Wealth Building | A Financial Plan & How To Get Out Of The Hole

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Welcome back everyone to another episode of the real Authority show. My name is Rick Harrison. I'm your host. And today we're going to be talking about wealth building how to get out of the hole. So I know a lot of Millennials out there like me graduated college with quite a bit of debt in their pockets. And then once we graduated we ended up getting jobs that didn't really cover the debt as well as all of the necessities of living and bills. So today we're going to be talking to.

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If advisor stuff contorno who works with UBS Touchstone well partners and he has a local office down here in Bonita Springs and he's going to be covering some of the ins and outs how to get out of the hole and what we can do in our futures to set ourselves up for financial success right after this.

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Thanks for joining. Everyone everyone today. We are talking about wealth building with Steph Stephen contorno. Who is the senior vice president and partner of Touchstone Wealth Partners UBS. He has a local office down here in Bonita Springs, but they do have offices all over the country Toledo, Ohio, Manhattan.

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It consists of 25 professionals and most most notably. I know that Stephens has been doing a great series with CBS News wank every Monday at 9:25. He has money Monday where he talks about. It's a financial segment that talks about a lot of different Financial topics. So welcome to the show Stephen and I appreciate you joining us today. Oh one other thing. I forgot to mention UBS, it's they they manage over 4.2 billion dollars.

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Assets for families across the country. So they're a great company to look out for and do some research on and with that. I'll give the floor to Stephen. Well, thank you. Thanks for having me Rick. I'm excited to to be part of this today. So as you mentioned our team touched on wild Partners, we're fortunate to be one of the top recognized wealth management practices in America. And as you said we manage roughly about four point two billion for our clients Assets Now, our firm UBS is actually the largest global wealth.

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Management firm in the world and they manage a whole lot more than that, but our group manages manages that amount that you mentioned. So I'm excited to be here our team, you know Touchstone in general. We're a little bit different than most others that you made me. We're more like a boutique type of wealth management team and what we focus on and it's been the same from the beginning. It's all about educating the community and the country and as you mentioned we do that various ways. One of the ways we do that is through I host money Monday.

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On CBS Wink News every week. And we also teach a course at Florida Gulf Coast University local University where we teach classes on Financial Planning and retirement strategy. So I'm excited to be here. That's awesome. Yeah. I know that the I've watched a few year episodes on money Monday and they're really informative. You know, I think a lot of people can gain a lot of the wisdom out there and it's it's stuff that some people think is common knowledge, but there's really a lot of people out there that don't always manage their finances or understand a lot of the.

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Different you know ways of investing and keeping yourself, you know progressing towards that Financial stability that everyone wants well, I appreciate you saying that like I said from the beginning it's all about education. One of the things I focus on on money Monday is to always make sure that the viewer understands the concept of what we're trying to say and we're going to do the same here today. I mean, it's not about trying to use fancy words that no one understands. It's about using common sense and using common words that people can resonate with right. Yeah, and you're pretty active on social media, so.

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You know just for those of you out there who are looking to get in touch with stuff on my throwing at his Facebook page up on the bottom of the screen. That's a really great point. I know he's super quick to respond through Messenger. I'm surprised and amazed at how quickly responds all the time. But definitely a great way to get in touch and definitely check out his Facebook page. He has a lot of videos he puts up. Like I said every week he has something new to say about your finances. So absolutely go there and follow him and like his page.

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Age.

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So yeah with you know, our topic today is a little bit more geared towards, you know, starting from the beginning and slowly working through the different segments of Our Lives to you know, secure that Financial stability. We're all looking for. You know me being a millennial. I know there's a lot of Millennials out there who will be able to relate to this show and some of the things we're going to cover and would that even the the Gen-X, you know, the Gen xers that are coming after the Millennials who are just starting to graduate high school and move into college.

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You know one of the biggest questions I've always had and I know I had it as soon as I got out of college was you know with so much debt and comparisons of the income that many people are making where do we really start, you know to get ourselves out of the hole Yeah. I guess we're do we start? Well, that's a great question and unfortunately student debt is a big problem. I mean, we hear more and more about it every generation. I mean listen, I'm not a millennial but I had student debt. So I.

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I can completely understand and appreciate that question. Yeah, so as a country, we know that's that's a big issue. I think there are a couple of components to answering that. The first is for anyone watching who maybe has not accumulated that dead yet or maybe they have children that are looking into going away to college and and taking on the kind of data me from the beginning kind of evaluate what your situation is because if there is a way to get through college the best way you can without taking on too much debt. I think that's the best place to start but but.

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It's kind of address where we are now, which is is a crisis of student debt in my opinion dealing with student debt really comes down to some good old-fashioned budget. Okay. So for anyone and again, I went through this myself as well generally become out of college after graduating and we get a job that doesn't pay us necessarily as much as we'd like and we're faced with some choices, right it always comes down to to what we want and what we can have and that is important to decipher as we're beginning.

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Beginning to become adults and enter the real world. So starting off with budgeting is an important thing one of the kind of tricks that I've always use is kind of segregating our money. Okay? What do I mean by that most of us have a checking account and a savings account at a local bank, but sometimes we could take it even a little bit further. I'm a big believer in having multiple accounts where we are able to put certain funds for certain purposes. So for someone who's just getting out of college and now they're starting to earn a paycheck.

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Check and hopefully they're contributing to a 401k or any kind of retirement account for the beginning as well. But you want to set up a separate account where you can begin to budget and put certain money away every month to pay for your student that the sooner you can begin to do that. I think the better off you will be and I'll even take that a step further. It's not just for Millennials. We actually have conversations with our clients who are retired about the same thing. The only difference is maybe that account is for a vacation or something exciting or some kind of a wedding or something like that.

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But the same rule applies, right? So I guess going right off of that. You know should should the typical Millennial should they be trying to balance paying off student debt and putting money away, you know while trying to live within their means or should they focus on one or the other? You know, what's the best solution to that? Not a priority is Rick. I mean we need you need to look and say what can I spend money on now? What do I not need to spend money on we live in a subscription based economy as we know everything we do.

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Now has a monthly subscription right so are built and get can get high very very quickly. So I think you started from the beginning. I think you say maybe I'm going to live at home with my parents for a little bit and sorry tended to parents who were listening to that. Maybe don't want their kids back at home. But maybe that's one way where you begin to save money or maybe you you end up moving out. You have a roommate whatever you could do to reduce your cost because having a fancy car or spending money lavishly and having a fancy watch is all really great and.

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Hopefully someday we could all get to that point if that's a priority for us. And that's actually what we want. But ultimately it comes down to being able to get rid of that debt the longer you keep student debt the more of a burden it's going to be even if you think about it down the road, you know, when we decide to get married and we want to buy a house that we want to do certain things and if you still have that student dead kind of looking over you it makes things much more difficult. So I think you live a Frugal Lifestyle the beginning. I mean, that's really what we tell to our clients whose children are.

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Lineal said we work with a lot of Millennials when it comes to financial planning. You have to live a Frugal Lifestyle the beginning, you know with social media makes it really attractive for us all the want to live a great life. Right? Who does he live like a star and again hope when they we get there, but at the beginning live frugally right put that money away do everything you can once in a while. You hear a great story in the news about some student who knocked down all the student debt in a year or whatever the time frame is those are great stories what I hear things like that in a financial planning business. I love to hear things.

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Like that. Yeah. Yeah and you know speaking of social media. I know that's social media is so funny because it's most of the time people are showing the best parts of their day and they're not showing you know the whole life. So they're showing that time where they're sitting in front of a Lamborghini or Ferrari and it's like that's not actually their car, you know. Well, that's exactly right. I like to say listen. I've been in business over 20 years. We have a fairly successful practice, but I'd love to tell you that every day is wonderful in our business. It's not right. That's the reality but on social media very.

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Ali does anyone post anything that's not glamorous. So you're exactly right. Everybody likes the idea of a Lamborghini or a Ferrari maybe listen, Maybe due to covid I think some of us kind of look at things a little bit different with now maybe that's not as important as it used to be to some of us most of us aren't even driving our cars now to begin with so now is I'll tell you what now, if your fortune unfortunately, there are as we know way too many people who don't have a job right now, but if you are fortunate enough to have a job now is the time to pay student debt.

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Cuz most likely and I hope this is the case your expenses should be much lower now than they were before covid. Yeah, I was actually I was just live a little while ago on Facebook talking about, you know, our interview coming up today and I was mentioning, you know, there's a lot of people out there who were worried about what's going to happen with real estate. And you know, are we going to be seeing a lot of short sales and foreclosures coming up because right now people don't have to pay their mortgages or they don't have to pay their leases. It's the furred but you know,.

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I have the same situation going on with my student loan debt right now. I don't have to pay it but it's an opportunity where it's not accruing interest. Why wouldn't I keep paying the same amount if I can and you know, really Crank that number down and yeah that that's exactly right. Like I said you're doing the right thing now is the time to do that in the focus on that debt interest rates also a very low so hopefully the student debt that you have in the viewers have is low enough that it's not a high interest rate. And again, the numbers can accumulate we all know the price of college is extremely.

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Expensive and there are ways to of course, you know try to cut that down depending on what school you go to but really trying to get rid of that did early on the sooner the better, right? Yeah another another thing. I know, you know kind of want to move through the different segments of our lives and you know, obviously getting out of debt is number one priority when we're just starting out but you know something that's always been a fascination with me has been compound interest and I understand the power of it, but there's a.

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There's a lot of people out there who don't really understand it and it was something I used to teach when I was you know, when I was a high school teacher, I would teach them about compound interest because they didn't understand it and you know, the best time is to start when you're that young because it's you know, it's in your favor a couple of years make a huge difference huge difference. So can you just real briefly explain compound interest and how powerful it is for our viewers it is it's a very powerful concept compound interest and most of us use it and apply in our lives and sometimes we don't even realize what it is.

• 12:28 - 12:58 
Is but basically compound interest is getting interest on our interest. That's essentially how it works and I think a good example of compound interest is maybe having money in the bank now nowadays. Unfortunately, we're not getting a lot of interest on our bank accounts. But back in the day when we were would you would do is you'd put money away and you'll be able to get certain interest on that money and rather than taking the interest out you actually reinvest it. You leave it back in the account and then you begin getting interest on the interest that's already accrued. So if you do that.

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Early on as you mentioned. It's a very very powerful technique. There are a lot of illustrations you could find on the internet as far as how compound interest works and different examples, but probably one of the most common ones and it's a little bit different. I don't have a chart here to show you but what are most common ones is really when you take two individuals who are investing money and and both of them are investing the same amount of money for the same amount of years. You only difference is they're investing them at different times. So it's like you investing say $5,000.

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A year for the next ten years and I don't do that. I wait so after your 10 years you stop investing but 10 years later. I do the same exercise. Now, I invest the money for 10 years when you find is the money you have is a lot more than the money that I have. Now you would say how is that we both invested the same amount of money for the same amount of time ultimately. It was the same amount of money that was put in the difference is compounded starting earlier makes such a difference of compounding interest is really important also,.

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Another concept that kind of goes with compounding interest is also to understand what we refer to as a rule of 72. Now if your listeners really know about that, but whatever you're trying to accumulate. Well the rule of 72 is an important thing to know. It's a very simple formula that tells you how long it will take to double your money. So let's use an example. Let's say I am earning 6% on my on my investments. All you would do is divide 6 into 72.

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And that tells you 12 how many years it would take to double your money so you can play around that determine how much money you're actually making on your money and then you get a better feel of how long it takes to double your money. Also another very powerful concept and these are some of the things work that we actually teach at our class at Florida Gulf Coast University just the basics because ultimately all of us no matter what age we are. We need to know certain things and I'm glad you mentioned compound interest because compounding in general is a very very important concept.

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Yeah, I mean I think just from reading is where I learned a lot of it but there's a lot of people who might not even you know, they've heard of it but they don't understand the concept of it and how much like you said the time makes a difference, you know, I tried to tell my students that back in the day because if they started at that age, you know just putting a couple, you know, a hundred bucks a couple hundred bucks a year into it. They would have ended up with a lot more money over time than if I had started, you know in my 30s because they had you know 15.

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Years or more on me the tag, that's exactly right. It's incredible when you look at that and even as far as anyone entering the workforce, you know, I mentioned retirement savings if you're fortunate in your employer offers a 401k plan or any kind of retirement plan. Those are great things to take advantage of because a lot of times people tell me they didn't enroll yet. They're waiting you want to do that right away because like you just said the sooner you start the better. You'll be very happy when you approach that retirement age. Yeah, and you know another popular idea or at least it used to be popular. I don't think it's as popular now.

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Days, but putting the money in the savings accounts, you know, I had no interest rates with savings accounts are extremely low at this point. Are there better I guess better ways of saving the money outside of a savings account. Well, you're right. So the term cash is King, you know still it's always great to have cash. But unfortunately, you're not making anything on your cash at this point. Let's look at the landscape of the economy right now, right? The Federal Reserve has lowered rates to basically zero. So for most of us that I haven't looked at the savings account rates recently, but for most.

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Of us we're going to put money in the bank and pretty much not make anything on it. Now the positive side is that it's safe money, but on the downside that's Safe Money may not be as safe as we perceive and the reason is inflation when you factor in inflation, it's a very important component of what can erode your savings and let me give you an example right now right now. We're looking at inflation rate of anywhere between 1 and 2% It's closer to 1% if you leave your money in the bank and you don't do anything with it.

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Our time you're actually going to find that you have less money than you started with and the reason is inflation. Okay, I'm older than you are so I can go back and look and see what the price of something was when I was a kid, but you could do the same thing. You look at College you look at a price of a car prices go up over time. So you need to invest the money now to get back to your question. How do you do that? Right investing is not for everybody and everybody needs to understand this always going to be some kind of a risk when you're investing but most of us, it's always.

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Is about investing for long-term. Okay, always going to be important traditionally you have stocks and you know, the things you hear in the news as far as ways to invest but ultimately the best way in my opinion to invest is to be Diversified. Okay. It's not about picking one or two stocks or one or two types of Investments and kind of putting everything in those stops and hoping they do well and hoping we make a lot of money one day. Now if you pick the right ones, you know that works out great. Unfortunately, it's not that easy so you want to.

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Sub like the Warren Buffett type of style where you picked a very high quality companies companies that are gonna be around a really long time and then you diversify with in there and let me classify diversification because like you say your stocks the only thing to invest in there's lots of things you can invest them in and listen you're in a real estate business obviously real estate is an option. But even when it comes to my business, it's not all about stocks. Okay. There's there's what we call asset allocation, which is investing in various asset classes, that could be stocks that.

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Could be bombs that could be putting some money in cash as well for a liquidity or rainy day type of funds you want to diversify that now once you begin to come up with that asset allocation or that that diversification within the asset classes, then we can take it even further then we come up with what we call sectors. Then there are various sectors to invest our money in an example of a sector can be information technology. So technology type of stocks or maybe Healthcare or maybe Financial Services bag stocks or.

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Various groups like that even consumer staples and consumer discretionary. So the term diversification is a lot bigger than most people think it's really about spreading out all of your Investments amongst many Investments and ultimately the goal there is to ultimately lower your risk, right? So, I know you mentioned Warren Buffett and we've you know, briefly talked a little bit about this before but Warren Buffett's famous for you know, the whole the couch potato type of investing style which is you know,.

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No, invest your money into the sp500 long-term. Just leave it there. Even when the stock markets go down leave it there. Even you know, when it goes down actually invest more money into that because you're buying low and you know, it's going to increase even more but is that you know, is that the best way to invest or do you think you know, somebody getting a financial advisor would be much more beneficial to them long-term? Well by and low strategy is very important when you just said and in most investors Unfortunately, they do the complete opposite of what they're.

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We all know you buy low and sell high. But even when you have like in late March would covid-19 Market drop people's tendency normally is to want to sell and then hopefully get back in one day. That's usually the methodology and that generally does not work. So yeah, the S&P 500 over time has done extremely well, but I always like to tell clients. There's a lot more than just doing that when it comes to investing. I just went through diversification how important that is, but there are also ways to diversify.

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Once the type of investment philosophies that we have as well. What do I mean by that? There's what we refer to as active management and passive management two different types of methodologies when you mentioned as an investing in the S&P 500 or the Dow Jones or any type of an index. Okay is what we refer to as passive management. It means you put the money in index you add to it. Like you said when the markets drop and you just leave it nobody's really managing the funds for you. You just relying on the market.

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To some degree. That's a good strategy. But then you also want to look at what we refer to as active management active management or portfolios that are managed by portfolio managers. So whether it's mutual funds or other various types of investment companies, the reason I bring up both is because at various times throughout history one method does better than the other and if you can figure out which one's going to do well tomorrow you're better than I am. So what we believe in when it comes to diversification you want to take it even further.

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Either you want to own a little bit of both. So the strategy you mentioned is not necessarily a bad one, but you want a couple it as well with some active management now also an index you mentioned the S&P 500 that is an index that you can invest with its 500 companies, right the Dow Jones makes up 30 companies but their indexes throughout the world. So the way that we would prefer the manage the money is to diversify the indexes you want on many different indexes in many different areas that could include small companies large companies mid-sized.

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It is international even Boggs and when it comes to bonds, there are so many different types of bonds. You have government bonds corporate bonds tax-free municipal bonds. So there's a lot more to it. So, I don't know if I necessarily agree with just putting it all in the S&P 500. Now you mentioned, you know, does it make sense to hire an advisor? I think the biggest benefit that we add is the emotional aspect and like I said going back to March 23rd or so when the markets hit their low during covid the initial reaction from oh,.

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As investors was to get out of the market. If you have a long time frame, you actually want to do the opposite. That's actually when you want to invest more money. Okay, that is going to be risk and no one knows where the bottom is going to be in the markets. But what we do know is if you have a long enough time Horizon over time, you'll do very well with that kind of strategy.

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I think you hit the nail on the head to the emotional part of the the investing. That's when you know when everybody sees a stock market starting to go out they pull out all their money. That's why the stock market gets driven down even further and you know, if you have an advisor that's where they can kind of calm you down and say listen, you know, it's going to recover it's going to come back and you know, you're going to end up making more money in the long run if you just stick with it instead of trying to you know time the bottom the top. Well, that's right because you're there very few things more emotional to us that money. Okay, so it's.

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Easy for us to say yeah, if the market comes down I've had clients helmet is to say when the market drops. I want to add more money to the markets then when that actually happens and we're in that fear mode or what we refer to as capitulation. Okay. We're all of a sudden people are kind of waving the towel that they give up they surrender that is generally an indication of when it's kind of becoming an all-clear to start investing in the markets again again, that doesn't mean the markets are going to drop further but that is our job to talk them into that and when the same client who says I want investment markets.

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When were in that situation they think we're crazy. They said there's no way it would invest in the markets right now, but that is what you need to do. And that is the emotional part very that we all work hard for our money, right and and and to lose it never feels good. So so it is again, it's our job to kind of put some rationale behind what we're doing and explain why it makes sense to take advantage of those type of opportunities, right? Yeah, and I think you know, what as we move into our later part of our life.

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Where we are out of the hole and we're you know, we're doing these steps that you're talking about investing, you know, diversifying our portfolio and having a budget and all that thing we start to come into I guess a little bit more money are earning years. We're making a little bit more we don't have as much debt and you know, I know I'm pretty much at that point right now where I'm making the transition to, you know, do I try to just pay off all my all my debt right now with a lump sum would have saved up or do I you know,.

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Keep chipping away at it and put that money towards either a down payment on a house or you know, keep it there for investing. You know, what's what do you think the next move should be as you get to that point? Yeah, one of the things you mentioned at the beginning is that where a financial planning practice and as far as I'm concerned everything starts and ends with a financial plan. It is the beginning of everything that we do. I mentioned that our group is very different than others. We take planning to whole different level, okay?

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A lot of times I'll ask people. Have you done a financial plan and right away, they'll say yes. I have a financial plan. But unfortunately that financial plan just consisted of having a conversation with their advisor is to what the plan was to how we're going to invest the money. That's not a financial plan. So when you get to that stage as you mentioned where you start making more money and you're in a situation to start doing smarter things with your money, that's when the planning stage comes comes into play and I actually think it should start even earlier. But once you get to the point where you say, you know, what,.

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I think I'm ready to speak with someone about helping me. We get that we have we have people call us who are you know on the younger side they say you know what? We're at the point now where we think we need an advisor. We need someone to help us so it starts with a financial plan and let me just just be your audience. Let me explain what a real financial plan is real financial plan is a roadmap for the rest of your life. Essentially. What we do is we take a look at all of your assets everything that you want and we took a look at all of your liabilities everything that duo and we it's a balance sheet, right?

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Most people in our business tend to look at one side of the balance sheet. They focus on the assets. Okay, but there's also a management that needs to be done on the liability side as well very important. But once we get an inventory as you will on what you have then it comes up to what are the goals you mentioned buying a home for most people buying a home. It's the American dream. It's what we all want to achieve right? And again, it's your job to help people do that and find a house that's right for them. But putting a home as a goal in a financial.

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Lan is a really popular one. So what you want to do is you want to sit down and you want to kind of Dream a Little Bit realistically of what you want your life to look like and that may start with a home and how much you think you can afford to spend on a home then, you know, like most people and again right now we're not traveling as much but there's going to be a day where we'll bake ation is going to be important to us again having a vacation in your financial plan is also important. Maybe you like to take one a year and maybe like take five a year. Okay, you can assess add value to that and put that in the.

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Financial plan as well same goes with a car you mentioned a Lamborghini before but maybe maybe more of a normal type of modest car to put that in your plan as well. Don't we have clients who put those in there as well, but you can put whatever car it is that you like and is often as you like to change the car. Maybe you're the type of person who buys a car and you let it just you run it to the ground and you really don't need to buy a new car until the time comes or you like to change a car out every couple of years. Whatever that may be. These are all the things we put in the plan and then what we do is a group.

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And we have the certified financial planners at our team actually work backwards. Okay, we work backwards to determine what do you need to do to have all of these things accomplished on your end? And how do we need to invest your money to have that happen? So the first example I said, everybody thinks they have a plan just investing in the market is not a plan, right because you have you don't have a goal in mind. The goal is to make as much money as you can. I mean, that's a good goal, but it's not going to get you where you need to be and unfortunately by doing that you probably going to take on.

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And more risk than you wanted to or that you thought you were taking on so by doing a plan you work backwards and then you can establish that so like you said getting to a stage where you can afford to buy a home and do other things that's all planning. So, I think there's a point in our lives where we all have to address the fact that we need a financial plan and it's like the analogy of traveling, you know, we're driving from Southwest, Florida to California with no map not easy to do now we have GPS, but let's assume we turned off the GPS.

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Gps turned off the watches. We turned off everything. How would we know how to get there would be very difficult. So having a plan full help you get there, right? Yeah. I know you mentioned, you know, you you measure the assets versus a liabilities and you know one idea that's for those who you know, like to read more financial types of books. This has been made kind of Popular by Robert Kiyosaki and Rich Dad Poor Dad aren't over the years. Do you does your company or do you view a.

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House as a liability or an asset because I know he mentions it more as a liability, but I guess it depends on you know, what you bought the house for and appreciation and all that stuff. What is your view on that? Yeah. I think you just said it. I think it comes down to the equity in a home. You can you can argue that probably many different ways. I haven't given a lot of thought to that necessarily but but when you look at a home, I mean, of course, you know, you have a value of the home you have the the loan or liability that difference of.

• 29:44 - 30:14 
Of course, that's the equity that you have in the house. Now that is an asset now certainly have to speak to your mortgage professionals or lending professionals as far as how they would view that as well because if the money's in the house and you cannot touch it, it doesn't help you a whole lot. But if there are ways and it makes sense for you to utilize that money then it then it becomes something that you can kind of work with but when it comes to death though, Rick, there's good debt is bad, right, you know a mortgage would be considered good day, right? I mean a home.

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Important thing to have to raise a family and nobody's going to consider that a bad thing going out and buying something really extravagant that you certainly did not need because maybe you wanted to impress a few people and taking a loan to do that. I think we would all agree that that is bad debt. So it depends if you how you want to look at the home, but certainly the equity that you build in there and then that is an asset to some degree. Yes. Okay. Alright, so I mean, let's just say that we bought the house. We're secure, you know, we've knocked out all of our debt.

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Now we're still in our earning years, but we're running into almost The Other Extreme of the problem where we're maxing out our 401ks or maxing out our iirira s where do we put the money now, since you know savings accounts aren't really gent aren't really worth too much as far as investing in earning a lot of money there. Where do we invest our money now when we have those retirement accounts already, you know full sure. Well, first of all, that's a good place to be right. It's not know what to do with your money.

• 31:14 - 31:44 
So is that's always a good thing again comes down to planning? Okay, you want to have a good strategy as you mentioned having money in the bank just to keep it. There is not going to help you because it's an eroding your principal. You're losing purchasing power. So not really a good strategy. Of course, you're always going to want to have a little bit of money on the side for an emergency always important to have but let's say the scenario you mentioned now, you're at the point where you have more money and you could do more things with it one of the approaches that our team.

• 31:44 - 32:14 
Uses often is what we refer to as the 3L approach the L stands for liquidity longevity and Legacy. Okay. So one of the things we mentioned the beginning this broadcast was was about segmenting your money into different type of bank accounts at really putting money away for a purpose. Okay. This is the same thing. This is investing with a purpose in mind. So let me go through the strategy a little bit. I think it will address what you mentioned. So the first L for liquidity liquidity is where you want to put the money that you need maybe over a.

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One to five year period of time so it's to some degree a little bit of your savings accounts. Okay, you still want to have the emergency fund but you can put 125 years away into a liquidity account where you would invest The Firm the funds in their more conservative manner. Okay. We don't take high risk in something like that. The goal is just to get over a long period of time a more consistent modest type of performance that will gain on those type of accounts, but that's the money that if you're at the beginning.

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Inning, if you're early stages of your career, that's the money you put away to allow to grow. Maybe if you want to buy a home in 5 to 10 years from now, whatever it may be that's what the liquidity account could be for now for those who are retired for them. That could be the account that they live off of where they actually take income on a monthly basis. Okay. So that is the first component. The second component is the longevity peace longevity is really really the bulk of where the money goes. Okay, that is where we'll be doing financial plan. We tell you this.

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The exact allocation that you should be investing your money, whether you're conservative moderate Progressive or even just somewhere in between that is where you want to invest the bulk of your money for the rest of your life. Okay, and that is going to be geared more towards a longer-term approach. You'll be taking out a little bit more risk. And then you also have the Legacy account Legacy account for some people has different meanings for some they may want to take a little bit more risk with an account like that for some it may just be literally a legacy money that you want to leave your heirs when you.

• 33:44 - 34:14 
Pass away one day everybody has a different purpose for those three accounts. But here's what that accomplishes. Okay gives you a place to invest your money based on purpose. Okay, so when we have volatile markets as we saw during the tech bubble in 2000 or 2008 ordering covid in March whenever that may be we mentioned at the psychological part and how easy it is to want to take the money out and just wait by having a liquidity account, you know, that is kind of to some degree.

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Safer money still probably going to take a degree of risk, but it's on the safer side. That is the money that you know, in case of an emergency you can always tap into that. You have that money available to you and and you know, it's to some degree safe and sound again. It's bank accounts were paying five or six percent again, it would be even better. But you have to take a little bit a little bit of rest these days, but that's what that does and what that also does is allows you to kind of keep your eye on the end game. Okay, so you don't need to make a knee-jerk reaction when the markets get volunteers.

• 34:44 - 35:14 
Little for some clients when markets drop and they're thinking about buying low. They may actually want to take money out of liquidity account and use it in the funnel the longevity account. Right and Longevity account is something you probably not going to touch now, we're going to manage it for clients and we're going to make changes based on the markets and opportunities, but it's not money you going to liquidate and you're not going to feel you need to because you know, it's kind of kind of set aside long-term. So again, a lot of this is psychologically as you can see sometimes I think my job is more a psychiatrist that did it.

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A portfolio manager a financial advisor, right? But that's really what it is. It's kind of almost playing tricks with your mind as far as how you're viewing the money and what that money is doing for you right? Yeah. No, I think that's a that's a brilliant way to do it having those three things set up and you mentioned the liquidity moving the liquidity. That's exactly my philosophy is you know, when the when the markets do hit low to really be disciplined and use my cash reserves to buy in.

• 35:44 - 36:14 
Into those those index funds low. So well, you're smart you're ahead of most people because most people don't think that far ahead and you're absolutely right about that's a great strategy. Yeah. Alright. Well, I think you know, I think that's plenty of information for you know beginners, especially Millennials and gen xers right now, but if you could wrap it up, I mean, I guess what what kinds of what should everybody be taking away from today's discussion like what are the key points that you think people need to walk away?

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Away with to you know, get started and be on the right path towards that Financial stability as you mentioned. We touched on a lot. We've discussed everything from budgets to planning to how to invest funds right a few take homes that I hope. Hope your viewers get number one is start off with a budget. I mean you will be surprised how many people don't have a budget you'd be surprised how many retirees have never had a budget in her entire life?