Lots of different approaches suggested here, so I just want to add a couple of thoughts about how I chose my system, which is now second nature for me on the camino.
I agree that whatever the system, you should use it at home for a while to get used to it.
Think about what you are trying to protect yourself from — on the Camino the odds that someone will pickpocket you or slice off the strap of your purse or your waist pack are extremely low. The odds are much greater that the opportunity to take your stuff will present itself to someone. For me, that means that the most important thing is to have everything in one place with me at all times. I understand the rationale about having different things in different places, but I would only use that system if you have got it down pat and can gather all your valuables quickly and without hassle. After all these years, I can trust myself to never leave my waist bag anywhere, so the odds that it will get stolen are very low (I do have a list and some pictures of phone numbers and ID numbers like passport on a sheet in my pack and on my phone just in case).
I have seen people who carried a few valuables in their packs and some in other places, but that requires moving and repacking things when, for instance, you have to leave your pack outside to go into a café, or go the shower, etc. It may work for you, but for me it is unnecessarily confusing.
Things change off camino — if I am on the metro (especially in Madrid or Barcelona), I have absolutely everything valuable under my clothes. I learned long ago that I will never develop the sixth sense or pickpocket radar that my Spanish friends have and that my attention and alertness will invariably lapse. So the easy solution is to get it all under my clothes and not worry.
The most important thing IMHO is to adopt a system that removes the worry and anxiety, and that will be different for different people. Buen camino, Laurie