Saturday, September 13, 2008

How to Use This Guide

To start, we will assume that you are an employee who gets paid a salary. We will use the following analogy: your salary is a stream of water that will flow through different buckets, which are connected by pipes.

Each container is intended to hold portions of your money. Some of them will hold them briefly and others for a long time. The five buckets we have identified, which are also the sections of this guide, are the following:
  1. Retirement Bucket #1: Contributing to a 401(K) Plan
  2. Parking Bucket: Using a Free Checking Account
  3. Short Term Bucket: Building a Safety Fund for “Rainy Days”
  4. Retirement Bucket #2: Contributing to a Roth IRA
  5. Long Term Bucket: Saving and Investing for Growth
You can see how these buckets are interconnected in this chart:

You can refer to the chart above at any moment when reading this guide.

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