I’m a personal finance nerd.
High yield savings accounts. (I keep mine at Ally)
Roth IRAs. (Vanguard for this)
HSAs. (Fidelity)
I love the alphabet soup of it all. I love playing the game of “How can we make Awesome Old Lady Rebecca’s life totally bomb?” I love checking the stock market, calculating my net wealth every month, and running retirement calculators. I love picking investments, and I love updating my budget. I love listening to personal finance podcasts.
My favorites are Financial Feminist, Smart Money by Nerdwallet, and Bad with Money.
But there’s one little concept of personal finance that is, to me, more important than anything else. It transcends the world of money:
Diversification.
If you know anything about investments, you probably know about diversification. It’s the idea that if you hold investments in lots of different companies, sectors, and markets, you shield yourself from risk. If you own stock in lots and lots of companies, it’s no biggie if one of them is having a bad moment - the others will even things out and buffer you from the storm.
That’s why mutual funds or ETFs are so cool - when you buy them, you’re buying small slivers of stock in LOTS of different companies and sectors. Automatic diversification and protection from market ups and downs FTW!
I have a decent chunk of my money in the market, and it’s invested exclusively in mutual funds and ETFs. I want the protection of that diversification.
Diversification isn’t just protection in the financial realm, though.
Remember in elementary and middle school when you had a fight with your best friend and it felt like the world was going to end?
Well, that scenario lives in my world a lot. Not for me, but for my kid and the students I work with. Fighting besties happens ALL THE TIME.
So I teach about diversification.
Sometimes I teach them the financial underpinnings (hey - let’s create financially literate kids!), but we lean hard into the idea of diversifying a “friends portfolio” so that you always have other options if something isn’t working out with a specific friend at the moment.
It makes sense, right? Good to have a range of connections to help you ride out the storm if something comes up in one area of your social life. It’s also why I try to steer kids away from the idea of having one best friend - that’s like putting all of your stock in Tesla. You might hit it big, but if you and that bestie fall out, you will feel very friend-poor and lonely.
I think diversification is really the key to security in life. When I was making my job transition, one of my friends pointed me toward the idea of diversifying your “meaning-making portfolio”; finding things (other than work, specifically), that bring life meaning. When you’re un- or underemployed, it’s easy to feel useless. But there’s no reason that work should be the single place you find meaning! Building out that portfolio helps protect from the emotional ups and downs of job transitions.
This was great advice! The big job transition was scary, but less-so when I deliberately built meaning outside of my professional identity. I read those books. I refocused on hanging with my family. I spent more time on my hobbies and picked up my camera again. I relaxed in that hammock. And I explored other sides of my professional skillset that never felt really “legit” before, but ended up adding a lot of meaning in a lot of different places.
I carried that diversification into my current professional set-up, too, opting for several part-time consulting jobs instead of one full-time one.
I’m happier. My stress is diversified. My colleagues are diversified. The satisfaction and purpose I derive from my work is diversified. My work location and format is diversified. I feel steadier, calmer, and less overwhelmed than I did when all of my employment lived in a single place.
I really think diversification is one of the keys to living a healthy and balanced life, and I’m constantly looking for new places to implement it. Food and the meals I cook, my book list, the news I consume. Hobbies I enjoy.
What about you? What areas of your life are well-diversified?
Where would you like to diversify more?
Onward,
