27. Diversify according to your spending intentions

 

the money that we save today; we will spend in the future !

using this as a guide, a practical way to diversify is to diversify according to your spending intentions and preparations for contingencies.

First is to keep an amount as income buffer, this goes to your savings account.

Second is start articulating your financial goals, these are big ticket life events that you need to prepare for such as funding for a child's college education or your retirement, construct a portfolio of stocks and bonds that can outpace inflation over time.

Contingencies are large expenses associated with unforeseen events like accidents, critical illness and worst, an early demise of the breadwinner. These are best covered with insurance.

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