Group all of your assets into three categories: investments, home, and stuff

Sonnie Bailey

18 March 2018


You can group all of your assets into three categories: investments, home, and stuff.

Thinking about your assets in this way can be a powerful exercise, and help you clarify your financial situation and what you want to achieve over the long-run.


Investments can include financial assets, rental properties, and interests in businesses you’re involved with. KiwiSaver, for example, fits into the investments category.

These are assets that generate income for you in some form or another. And for the purpose of this exercise, even capital gains represent income over the long-run.

Investments are important over the long-run because these assets can support your lifestyle when you’re no longer generating an income of your own.


If you own your home, this is where you live. If you have multiple houses, a motorhome, and/or a bach, these assets fit into this category.

Your home is an asset. It provides you with a benefit: namely, accommodation. But unlike an investment property it doesn’t generate an income.

Having a home, or the means to buy a home, is important over the long-run. If you need to rent when you retire, you’re likely to be in a fairly tenuous financial position.

This is why, at minimum, you should aim to have enough money to buy a unit, or pay for an occupancy advance in a retirement village, by the time you retire. (It doesn’t, however, mean you need to buy a property right now.)

However, it’s important to balance home and investments and making sure they complement each other.

If you use your KiwiSaver funds to buy a home, you’re transferring assets from one category (investments) to another (home). There’s nothing wrong with this, but keep it in mind when you’re thinking about how the assets fit in together.


This includes your clothes, your gadgets, your chattels, and your cars. These are the things that might add to the quality of your life, but don’t really add to your financial position.

Like assets in the home category, stuff doesn’t generate an income for you.

Get the balance between these categories right

Whenever you spend money on something, think of the decision in terms of these three categories.

Most often we spend money on stuff. There’s nothing wrong with that. But it’s worth remembering that if you spend an extra couple of hundred of dollars on something you didn’t need to, that’s a couple of hundred dollars that could have been put in the “investments” category – which will generate an income for you over time.

When you make decisions about housing, think about the trade-offs in terms of how it might impact your investments over the long-run. You can build wealth in your home, but for most people, that wealth will stay in your home, or any future homes. It doesn’t generate an income to benefit your lifestyle, which is why it’s important to have investments.

It’s also worth keeping in mind that the composition of these categories will change over the course of your life. For example, it’s common to be “over-weight” towards home, relative to investments, as you focus on repaying your mortgage. Once you repay the mortgage, you can then focus on building investments.

My question to you is this.

If you look at your own balance sheet, what proportion of assets fit into these three categories? As you approach retirement, what proportion of these assets would you like?

At a personal level, I’m not too worried about the balance of my “stuff”. But I’ve got a pretty good idea of how much money I want in the “home” category, and how much I want in the “investments” category. This may change over time, but it sets a target to aim towards.

What about you?

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