Last week marked the launch of How I Invest My Money, a compelling collection of essays curated by Josh Brown and Brian Portnoy, enriched with illustrations by Carl Richards. This book gathers insights from a diverse group of financial professionals, each offering a personal look into their own methods of managing their finances, directly addressing the question many ask: How Do I Invest My Money?
This book offers a concise yet insightful read, with each chapter presenting a unique viewpoint on personal investment management. Rather than focusing on prescriptive advice or groundbreaking investment strategies, it collectively highlights a crucial understanding: there’s no universal formula for personal finance and investing. It underscores that the optimal approach to how to invest my money is deeply personal.
These narratives also humanize financial advisors, revealing that we are not detached algorithms but individuals navigating our own complex financial realities. This personal element resonated deeply with readers, mirroring the transparency I’ve aimed for in my own book and on my website.
Inspired by How I Invest My Money, I felt compelled to further this conversation by sharing the specifics of my own financial landscape – my assets, liabilities, and spending behaviors. It’s about providing a tangible example for those wondering how do I invest my money effectively in real life.
While it’s true that personal finance extends beyond spreadsheets, transparency is vital in making professional investment management more accessible and relatable. So, let’s delve into my balance sheet to illustrate one practical approach to how to invest my money.
Book cover of How I Invest My Money book, a guide for anyone asking how do I invest my money.
Understanding My Assets: A Detailed Breakdown
While the immediate question might be about portfolio investments, it’s crucial to recognize that a portfolio is just one component of a larger financial picture. When assessing my financial standing, I don’t solely focus on investments; I take a holistic view. This comprehensive approach is key for anyone considering how do I invest my money as part of their overall financial health.
My primary tool for this is a net worth worksheet, something I’ve maintained for over a decade. This worksheet, which you can access here, provides a clear snapshot of my financial position at any moment.
My early experiences shaped my approach to finance. As a child, I found immense satisfaction in seeing my hard work translate directly into savings. From various part-time jobs like waiting tables to refereeing basketball, the accumulation of cash was my primary motivator. While peers might have been driven by immediate spending, for me, the real reward was watching my savings grow. Each paycheck was added to my “dresser drawer stash,” and the act of counting the total sum was incredibly gratifying. This early focus on saving is a foundational lesson for anyone wondering how do I invest my money – it starts with having something to invest.
This childhood fascination with tracking my savings evolved into a consistent practice of monitoring my net worth as an adult. It’s a way to visualize the tangible results of my financial decisions. Updating my balance sheet biannually serves as both a motivational tool and a reminder of my financial trajectory. This regular review is a proactive step in managing how do I invest my money and ensuring I stay on track with my financial goals.
Over time, the benefits of maintaining an up-to-date balance sheet have expanded. Beyond the sense of accomplishment, it provides crucial perspective, presenting my entire financial landscape in one place. This clarity is invaluable for productive financial discussions with my wife, allowing us to review our financial health together. It also aids in future planning, grounding our focus on elements within our control. For anyone wondering how do I invest my money and build long-term wealth, consistent tracking and planning are essential.
Therefore, to offer a complete picture of my financial strategy and address the core question of how do I invest my money, I’ll walk through my balance sheet in detail. We’ll start with assets, then examine liabilities, and finally, discuss spending habits, as I believe spending patterns reveal more about personal values than investment choices alone.
Non-Liquid Assets: The Cornerstones of My Financial Strategy
My least liquid assets are also the most substantial components of my balance sheet. The largest of these is my ownership stake in Plancorp. This is a significant asset, though it’s also linked to a considerable liability in the form of a business loan used to finance the purchase of my share. (More on liabilities later.) Combined with my portfolio assets, my balance sheet is closely tied to the performance of publicly-traded markets, reflecting my comfort level with market risk. Understanding this balance between liquid and non-liquid assets is crucial when considering how do I invest my money for long-term stability and growth.
My next largest asset is my home, another relatively illiquid holding. However, I don’t typically view my house as an investment, despite its place on my balance sheet. To me, it’s more accurately categorized as consumption. This perspective is important when thinking about how do I invest my money – differentiating between assets that generate returns and those that provide lifestyle value.
My view of my home as non-investment is reinforced by the projected growth of my investment portfolio. I anticipate my portfolio will eventually exceed the value of my home, making the house a progressively smaller fraction of my total assets. Currently, my home represents about 30% of my assets, and I expect its value to appreciate at or below the rate of inflation. Conversely, my portfolio, currently around 23% of my assets, is expected to yield a long-term real rate of return (above inflation) of 6% to 7%, consistent with historical equity returns. This comparison highlights the different roles assets play in answering how do I invest my money for both growth and personal use.
Furthermore, my investment portfolio benefits from regular contributions, while I don’t intend to inject additional funds into my home to artificially inflate its value. Home-related expenses are viewed as ongoing consumption—funds spent on maintenance and improvements to suit my family’s needs. This distinction is vital when deciding how do I invest my money – focusing investment capital on assets designed for growth.
Another reason I exclude my home from long-term financial planning assets is that I don’t plan to use a reverse mortgage to access its equity in retirement. Essentially, I consider my house an asset for my heirs to liquidate after my passing. Since I won’t tap into its value myself, it’s mentally categorized more as consumption than a financial asset, even though it’s listed as an asset on my balance sheet. This long-term perspective is key when strategizing how do I invest my money for retirement and legacy planning.
My Investment Portfolio: Simplicity and Strategy
As Chief Investment Officer of Plancorp, overseeing approximately $4.5 billion in client assets, how do I invest my money personally? My approach is rooted in simplicity. In my Roth and Traditional IRAs, I invest in a single mutual fund. My 401(k) utilizes the most aggressive model portfolio option available. This streamlined approach demonstrates that effective strategies for how to invest my money don’t always require complexity.
Roughly 70% of my family’s overall portfolio is held in a Roth IRA, primarily funded through a rollover from a Roth 401(k) from my previous employer. During my tenure there, I consistently maximized my retirement contributions via bi-monthly payroll deductions. I never altered my asset allocation or attempted to time the market. Every two weeks, I automatically invested in the firm’s most aggressive model portfolio, a 90% stock and 10% bond mix of index funds. This consistent, hands-off approach is a powerful lesson in how to invest my money for long-term growth through disciplined, regular contributions.
This straightforward investment strategy for my Roth 401(k) was simplified by my employer’s plan design, which offered only index funds and model allocations created by their investment committee. As a young professional, I recognized the wisdom of deferring to their expertise, setting my investments and leaving them untouched. This highlights the importance of recognizing one’s own limitations and leveraging available expertise when considering how do I invest my money effectively.
This decision proved incredibly beneficial. My diversified, low-cost index portfolio in the Roth 401(k) capitalized on the compounding effects during the early years of a significant bull market. Meanwhile, in my taxable account and Roth IRA, I made numerous mistakes, primarily trying to outperform the market through security selection and market timing. These early missteps are common learning experiences when figuring out how to invest my money, and they often underscore the benefits of simpler, more diversified strategies.
Detailing these early investment mistakes is a topic for another time, but they largely stemmed from attempts to beat the market through stock picking and market timing. I also learned about the risks of leveraged ETFs the hard way. While I can’t precisely quantify my performance relative to the market during that period—a common challenge for DIY investors—the automated discipline of my Roth 401(k) ensured I was in a solid financial position when I joined Plancorp in 2015. This underscores the value of automation and disciplined investing in how to invest my money successfully.
Upon joining Plancorp, I consolidated my retirement assets, rolling over my previous retirement plan into a Roth IRA and a Traditional IRA (company matching funds must go into a Traditional 401(k), hence the Traditional IRA rollover, while my Roth 401(k) assets went into a Roth IRA). This consolidation was a strategic move in refining how do I invest my money by simplifying account management.
To safeguard against future errors and ensure the continued growth of my largest account, I opted for a single fund strategy with automatic dividend reinvestment. The fund I selected was the DFA Global Equity Portfolio (DGEIX), which provides 100% global stock allocation and employs a systematic factor investing approach—the same strategy we recommend to Plancorp clients seeking enhanced returns over index funds. This decision reflects a key principle in how to invest my money – aligning personal investments with professional beliefs and strategies.
“Eating my own cooking” was a significant factor in choosing strategies similar to those advised for our clients. While not without risk, I assessed that the long-term downside was likely to be market-like returns. Currently, I hold no taxable investments, having sold them to invest in Plancorp. However, I plan to purchase the Vanguard Total World Stock Index Fund (VT) in taxable accounts once my business loan is repaid. This future investment demonstrates a continued commitment to diversified, long-term strategies in how do I invest my money.
It’s crucial to note that I would never recommend a 100% stock allocation to everyone. Overestimating an investor’s risk tolerance is a significant pitfall in asset allocation advice. This mistake often surfaces during market downturns, leading to panic selling and locking in losses. Understanding risk tolerance is paramount when considering how do I invest my money appropriately.
When advising others, erring on the side of caution with a slightly more conservative initial asset allocation is prudent, especially if there’s uncertainty about risk tolerance. It’s easier to become more aggressive later, ideally during market dips. Conversely, realizing the need to be more conservative during a downturn is far more challenging and emotionally taxing. Therefore, a 100% stock allocation is rarely advisable for someone whose risk tolerance isn’t intimately known. This highlights the personalized nature of how to invest my money effectively.
However, having navigated the 60% drawdown of the Great Recession without panic, I recognized my personal capacity to handle the volatility of a 100% equity portfolio. My wife’s 403(b) is also globally invested in 100% stocks across three index funds. Our Health Savings Account (HSA), which I consider a top-tier retirement savings vehicle, is invested in the Vanguard Total World Stock Index Fund (VT). These choices reflect a high-risk tolerance and a long-term investment horizon, key factors in how do I invest my money in line with personal circumstances.
Yet, my overall investment strategy isn’t purely 100% stocks. My 401(k) at Plancorp is allocated to an 80% stock and 20% bond mix, using the same factor-based funds recommended to Plancorp clients (we also offer index and ESG portfolios). This blend of stocks and bonds acknowledges the importance of diversification in how do I invest my money responsibly.
Similar to my previous role, I maximize my 401(k) contributions through bi-weekly payroll deductions. This ongoing contribution strategy gradually makes my overall portfolio more conservative as the bond allocation in my 401(k) grows. This gradual shift towards conservatism over time is a strategic consideration in how do I invest my money as I approach different life stages.
Looking ahead, I’ve decided to adjust my overall asset allocation to 70% stocks and 30% bonds on my 50th birthday. If this milestone coincides with a bear market, I’ll delay the shift until markets recover to their previous highs. This decision isn’t based on rigorous science but rather a personal sense of what feels right for my risk profile at that stage of life. This personal adjustment underscores that how do I invest my money is not static but evolves with personal circumstances and market conditions.
Our family’s remaining investment accounts are our children’s 529 plans. For both children, we make monthly contributions up to the state tax deduction limit. As our children attend private school, up to $10,000 annually from these accounts is used for tuition, meaning that portion doesn’t get invested. The remaining balance is invested in the most aggressive age-based models available. These 529 plans are a specific application of how to invest my money for long-term goals like education.
A final point on my investments: I rarely monitor them. Writing this article required me to review my accounts, marking only the second time in 2020 I had done so. Frequent checking often leads to unnecessary, emotionally-driven mistakes. Having conducted thorough due diligence on my fund selections and maintaining ongoing oversight as part of my professional role, I trust in my plan and adhere to it. This disciplined, long-term approach is arguably the most critical factor in my portfolio’s projected success and a key lesson for anyone asking how do I invest my money for the long haul.
Cash Reserves: The Foundation of Financial Flexibility
Maintaining a robust emergency fund is fundamentally important. I advocate for holding three to twelve months of living expenses in reserve to cushion against life’s unforeseen events. The specific size of this fund should align with individual job security and income stability. This is a crucial first step before considering how do I invest my money beyond basic savings.
I’ve consistently aimed for a 12-month expense buffer in cash, not out of necessity for job security, but primarily for the flexibility it affords. This cash reserve provides the freedom to pursue career risks and capitalize on opportunities. This strategic cash management is integral to how do I invest my money and broader financial planning.
Throughout my career, I’ve opportunistically utilized my emergency fund three times. The first two instances were to invest in my business ventures. The most recent was during the 2020 market downturn, allowing me to invest at reduced prices. (In 2007-2008, my emergency fund was minimal, making 2020 the first recession where I could invest meaningfully.) This strategic deployment of emergency funds is an advanced tactic in how do I invest my money, leveraging cash reserves during market opportunities.
Beyond the emergency fund, I minimize holding excessive cash. I maintain a two-month expense cash buffer in my primary checking account to cover reimbursable work expenses and mitigate cash flow mismatches within my automated savings system. This efficient cash management ensures that funds are readily available for immediate needs without unnecessary idle cash, optimizing how do I invest my money and manage liquidity.
Understanding My Liabilities: Debt Management Strategies
My mortgage represents the largest liability on my balance sheet. Early in my career, I was intent on rapid mortgage repayment. However, this priority shifted when I secured a loan to purchase my stake in Plancorp. This business loan is now my second-largest liability and carries a 5.5% interest rate. I aggressively prioritize repaying this loan, directing every penny of income from my ownership stake towards it, rather than making minimum payments. Strategic debt management is a critical aspect of how do I invest my money and build net worth.
After maximizing retirement contributions, 529 plan contributions, and emergency fund maintenance, all surplus cash flow is channeled into paying down my business loan. Once this debt is cleared, I’ll reassess how to allocate the freed-up cash flow. Part of it will be directed to taxable investments, but specific plans beyond that are still under consideration. This proactive approach to debt reduction and future investment planning is essential in how do I invest my money effectively over the long term.
I’ve decided against accelerated mortgage payments unless a significant financial windfall occurs. Such events might include a corporate action at Plancorp or BrightPlan, an inheritance, or winning the lottery (though we don’t buy lottery tickets). Prioritizing higher-interest debt like the business loan over the mortgage reflects a strategic approach to debt management and how do I invest my money to maximize returns by minimizing interest expenses.
While being mortgage-free in my 30s or 40s is appealing, I’ve been making mortgage payments since 2010, making it a normalized expense. The primary driver for maintaining a standard mortgage repayment schedule is the potential return I could earn by investing that extra cash in the market. If I were to allocate extra funds to debt repayment, it would be towards the higher-interest business loan. This analytical approach to debt versus investment is crucial in how do I invest my money and manage liabilities.
Auto loans are something I generally avoid. Historically, I’ve saved for car purchases and paid in cash. However, in 2017, I took out my first car loan after realizing my existing car couldn’t accommodate two car seats. While we had sufficient emergency funds to cover the purchase outright, the low interest rate on the auto loan, compared to my business loan, made taking the debt financially sensible. This decision demonstrates a nuanced approach to debt, considering interest rates and opportunity costs when deciding how do I invest my money and manage liabilities.
The initial plan was to aggressively repay the business loan while maintaining standard payments on the auto loan. However, after a few months of car payments, I opted to pay off the auto loan in full. This illustrates that financial decisions aren’t always purely spreadsheet-driven, and sometimes, peace of mind outweighs purely mathematical considerations. This highlights the personal and sometimes emotional factors that play into how do I invest my money and manage debt.
Understanding My Spending: Aligning Money with Values
We often concentrate on saving and investing, but less frequently on optimizing our spending for greater happiness. My go-to resource on this is Happy Money: The Science of Happier Spending, which I highly recommend. Thoughtful spending is as crucial as strategic investing in overall financial well-being and understanding how do I invest my money to support a fulfilling life.
My day-to-day spending doesn’t require much deliberation because I adhere to a reverse budget. This system prioritizes savings by first defining savings goals, automating contributions, and then allowing discretionary spending of the remaining funds. This approach ensures savings are prioritized before spending, a fundamental principle in how do I invest my money and manage finances responsibly.
We utilize credit cards that offer rewards for most expenditures (excluding fees, like the 2% fee for daycare payments) and automatically pay balances in full monthly. Recurring expenses are set up for automatic bill payment. This efficient system maximizes rewards and avoids interest charges, optimizing daily financial transactions as part of how do I invest my money and manage cash flow.
While not overly materialistic, I prioritize quality when making purchases. I drive a good car but intend to keep it for a decade, similar to my previous vehicle. Our home is comfortable but viewed as long-term consumption; we plan to stay until accessibility becomes an issue. A key spending habit is avoiding impulse purchases. Even for minor items like work shirts, I take time to compare options before making a decision. This deliberate approach to spending aligns with the principles of mindful consumption and responsible financial management, complementing how do I invest my money for long-term goals.
My most significant discretionary spending is on experiences—vacations, sporting events, live performances, and special dinners. Experiences contribute to our sense of identity. Unlike material goods, the memories from shared experiences strengthen connections with loved ones. Prioritizing experiences over material possessions reflects a values-based approach to spending, enhancing life quality alongside strategic decisions about how do I invest my money.
Our family also prioritizes charitable giving, donating 2% of our income. While the percentage isn’t based on a specific calculation, it feels right for us. We’ve also integrated giving into our oldest son’s allowance. This commitment to giving back reflects a broader perspective on wealth and responsibility, integrating philanthropic values with how do I invest my money and manage resources.
Final Thoughts: A Holistic Approach to Personal Finance
So, there you have it—my personal approach to how I invest my money, along with saving, managing, and spending.
I wish I had included this level of personal detail in my book, which remains a comprehensive guide to effective money management systems for saving, spending wisely, and investing for long-term growth. While I largely adhere to my own advice, I’m not a robot and occasionally deviate from recommendations I’d give to others. This personal account aims to provide real-world context to the often-abstract discussions around how do I invest my money.
If this post resonated with you, explore the book that inspired it and for further learning, I recommend five books that shaped my philosophy on wealth building and ten books for becoming a better investor.
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RESOURCE: Want to optimize your financial decisions? Uncover key opportunities with my Financial Wellness Assessment.
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