Life Asset Allocation

In the personal finance world, we like to discuss asset allocation and rebalancing our funds. Where will you put your money? How much will be in stocks or bonds? Will you choose an index fund or buy individual stocks? With the stock market plummet of the past week and people freaking out, I thought about how we undervalue ourselves while we focus so much on money. If we were to manage our lives like we manage our assets, we would ask ourselves similar questions. Let’s explore the possible life allocations:

  • Work – You spend a great deal of your life working. But within “work” are many choices, just like saying you’ll invest in “stocks” doesn’t cover the whole story. You could plan to throw 100% of your life assets into work for a few years and then decide to stop after a number of years. You could decide to work for yourself and see where that individual stock goes. You could find a job that allows you to allocate 50% or less of your life to provide you plenty of life assets to invest elsewhere. This investment decision is the one we focus the most on because it is the one that funds our financial allocations, but we sometimes neglect the other life investment options.
  • Relationships – If you’re married and/or have children, this investment option is necessary. You’re automatically enrolled in the plan. But it’s still up to you to decide your allocation. Family also includes parents, siblings, and extended family. Relationships also include friends. These are investment options that are often easy to ignore. You’re not automatically enrolled in these varieties of relationship investments and it takes conscious effort to invest life assets in these relationships. We also know based on the research about regret that regret involving relationships is felt the most deeply
  • Entertainment – The investment options available in this portfolio are nearly endless. Possibilities range from cultural experiences and travel to Facebook scrolling and app playing. What percentage of your assets do you currently allocate to entertainment? Are you happy with the choices within that investment? Is it time to drop some choices and pick up others for a better return?
  • Health – Exercising, sleeping, meditating, and eating healthy all require a major life investment. It’s easy to allocate life resources elsewhere. It’s so much easier to dine out than cook yourself, or browse on devices instead of sleeping or meditating. It’s easier to do more work rather than work out. And it’s easy to say that our investments in work trump investments allocated into health. Work investments have immediate, tangible rewards ($). Health investments give slow, steady returns. It’s a conservative, long-term investment. Have you allocated enough here?
  • Self – Other than investing in your health, you are a tangible asset that deserves specific investment. What are you worth and how could you improve your own equity? Learning a new skill, taking a class, reading a book, and creative expression are all possibilities for increasing your return. Do you spend enough time building equity in the most important asset you already have?

In finances, it’s good to rebalance investments. Sometimes stocks take off and your allocation becomes too stock-heavy and you have to adjust your investments to account for that. This is true in life as well. We need to take the necessary time to rebalance our life allocation. In some stages of life, our life investments are nearly 100% in relationships. I can say that right after each one of my three children was born, I didn’t do any work, and I struggled to allocate anything to my personal growth or my health (though, amazingly, we always manage to invest in entertainment… our choices just become less wise within that category). After a few months, I had to consciously rebalance my assets and diversify again. Sometimes work is busy and we throw everything we’ve got into that. There’s a reason diversification is a good thing. Make sure you are actively managing your own life investments and are happy with the returns you’re seeing.

What are your life allocation percentages?

A Guide to Life Asset Allocation - Northern Expenditure

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8 Comments

  1. This is a great analogy and demonstrates how important it is to think about how we invest our time in the short term and the long term. According to our plan, I will work full-time for the next seven years in my bread-winning occupation. Then, I will “diversify” my income sources over a variety of part-time endeavors. We won’t be able to reach full finanacial independence by the time we are 40 because of our debt. However, we are working towards a rebalancing of our lives so we have more time to invest in other life “allocations.”

    • MaggieBanks

      This is a great plan. Our 2022 financial independence date most likely includes some income-producing activities on our part as well. But the money will be less important than the pursuit at that point as we just want to try things we’re interested in doing. I think it’s the best when the investments can have some overlap (ie: creative expression is income producing or relationships are enhanced by the right kinds of entertainment).

  2. I love this. Thanks for the moment of self-reflection. I really need to think about how I’m allocating my time now. Truthfully, I work a lot of hours, so I’m not achieving the balance I seek in all areas of life. I’m going to put some thought to this over the weekend to give myself some time to be honest with the imbalance I’ve struck.

    • MaggieBanks

      Claudia – I honestly have to re-assess my life allocations every weekend. Some weeks run smooth and I strike a fairly good balance, but other weeks, I realize I don’t love the returns I’m getting and I have to make some changes.

  3. J

    Great post, Maggie! This is so thought provoking. I honestly haven’t thought about it this way before; it has always been work-life balance for me but you just made me realise that life branches out to a few more aspects. I don’t know what my life allocations are but I’m guessing my portfolio is imbalanced. I will have to do a reassessment and maybe re-set my priorities too.

    • MaggieBanks

      If we’re managing finances, we’ll be rich, but if we don’t pay attention to our life, we won’t be happy with our money. Money doesn’t equal happiness. We’re trying to retire early, but we need to figure out how to still be healthy and happy when we get there!

  4. I love this post. Such a good way to think about the important things in life — our real assets. Ever since we put a timeline on our early retirement plan, we’ve unconsciously shifted toward a bit of a “deferred compensation” model on a lot of the important things in life. We don’t take enough time to travel, we don’t have enough time with each other, and we don’t invest in ourselves as we should — all because we believe we’ll have time for that stuff after we retire in a few short years. But of course tomorrow is never a guarantee, and this approach makes us grumpy in the meantime. Lately we have been making a bigger effort to put more stock into TODAY, and not just live for tomorrow, and it’s definitely a better way to go for our sanity and connectedness (in the relationship sense, not tech).

    • MaggieBanks

      I Agree. We fall into that rut of waiting to take care of ourselves and it’s something we don’t want to do. We want to establish those habits and routines now so that transitioning into something else isn’t difficult because we’ve already managed to take care of ourselves around a crazy schedule. (We haven’t figured it out entirely yet… but that’s the goal!)

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