A couple of years ago I happened upon a book called Smart Couples Finish Rich. In it I learned of three baskets (you can call them buckets or pockets or whatever you wish). Those three baskets are:
- The Retirement Basket
- The Security Basket
- The Dream Basket
These baskets are essentially the primary areas of your financial life. Simple, I know, but my brain likes it when things are simple.
The Retirement Basket
This is where things like an IRA (Roth or Traditional), a 401k, or any other money or any other accounts dedicated to retirement belong.
The Security Basket
This basket includes insurance (life, medical, disability, etc.) and an emergency reserve (3-24 months worth of cash).
The Dream Basket
This is my wife's favorite. It's not that she dislikes the other baskets. She agrees they are good things. They just aren't a lot of fun! The purpose of the dream basket is to save for the fun things. Vacations, decorations for the house, scrapbooking supplies, new golf clubs...they all come out of the dream basket.
Though it's my sweetie's favorite, this is a very important basket for me as well. I'm a saver. I like to save and invest and watch our portfolio grow. If it were up to me, we'd save 10 times what we are saving now. But in marriage there are compromises. That's where the dream basket comes in. I get to save and she gets to spend, but we each benefit.
So, David Bach changed my financial view of the world with a simple metaphor that we use to this day. The purpose of this blog is to share a little about my three baskets and what goes in them. None of what is presented is rocket science, nor will this information bring world peace, but it might give a few folks some peace of mind regarding their personal finances.
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