Lifestyle, Longevity and Legacy My Three Ls of Financial Planning

Lifestyle, Longevity and Legacy signify the time horizons of your financial objectives and a way to visualize three different buckets for your money.

Bucket #1: Lifestyle – the availability of funds in the short term (a.k.a. liquidity) so we look at the following:

• Liabilities you have in the next 5 years.
• Plans that require the flexibility to access these funds: downpayment on a house, invest in a business, travel…basically any major purchase in the short term.
• Reserves for emergencies: out of work, illness, etc.

Cash is the only asset in Bucket #1!

Bucket #2: Longevity – money that you are going to need later in your life and ultimately will spend over your lifetime. Its focus is mainly around retirement and making sure that you have planned and invested wisely so that your assets in retirement replace the earned income you received while working. The goal is to maintain the lifestyle of your choosing during your retirement years and making sure that you don’t outlive your money!

The time horizon for this bucket is anywhere from 10 to 40 years. Inflation must always be factored into your goal planning and investment selections because inflation can be your enemy! A diversified portfolio that will beat inflation but tailored to how comfortable you are with market volatility (a.k.a. risk tolerance) is the goal. Working with an adviser can help you understand and navigate the market, especially during stressful market periods.

Bucket #3: Legacy – money that can be passed to your loved ones or even causes you care about. Many of you may not have reached this stage yet, and not have enough for this bucket, but with good financial advice, you could. Your legacy means assets for your children and even your eventual grandchildren which can really make a difference in their lives. This could involve creating a trust for proper distribution of your assets. Your legacy may also mean leaving assets to various charities and causes to which you have a personal connection.

Here you have an even longer-term horizon so you can afford to be more aggressive in your investment choices. You should also be mindful of estate tax and how to minimize it.

Purposeful planning and implementation around these three L buckets, Lifestyle/Longevity/Legacy, provides a strong foundation and helps to create the right balance in handling your assets for now and for your future!