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Building for Tomorrow – and Today

Building for Tomorrow – and Today

April 29, 2020

Personal financial planning allows you to maximize growth potential over the long term while ensuring short-term financial needs are covered.

At Carey & Hanna, we work with you to determine how much cash flow is needed from sources beyond dependable streams of income (Social Security, pensions, annuities, etc.), and then divide your financial assets into separate and distinct buckets: Safe and Growth.

Safe accounts – Made up of cash in the bank, bonds, and other low-volatility vehicles, these accounts ensure you have easily accessible money to cover necessary expenses for up to five years. Assets are placed in reliable vehicles that maintain fairly consistent balances, so the money is there when you need it. Although a variety of research shows planning for three years of financial needs would give you a comfortable cushion, maintaining five years’ worth of funds in safe accounts allows for opportunistic buying when stocks are low, more choices in what to sell to generate cash, and the ability to avoid forced-selling of stock positions, which arguably is the most effective way to destroy long-term wealth.

Growth accounts – One of the best ways to grow wealth is by investing in and owning businesses - either through publicly traded stocks/stock funds or privately held stocks/businesses. Real estate has also proven to be a great vehicle for growing wealth over time – with some unique advantages to boot! Placing a portion of your assets in managed advisory accounts or real estate investments with potential for greater returns allows you to pursue long-term growth more aggressively. With short-term expenses covered by your safe accounts, you won’t be forced to sell good businesses or real estate holdings to meet immediate financial needs, which means market values can fluctuate without compromising your security – or sanity!

When it comes to building assets for the future, many investors rely on pre-determined glide paths and target date funds, which means the investment mix changes as you progress from a growth stage to balance and sustaining retirement stages. However, this approach could result in being over-allocated to under-performing funds over the years. As an example, two investors could be placed in the same Target Date 2025 fund, which typically means they have 40-50% allocated to safe accounts with the balance in growth accounts. Even with similar lifestyles, incomes, and expenses, 50% could mean not nearly enough in safe accounts for one investor but too much for another. It all depends on their total assets, specific needs, and goals for the future. That’s where personalized financial planning comes into play. 

At Carey & Hanna, we don’t view “growth, balance, and sustaining” as separate chapters of your asset journey. We plan for each concurrently – and from the very beginning.