The age-old question of…what do I do with $10,000? I am sure you’ve all had the thought. As a financial professional I have been asked this question numerous times and the right answer, at least to me, is not what you might think. 

When asked this at perhaps a party or networking event, the first thing that comes to mind is, how do I answer this and have it be really impactful and positively affect this person’s thought process? This is where my writing talent and passion can cross over into my more analytical life in financial planning. Do I use a food analogy? Perhaps something in nature? Or maybe construction? This decision, which must happen quickly while I’m in the moment, really depends on who asks the question. For the purposes of this column, I am going with food. Lasagna to be exact. So here goes…

We all know that lasagna is layered. That is what makes it soooo delicious. But what if you just threw everything in with no plan, no structure. What if you lumped it all in a pyrex and put it in the oven, would it cook? Yes. Would it be actual lasagna? No, it would be a pile of mushy soup. You wouldn’t really reach your goal if you chose the quick and easy route, right?

So, we have $10,000, correct? What do we do with it? Well, there is a layer that first needs to be taken care of. This is the one that will help give you a base, something to hold onto. Without which you put yourself in lasagna soup land if a tree falls through your roof, or your car breaks down, or you need an emergency dental procedure and it’s not covered. This is the ever sexy and often under-rated cash reserve, three to six months in cash, not at risk in an investment. This is our first layer of noodles. Big, thick, and reliable. 

Next, we have the sauce. In order to make it hearty, like a Bolognese, your financial picture should have as little non-tax-deductible debt as possible. In more direct terms, if you have $5,000 on a credit card that could be charging as much as 15% or more of interest, then it seems silly to try to put excess funds anywhere else. 

Now, I am not sure if you like a layer of vegetables in your lasagna, but I am a vegetable fan and so here we are. As in any balanced meal, you should have some vegetables. Without such a source of vitamins, you are short-changing your recipe. For argument’s sake let us call our next layer of vegetables the nourishing one. I imagine you are on the edge of your seat wanting to know how this relates to financial planning. Here it comes. Protection! Many people are afraid to talk about insurance. It still is “taboo” to discuss it in some circles because it might mean you are a dreaded insurance salesperson. In reality, it is an absolute necessity. I have seen far too many examples of people who were not insured properly. What follows is not only grief from losing a loved one but now financial devastation to go with it. So, what kind of vegetable and how many servings are needed? Well, that is different for everyone and the reason why real planning is individualized and tailored, not cookie cutter.

So, we finish our layers, another with noodles, sauce with meat in it, vegetables, and the final layer of pasta. Sprinkle on the cheese and put it in the oven. It is delicious once it is done, as long as no steps were missed in the recipe.