HapiMoney

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Once you’ve determined how much cash to keep on hand the next step is to figure out what to do with the rest of your assets.  It seems confusing, especially if you’ve never done it before, but it’s not.

These assets should be divided into two categories, fixed income (or assets whose value is derived from a fixed series of interest payments – things like CD’s, bonds, ) and what I will call capital appreciation assets (or assets whose value is derived from increase in asset price – things like stocks, real estate, currencies, etc).

How you determine this is based on 2 things:  1) How risk averse you are and 2) What your financial goals are (when do you want to retire?  how old are you now?). The younger you are and more risk seeking you are, the more you should put into equities. The older you get, or the more risk averse you are, the more you should put into bonds.

Here’s how you do that:

1) Establish how risk averse you are:

• Go take this quiz. Come back after it tells you how willing you are to take risks.  Remember what your score is (it’s out of 47).

2) Go to this site, and input how old you are, when you want to retire, and the score you got on the risk site. This will give you the answers to where you should put your money.

Lastly, you’ll need to figure out if this asset allocation will allow you to reach your goals, especially for you risk averse 55 year olds who have no savings, and no income… but that’s for another post.