The next "bubble" to be created is your Retirement account. This "bubble" will account for +10% of your N.I. leaving 20% for other bubbles. This is where the "fun" begins. Unlike children who like to pop bubbles, we want our bubbles to get as big as possible; then, when you do finally pop them it will be awesome. So, here are some examples of other "bubbles" that you can grow with your +20%.
Emergency Fund ~ $1,000 + (as your standard of living rises so too should this amount)
Moving Out Expenses
3-6 Months Expenses ~ Less risky job = 3 months; more risky job = 6+ months
Birthday/Holiday Gift purchases
New Technology (phone/computer replacements)
You can have as few or as many bubbles as you wish. With fewer bubbles each bubble will grow faster. Have lots of bubbles (at the same time) and their growth may become agonizingly slow. Here again, delayed gratification will help you be successful as you will have fewer bubbles and can watch them grow really fast.
Then, when the time comes and you have a nice big vacation bubble to "pop" that will be even more fun than popping bubbles as a kid.
As for the Investment percentage it too can be divided into various "bubbles" such as:
Retirement ~ (401k, Roth IRA, Mutual Funds)
Investments ~ (stocks, bonds, funds, trusts)
Just make sure that as your income increases and your 10-20% investing percentage grows, you need to have a fully funded 401k (if it's matched by your employer) and a fully funded RothIRA before you use the extra dollar amounts on individual stocks and real estate purchases.
1. What are some bubbles you would like to work on right now?
2. Why should some bubbles grow faster than others? Which bubbles should have priority (grow faster)?
3. Create a simple visual aid that shows how your 30% would be allocated between Savings and Investing at different stages of life (Now, College, Mid-life, Pre-Retirement)
PowerPoint: Stock Market
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