Too many people claim that they live from paycheck to paycheck. They seem to just make it to the end of the month after paying all of the bills, despite having received periodic increases in total income and making strong efforts to adhere to a strict budget. The Bucket Program is a cash managing system which incorporates the habit of Paying Yourself First to regain control of your finances, and redirects your cash flow towards the goal of building your wealth and financial security.
The bucket represents a category of financial transactions funded by a regular and consistent percentage of your disposable income, and directed toward a specific goal. Four buckets are named and more can be included, but only four are recommended at the initial phase of the program.
Bucket One – is the operating account where all incoming revenues are deposited preferably by direct deposit to build up the total disposable income for the month. A percentage of disposable income is automatically withdrawn from the operating account and deposited monthly into each of three additional accounts listed below. A cash management goal is to have 70% or less of the disposable income available in the operating account for payment of all expenses and expenditures after the three initial disbursements.
Bucket Two – is the “Pay Yourself First” account which receives regularly 10% more or less of disposable income as a seed to build working capital. This account is not to be viewed as a long-term savings that is used for the next perceived crisis. Instead, this account is for the express purpose of accumulating working capital that will generate new income to build new wealth and financial security. The PYF account is carefully managed exposing working capital only to reasonable level of risk for maximal growth with attention to safety measures to prevent the loss of working capital.
Bucket Three – is a reserve account that also receives 10% more or less of disposable income up to a level of around 1.5 to 8 times monthly disposable income. This account is flexible to use for urgent matters as well as to accumulate funds in sub-accounts for special needs and wants. The total amount of accumulated funds will be determined by the goal for the account.
Bucket Four – is set up for organizing and tracking your contributions. In this account, a predetermined percentage of 10% more or less of disposable income is transferred each month from the operating account. This account is your choice to have. It is included because many believe including the wealthy that giving does come back to the giver many folds.
The percentage of disposable income allocated for each bucket may be difficult at start, so make the appropriate adjustment to assure that a regular and consistent amount is deposited monthly into each account. Please note that at this point, the amount does not matter, but getting started does.
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