Buckets

Most, if not all, financial planning is overwhelming, especially to the non-financial person. Unfortunately, they blame themselves for not knowing. Some of these people are highly educated: they are physicists, technologists, marketing experts, journalists, even teachers. At Liquid, we're going to change that.

First, we're going to start with a novel distinction. Financial planners want you to look at the entire picture, including your stocks, your home, your investment accounts, and usually forget the day-to-day finances. While those other items are extremely important, we first need to focus on the day-to-day finances first so we create a solid foundation. The distinction is separating the day-to-day finances with the long-term finances.

Next, we'll start using friendly terms. Let's start with wells, which are commonly defined as a reservoir for liquid. We will refer to the distinction of day-to-day and long-term as representing two separate wells.

In the day-to-day well you'll have your income that is coming due for the month, your cash, checking and money market accounts, your spending budget, your credit card balance(s) and all items your saving for in the future, such as that new iPad. This is the well that Liquid is all about. The other well, is for your longer-term items, such as your investment accounts, your retirement savings, your home and money you've put away for your children's education. When the first well gets to your desired level, you'll pull excess funds out of it and invest it in the second well.

Now for the second term. This first well, the day-to-day well, will contain buckets. There will be a bucket for each item. Let's take your income you're expecting to receive; you may have several sources of income. There will be a bucket for each of these sources, such as from your regular "9 to 5" job, from your free-lance work, and from selling through multi-level marketing.