Do you want to better organize and manage your assets and portfolio? One of the best ways to approach this often-daunting task is to use a simple method that many children learn from their financially-savvy parents. This simple idea is to divide your money into three categories: save, spend, give. Here's how to do it and how it helps you.
Why Categorize Your Assets
The 'save, spend, give' method involves having children (or adults) place their cash into three jars or envelopes — each earmarked for a specific purpose. The first, 'save', is what the child learns to put aside for the future. The second, 'spend', allows the child to enjoy the fruits of their labor and buy things they want. Finally, the 'give' category helps a little one learn to give to others and see the joy of generosity.
As an adult, you can use these categories to create an outline that shows you how your money is doing and where it's really going. When broken down into these highly visible and very manageable broad strokes, it's easy to see patterns. You can see if you have been donating as much as you want, if you're overspending on today's needs (or luxuries), and if your money is growing sufficiently for the future.
How to Categorize Your Assets
So, how can you start breaking down your finances into these basic ideas? Along with your financial planner, assess the purposes of your various money sources to fit them into a category. Retirement accounts are 'save' while the amount you use from your paycheck each week is 'spend'. Charitable activities belong in the 'give' pile. Investment accounts are usually 'save', although goal savings accounts could be 'spend'.
Of course, it's much harder to categorize your entire portfolio or wealth than to put some dollar bills into an envelope. But don't let this deter you. The specifics only matter for your own analysis, so you don't need to get too critical. Divide items by how they make sense to you and your planner.
For example, do you give money to adult children? You could categorize this as 'give' or 'spend'. The first category helps you see this as a temporary charitable activity while the latter considers it a long-term part of monthly expenses. Neither category is wrong, and either can give you more insight into your goals and interests.
Where to Get Help Categorizing Assets
As mentioned, your financial planner is an excellent source of help with this project. Because they know the big picture around your finances and sources of income, they can help you organize your money in a way that makes it easy to analyze whether you are achieving your goals. Learn more by consulting with a wealth management provider today.
For more information about how a wealth management consultation can help you with your finances, contact a local financial planner.