To quote the (for this week) popular meme: Well, that escalated quickly. A 500 Year Plan. Even without any details, that’s a proclamation that’s simultaneously captivating and intimidating. After all, how often do we really hope to establish anything in our lives that will still impact the world five hundred years from now? Aside from the few whose names will grace the pages of history eBooks, we generally don’t hold much hope of actually accomplishing any such thing.
And yet, maybe we can. Maybe we don’t have to stand tall on the world stage for the impact of our lives to still be felt by our far-off descendants. Even if you can’t change the world, you can still change your family tree. It’s all about legacy. That, and a whole different way of looking at investing.
I had the pleasure of meeting another coworker late last week, and we had some very interesting conversation. This was one of the topics discussed: Oftentimes those who have been diligent to save and invest and spend wisely come to the end of their lives still owning much more than they will ever need. Understandably, their wish is often to pass this wealth down to their children and grandchildren. They want to leave a legacy.
This isn’t an unknown idea in the financial world. Far from it. The 500 Year Plan is a quote attributable to the Green family, owners of Hobby Lobby and Mardel’s. Dave Ramsey talks about The Legacy Journey. Other financial figures have their own ways of expressing it. It’s an awesome idea, but it’s relatively rare to come across a nuts and bolts discussion of what it means to leave a financial legacy.
Consider our elderly patriarch/matriarch. Most likely, their investments have gotten pretty conservative in recent years. It’s a standard practice for many people to cut back on risk as they become elderly.
That plan definitely has its place. In fact, I would say that’s what most people need to do. Everyone needs to do it to at least the extent of being able to be sure they’ll have enough to live on even if the market goes south.
And yet, is that all there is? Does it really make sense for everything to get pulled out of higher earning investments and stuffed into bonds and CDs because that’s just what you do when you hit 65?Maybe not- at least, not if you have enough stored away to take care of yourself and to set aside a legacy for your family. What I mean here is this: if the money isn’t really for you or for your benefit anyway, why would you invest with it as if it were? If it’s for the benefit of your children or grandchildren or every generation of your family for the next 500 years, why are you calculating the risk you can take based off the assumption that you’ll kick the bucket sometime in the next decade or three? It doesn’t make sense, and it could seriously impact the future earnings of the investment if it’s treated that way.
The risk you are willing to take and the return you desire to make should be determined by the purpose of the investment itself, and the circumstances surrounding that purpose. If the investment is separate from your life, treat it like it is. If it’s designed to make the rest of your life easier, treat it appropriately for that purpose. Just always be ready and able to step back and take a good, hard look at what you’re doing with your investments and whether or not that matches up with the supposed purpose for which each investment exists.
Thanks for reading,