Pi Day: Imagine your money split into pie pieces

Even if you don’t consider yourself a math nerd, you may have heard March 14 is an unofficial holiday when the numerically inclined celebrate pie and all things circular. On “Pi Day,” the date matches the first three digits (3.14) of pi – the ratio between a circle’s circumference and its diameter.

Whether or not you remember much about this key mathematical constant and the formulas you learned in geometry class, the image of a pie and how you slice it can help you analyze how an integrated whole breaks down into its components. This could be especially useful when it comes to your finances.

In honor of Pi Day, let’s imagine that your income is a delicious pie waiting to be divided into pieces. What is the best way to slice up your financial resources? What portion should you devote to investing, saving and spending? 

Pieces of your financial pie

Everyone’s financial situation is unique. When it comes to drawing a perfect circle around your monetary life and determining how to optimize your resources, there is no one-size-fits-all approach. Still, there are a few common pieces that will inevitably be part of the recipe as you seek to round out your finances.

How you slice it

Although the categories of investing, saving and spending may seem straightforward enough, determining the optimal breakdown can be challenging. For one thing, calculating how much you should spend without eating into your investment and saving slices may require careful planning and budgeting. This part of slicing the pie can become a balancing act between enjoying the present and planning for the future.

While the pie metaphor is useful for visualizing the whole picture, you may also think of categorizing your money into different “buckets.” The portion of your assets you direct toward savings become part of your “liquidity bucket” – you can access this slice of the pie whenever you need it. One thing to keep in mind is that savings products may generate lower returns than you would be able to pull in with other investments. However, they remain an important piece of the pie.

The bucketing approach can help you develop holistic strategies in securing your financial future. Beyond the liquidity bucket, wealth planners suggest dividing your assets into a lifestyle bucket designed to maintain your quality of life even under adverse circumstances, a legacy bucket destined to benefit future generations and a perpetual growth bucket aimed at long-term wealth accumulation.

The bottom line

As you consider ways to divide your financial pie, there are plenty of factors to keep in mind. A J.P. Morgan advisor can help you establish a personalized plan that matches your goals, timeline and risk tolerance.

So take a moment to think about your financial pie and the optimal allocation for your resources. Some careful planning and calculation can help sweeten your financial life on this Pi Day and for years to come.

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