Last week marked the release of How I Invest My Money, a compelling collection of essays curated by Josh Brown and Brian Portnoy, with insightful illustrations by Carl Richards. This book features contributions from a diverse group of financial professionals, each offering a personal glimpse into their own approaches to managing their finances, just as the title suggests.
This book offers a concise yet insightful read, with each chapter presenting a unique perspective on personal investment management. Rather than focusing on prescriptive advice or groundbreaking investment strategies, the book collectively emphasizes a crucial understanding: there’s no universal blueprint for personal finance and investing.
These narratives also bring to light the human side of financial advising. We, as advisors, are not detached algorithms; we are individuals with our own complexities and life experiences. These personal stories and core values are what make the book so impactful. I’ve previously shared similar insights in my own book and on my website.
However, I haven’t yet detailed how I personally manage my assets, liabilities, and spending. Inspired by How I Invest My Money, I aim to provide that transparency here.
As I often emphasize, personal finance transcends spreadsheets. Yet, I believe in the value of contributing to a more transparent and accessible professional investment management landscape. With that in mind, let’s delve into my balance sheet together and explore “Where Can I Invest My Money” in practice.
Understanding My Assets: A Detailed Breakdown
It’s natural to want to jump straight into my investment portfolio, especially given the title of this article. However, I view my portfolio as just one component of a larger financial picture. It’s not the sole indicator I rely on to assess my overall financial health.
To get a clear snapshot of my financial standing at any moment, I turn to the net worth worksheet I’ve maintained for over a decade. You can access a copy of this spreadsheet to use for yourself here. This tool helps me understand “where can I invest my money” in relation to my entire financial situation.
From a young age, I found immense satisfaction in seeing my hard work translate into tangible earnings, which I could then add to my savings. Throughout my school years and summers, I held various jobs – from waiting tables and washing cars to refereeing basketball and pet-sitting. Unlike many peers who might have been driven by the immediate spending potential of their summer earnings, I was more motivated by watching my savings grow. Each payday, I would add the cash to my dresser drawer stash and recount the total, finding the accumulation itself the greatest reward.
This early experience likely instilled in me the habit of consistently tracking my net worth as an adult. It allows me to visualize the cumulative effect of my financial decisions. Updating my balance sheet every six months serves as a powerful motivator and keeps me aware of my financial progress over time, helping me see “where can I invest my money” and how those investments contribute to my overall growth.
As I’ve matured, I’ve recognized additional benefits of maintaining an updated balance sheet. Beyond the sense of accomplishment, it provides crucial perspective by presenting my entire financial landscape in one place. It facilitates more productive financial discussions with my wife, as we can jointly review our financial numbers. It also aids in future planning, reminding us to concentrate on the financial elements within our control.
Therefore, I’ll guide you through my balance sheet in detail, explaining the entirety of my money allocation. We’ll begin with assets, then examine liabilities, and conclude with spending, as I believe spending habits reveal more about one’s values than investment choices alone.
Non-Liquid Assets: My Foundation
My least liquid assets are also the most substantial. My ownership stake in Plancorp represents the largest asset on my balance sheet. It does come with a significant liability in the form of a business loan I undertook to acquire my share, but we’ll discuss that further. My Plancorp stake, along with my portfolio assets, means my balance sheet is significantly linked to the performance of publicly-traded markets. This reflects my comfort level with market risk and influences “where can I invest my money” decisions.
Peter Lazaroff net worth worksheet
My next largest asset, my home, is also relatively illiquid. However, I don’t actually consider my house as an investment asset, even though it’s listed as such on my balance sheet. For me, a house is primarily a form of consumption. This perspective affects how I think about “where can I invest my money” for growth, keeping my home separate from investment considerations.
My view of my home as non-investment is further reinforced by the fact that my investment portfolio is on track to exceed the value of my home, making the house a progressively smaller fraction of my overall balance sheet. Currently, my house constitutes roughly 30% of my total assets, and I anticipate its value will, at best, keep pace with inflation. Meanwhile, my portfolio, currently about 23% of my assets, is expected to generate a long-term return exceeding inflation—a real rate of return—of around 6% or 7%. This expectation aligns with historical real returns from equities.
As you’ll see, I consistently contribute to my investments, whereas I don’t plan to regularly inject funds into my house in an attempt to boost its value. I will continue to spend on my home for maintenance and to adapt it to my family’s needs, but this is purely consumption.
Another reason I exclude my home from my long-term financial planning assets is that I have no intention of using a reverse mortgage to gradually draw on my home equity in retirement to cover expenses. Essentially, I view this house as an asset for my children to manage after my wife and I pass. I don’t foresee tapping into its value myself. Therefore, I mentally categorize it more as consumption than an investment asset, even though it’s listed under assets on my balance sheet. This distinction is important in determining “where can I invest my money” for retirement and long-term goals.
My Investment Portfolio: Simplicity and Strategy
So, how does the Chief Investment Officer of Plancorp, responsible for approximately $4.5 billion in client assets, manage his own investments? My approach prioritizes simplicity. In my Roth and Traditional IRAs, I hold a single mutual fund, while my 401(k) utilizes the most aggressive model portfolio available. This streamlined approach helps me focus on the bigger picture of “where can I invest my money” for long-term growth, rather than getting lost in complex strategies.
Approximately 70% of my family’s total portfolio is invested in a Roth IRA, primarily funded by rolling over my Roth 401(k) from my first job. During my time at that company, I consistently maxed out my retirement contributions through bi-monthly payroll deductions, investing on the 15th and 30th of each month. I never adjusted my asset allocation, never attempted to time the market. Every two weeks, I automatically invested in the firm’s most aggressive model, which was a 90% stock and 10% bond mix of index funds.
The decision to invest my Roth 401(k) in this manner was straightforward, thanks to my employer’s plan design. The options were limited to index funds, and model allocations were determined by our investment committee. Fresh out of college, I was confident that I didn’t possess more expertise than this group, so I set it and left it untouched.
And I am incredibly grateful I did. While this well-diversified, low-cost index portfolio in my Roth 401(k) benefited from uninterrupted compounding during the early years of a significant bull market, I was making numerous errors in my other investments, located in a taxable account and Roth IRA. These early experiences shaped my understanding of “where can I invest my money” effectively.
A detailed account of my early investment mistakes is for another discussion. However, most of these errors stemmed from my attempts to outperform the market through stock picking and market timing. I also learned the complexities of leveraged ETFs the hard way.
I’m uncertain about my exact performance relative to the market during that period—a common and often painful reality for DIY investors. Fortunately, the automated and disciplined nature of my Roth 401(k) meant I was in a solid financial position when I joined Plancorp in 2015.
Upon joining Plancorp, I decided to roll over all assets from my previous retirement plan into a Roth IRA and Traditional IRA. (Company matching contributions must be directed to a Traditional 401(k), so those were rolled into a Traditional IRA, and my Roth 401(k) into a Roth IRA.)
I felt the best strategy to safeguard against future missteps and ensure the continued growth of my largest account was to use a single fund and set up automatic dividend reinvestment. The fund I selected was DFA Global Equity Portfolio (DGEIX), which invests in a global portfolio of 100% stocks and employs the same systematic factor investing approach we recommend to our clients seeking higher expected returns than traditional index funds. This decision reflects my belief in “eating my own cooking” when it comes to “where can I invest my money”.
I believe strongly in practicing what I preach, which significantly influenced my choice to use strategies similar to those we advise for our clients. While this strategy isn’t without risk, I believed then, and still do, that the worst-case scenario over a multi-decade horizon was market-like returns. I currently don’t have any taxable investments—I liquidated them to invest in Plancorp—but I plan to purchase the Vanguard Total World Stock Index Fund (VT) in taxable accounts once my business loan is fully repaid. This approach to “where can I invest my money” in taxable accounts is a future goal.
I would never advise a 100% stock allocation to everyone because the most significant error an advisor can make in asset allocation is overestimating an investor’s willingness to tolerate risk. In my experience, this mistake often becomes apparent during market downturns, and reducing stock exposure after prices have already declined solidifies what would otherwise be temporary losses. Understanding risk tolerance is key to advising “where can I invest my money” for others.
When advising others, it’s prudent to start slightly more conservatively if there’s any uncertainty about the ideal asset allocation (and the investor’s potential reactions) and become more aggressive later, ideally during a market dip. It’s considerably more challenging (and emotionally taxing) to realize you need to become more conservative amidst a market decline. Therefore, I could never recommend a 100% stock allocation to someone I don’t know intimately.
However, personally, having navigated the 60% drawdown during the Great Recession and not panicked, I realized I could manage 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), possibly my favorite type of retirement account, is invested in the Vanguard Total World Stock Index Fund (VT). This diversified approach to “where can I invest my money” across different account types is intentional.
Yet, I’m not entirely at 100% stocks. My 401(k) at Plancorp is invested in an 80% stock and 20% bond mix, utilizing the same funds recommended to Plancorp clients who opt for a factor investing strategy (we also offer all index and ESG portfolios).
Similar to my previous employer, I make bi-weekly payroll contributions to this account, maxing it out annually. This means my overall portfolio is gradually becoming more conservative as my ongoing contributions to this account grow. This shift reflects a long-term strategy for “where can I invest my money” as I age.
The final portfolio decision I made upon joining Plancorp was to transition my overall allocation to 70% stocks and 30% bonds on my 50th birthday. If we happen to be in a bear market at that time, I’ll defer this change until markets recover to their previous peak. This decision wasn’t based on rigorous science; it simply felt right, and I’m committed to it.
Our only other investment accounts are our children’s 529 plans. For both children, we make monthly contributions up to the level that qualifies for a state tax deduction. Our children attend private school, and we’re permitted to use up to $10,000 annually from these accounts for tuition. Consequently, $10,000 of our yearly contribution is directly used for tuition and not invested. The remaining balance is invested in the most aggressive age-based model available for both children. This is part of our strategy for “where can I invest my money” for education savings.
One final note regarding all these investments: I rarely check them. I reviewed them specifically to write this article, but this is only the second time in 2020 I’ve done so. The more frequently you monitor your investments, the higher the likelihood of making unnecessary errors. I’ve conducted thorough due diligence on my fund selections and continue to do so as part of my professional responsibilities. However, I have a long-term plan and I’m adhering to it—and that’s likely to be the most crucial factor in my portfolio’s long-term success. This hands-off approach is key to my personal philosophy of “where can I invest my money” for the long haul.
My Cash Reserves: Flexibility and Opportunity
Maintaining an emergency fund is critically important. I believe in having three to 12 months’ worth of living expenses set aside to cushion against life’s unexpected challenges. Within this range, the ideal size of your emergency fund should align with your job security and the potential variability of your income. An emergency fund is a crucial component of any strategy of “where can I invest my money” because it provides a safety net.
I’ve consistently aimed to keep 12 months’ worth of expenses in cash reserves, not necessarily due to concerns about job security or income volatility. The primary reason is the flexibility it provides—flexibility to pursue career risks and to seize opportunities.
I’ve opportunistically drawn from my emergency fund three times in my career. The first two instances were to invest in my business. The third and most recent time was during the market sell-off of 2020, to invest at lower prices. (I didn’t have a substantial emergency fund during 2007-2008, so 2020 marked the first time I could invest meaningfully during a recession.) Having accessible cash is vital to capitalize on opportunities in “where can I invest my money” during market downturns.
Beyond my emergency fund, I generally avoid holding excessive cash. The only additional cash I keep is a cash buffer of two months’ expenses in my primary checking account to cover reimbursable work expenses and protect against cash flow timing issues within my automated savings system. This cash buffer supports the smooth operation of my overall financial system, ensuring I always know “where can I invest my money” and have the funds readily available.
Understanding My Liabilities: Managing Debt Strategically
My mortgage is the largest liability on my balance sheet. Earlier in my career, I was determined to pay off my mortgage as quickly as possible. However, this changed when I took out a loan to purchase my stake in Plancorp. This business loan is now the second-largest liability, carrying a 5.5% interest rate. I aggressively pay down this loan with every extra dollar of income from my ownership stake, rather than just making minimum payments. Prioritizing debt repayment is a key aspect of my overall financial strategy, influencing “where can I invest my money” decisions.
Aside from maxing out retirement accounts, contributing to 529 plans, and maintaining my emergency fund, all my surplus cash flow is directed towards paying down my business loan. Once this loan is cleared, I will reassess how to allocate that freed-up cash flow. My current plan is to invest a portion in a taxable account, but beyond that, I haven’t made firm decisions for those funds regarding “where can I invest my money” next.
I am certain that I won’t prepay my mortgage unless I experience a significant windfall or liquidity event. Examples of such events, which are plausible but not anticipated, include a corporate action at Plancorp or BrightPlan, receiving an inheritance, or winning the lottery (though we don’t buy lottery tickets, making that scenario less likely). These potential windfalls could shift my strategy for “where can I invest my money” and debt management.
While I acknowledge the appeal of being mortgage-free in my 30s or 40s, I’ve been making mortgage payments since 2010, so it feels like an ongoing, manageable expense. The primary factor in my decision to maintain a normal mortgage repayment schedule is the difference in potential returns I could earn by investing in the market instead. If I were to use extra cash flow to accelerate the payoff of any loan, it would be my business loan due to its higher interest rate. This comparison highlights the importance of considering opportunity costs when deciding “where can I invest my money” versus paying down debt.
I believe I have an aversion to auto loans. Historically, I’ve saved up for car purchases and paid in cash. However, I did take out my first car loan in 2017, the day after our second child was born and we realized my existing car couldn’t accommodate two car seats. Although we had sufficient cash in our emergency fund to avoid the loan, the interest rate was so much lower than my business loan that using cash to avoid a cheaper debt didn’t make financial sense. This decision was a strategic choice about “where can I invest my money” — prioritizing business loan repayment over avoiding a low-interest car loan.
I reasoned it was better to aggressively pay down my business loan and maintain a standard repayment schedule for the auto loan, similar to my mortgage. Yet, after a few months of car payments, I couldn’t tolerate it any longer and paid off the loan in full. When I say, “I don’t live life in a spreadsheet,” this is a prime example. This anecdote illustrates that personal financial decisions are not always purely rational and spreadsheet-driven, but also influenced by emotional factors and personal preferences regarding “where can I invest my money” and debt.
Understanding My Spending: Aligning Values with Expenditures
We dedicate significant time to discussions about saving and investing, but I believe we underemphasize maximizing the value from our spending. My go-to resource on this topic is Happy Money: The Science of Happier Spending. I highly recommend it. Understanding spending habits is crucial for a holistic approach to personal finance, complementing decisions about “where can I invest my money”.
I don’t dwell much on day-to-day spending because I adhere to a reverse budget. This system involves defining my savings goals, automating those savings contributions, and then freely spending the remaining funds. This system simplifies financial management, allowing me to focus on “where can I invest my money” for long-term growth without micromanaging daily expenses.
We utilize a few credit cards that accrue rewards for all possible expenses, provided there’s no service fee. For instance, we can pay our daycare bill with a credit card but choose not to due to a 2% surcharge. We automatically pay off credit card balances in full each month. All other recurring expenses are set up for automatic bill payment. This automated approach streamlines bill management and optimizes reward points, supporting efficient financial habits alongside strategic investing of “where can I invest my money”.
I’m not particularly materialistic, but I do invest in high-quality items when necessary. I drive a reasonably nice car, but I drove my previous one for 10 years and intend to do the same with my current vehicle. I live in a relatively nice house, which I consider consumption, but again, it’s a long-term purchase; I plan to live here indefinitely. I believe my best spending habit is avoiding impulse purchases. Even buying a simple work shirt involves multiple store (or online) visits before deciding how to spend my money. This deliberate approach to spending contrasts with the more automated approach to “where can I invest my money”, highlighting a balanced financial philosophy.
My most significant discretionary spending is on experiences, from vacations and playoff baseball games to live performances and special occasion dinners. Experiences become integral to our identity. Unlike most material possessions, the memories from experiences strengthen our connections with friends and family. Prioritizing experiences over material goods aligns with a philosophy of spending that enhances life quality, complementing strategic decisions about “where can I invest my money” for the future.
Our family also prioritizes giving back, recognizing our fortunate circumstances and the importance of helping others. We typically donate 2% of our income to charity. I’m unsure if this is an ideal percentage, but it feels right for us. We’ve also integrated giving into our oldest son’s allowance. Charitable giving is an important aspect of our financial values, reflecting a broader perspective beyond just “where can I invest my money” for personal gain.
Final Thoughts: A Holistic Approach to Personal Finance
So, there it is. That’s how I invest (and save, manage, and spend) my money. This comprehensive overview provides insights into my personal approach to “where can I invest my money” and manage my overall finances.
I wish I had included something like this as a conclusion in my book, which remains the best resource for understanding the money management systems I advocate for implementation if you aim to save effectively, spend wisely, and invest for long-term growth. I largely follow my own advice, but I’m not a robot and occasionally deviate from what I’d comfortably recommend to others. My personal approach to “where can I invest my money” is grounded in these broader principles.
If you found this post insightful, I encourage you to explore the book that inspired it. For additional resources on financial learning, here are five books that influenced my philosophy on wealth building, and here are ten books I recommended a few years ago for those looking to enhance their investment acumen. These resources can further inform your decisions about “where can I invest my money” and improve your overall financial literacy.
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