Where your wealth should be and why
Money is somewhat elusive to many people, and those that have it often do not know where to put it. Experts have long disagreed over where the best places to put your wealth are, however, most would agree that the following is a good distribution of wealth.
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The Bank: 5-10%
- MMA
- CDs
- Cash
Having some money in the bank that you can get to easily and that serves as a safety net in case of emergencies, job loss, etc. is always a wise idea. While it is possible to get higher returns in other areas, there are many advantages to having at least a portion of your income be put directly into the bank, either in a Money Market Account, a CD, or just a normal savings or checking type of account. If you do put your money into a CD be sure to stack them so that you always have one that can be cashed out. Having 5-10% of your income put into the bank as savings means making wiser financial decisions.
Investments: 85-90%
- Lifestyle assets
- Stocks, bonds, mutual funds
- Real estate (not your home)
- Business accounts
- Pension accounts
This is where some of your bills fall, as lifestyle assets mean cars, homes, timeshares, etc. However, in addition to your assets, you should be investing a portion of your money so that you are allowing it to earn more money for you. This is also where you prepare for your future and for your family after you pass on. Retirement savings, and other such savings fall into this category. You should also use this portion of your money for building a business, investing in the markets, and working to grow your wealth.
Insurance: 5-10%
You use this wealth to protect the rest of your financial situation.
- Life
- Disability
- Property/Casualty
- Health
- Long term care
These are some of the kinds of insurance you should consider getting as they will help you protect yourself and your assets, estate, and wealth. Many people that have never made a claim look at insurance and think of it as a waste. However, if you did have to make a claim, even an average size claim, it could take you several years to make up the amount of money paid out. For example, a car that costs $10,000 and is totaled in an accident would take over eight years of insurance premiums to pay for. So, recognize that this is not something you want to use, in fact the whole reason you spend so much to have it is so that you protect the 80-90% investment category from loss.
