2023.

The safest national park was Gateway Arch National Park while the most dangerous was a tie between Grand Canyon National Park and Wrangell-St. Elias National Park in Alaska.

I visited Wrangell-St. Elias back in 2021 and totally get the rating. It's the largest national park at 13.2 million acres and has only one road that goes about 60 miles. There's mountains, glaciers, and rivers everywhere with the nearest hospital hundreds of miles away.

Bound for Nowhere

Hands down, my favorite YouTube channel is Bound for Nowhere. MAK and Owen are some of the best photographers & videographers out there. They're also phenomenal storytellers who capture all the small details of the outdoors and travel.

They just finished releasing a travel series on the Baja Peninsula which has been on my list for a long time. Highly recommend checking it out (and all of their travel series!).

Travel Planning

My wife, Julia, and I are planning our first extended trip this summer where we'll be working 100% remotely from our camper. We're aiming to spend about a month mostly in Montana and possibly a little time in Wyoming.

This planning process has brought up the struggle of coordinating drive times and camping locations in a bunch of different areas. This is never an issue when you're working with specified vacation time but trying to navigate working hours, internet availability (specifically unobstructed sky views for Starlink), water, and other utilities brings an extra layer of complexity.

We've been using apps like iOverlander and The Dyrt to map out and plan some of our campsites which have been super helpful so far!

If you have any suggestions on must-do hikes or things to see, let me know! As of now, we're planning on spending some time at a lift access mountain bike park and hiking the Cirque of the Towers in Wyoming.

News, Updates, and Important Dates

• January 29th - IRS began accepting 2023 tax returns
• April 15th - Tax Filing Deadline