A First Foundation Blog

What is Wealth Planning? Pt. 2: Lifestyle Planning

4 minute read

The ultimate reflection of financial security is having enough money to be able to live the lifestyle you desire, regardless of the stage of life you are in. To put it in more basic terms, you will undoubtedly feel financially secure if you have the income and/or assets to pay for all of your necessary—and discretionary—expenses. That is why lifestyle planning is a base foundation of wealth planning. It is an area of planning that most of our clients will need to address throughout their lifetime. 

So, what is lifestyle planning? Lifestyle planning focuses on helping you maintain enough financial resources to experience your desired lifestyle through all the different stages of your life. This includes maintaining income and expense needs before retirement, retirement planning, college tuition planning, and planning for other possible major expenses or purchases, like a purchase of a home. All of these will impact your overall savings and investments goals.

The Wealth Planning group at First Foundation helps clients achieve their lifestyle goals by creating various cash flow models which reflect a client’s current financial situation, including all in-flows and out-flows of cash, as well as the impact of income taxes. By doing this, clients can be in a better position to determine if they are able to live their desired lifestyle and how major financial decisions impact their overall financial picture.

In additional to cash flow modeling, we also look at four components, or stages, of Lifestyle Planning: 1) income and expense management; 2) major purchase or expense consideration; 3) college planning; and 4) retirement planning. The importance of each depends on the life stage that one is currently in. For someone who just graduated college or grad school and is beginning their financial journey, income and expense planning is critical. The main goal during this first stage is to budget so that earning can cover expenses, and ideally result in savings.

This is easier to accomplish if you enter this stage with debt under control. Being debt free is ideal but an unlikely scenario for most. That is why we now characterize this as having debt “under control,” meaning it is not growing beyond the interest you are accruing. One thing to also note is that it is important to consider the impact of debt even when picking a college. In the past many have considered student loans a necessary expense, but we now see the impact of out of control debt on one’s ability to maintain an income and expense balance, or to save money post-graduation. A major objective during this stage is to save as much money as possible to build one’s net worth and to have the funds to accomplish other goals, including major purchase goals.

As you become more established in your career and have more financial resources, the focus will likely turn to a major purchase like a home. A purchase of a home is no doubt a major life event and has a significant impact on your overall financial picture. This purchase will impact your ability to balance your income with your needed expenses, which then could impact other goals like savings for your children and retirement goals. While you might not be thinking about your retirement years when you are buying your first home, it is important to evaluate all financial decisions with respect to your future goals. This is why wealth planning is important. So, questions such as “how much can I afford?” and “what type of mortgage should I obtain?” need to be addressed in order to keep you on track to meet your future goals.

All goals for Lifestyle Planning should point to the fourth stage: retirement planning. Regardless of where you are in your financial journey, retirement planning should also be considered. The magnitude of importance depends on how close you are to retirement, but it should always be a part of the discussion during any stage. Keep in mind, for most it will take years of proper planning and savings in order to save enough for retirement. It is crucial to always balance retirement goals with other financial goals. Again, a properly calibrated wealth plan will help keep this at the forefront.

To best assess retirement planning, we always ask our clients the following questions:

  • What are your retirement goals?
  • When do you want to retire?
  • Are retirement plans such as a 401(k) being fully utilized?
  • Are you able to save the maximum amount to these plans?
  • How much income do you need?
  • What are your expense requirements?
  • Is there a source of post-retirement income such as rental income?

So there you have it: lifestyle planning, the foundational element of a wealth plan. Starting with income and expense management and ending with retirement planning, lifestyle planning is the cornerstone component of wealth planning. It sets the stage for financial security to ensure you—and your loved ones—have the resources to cover expenses. And ultimately it helps determine if you will be able to live the lifestyle you desire well into retirement.

If you are already a client of First Foundation Advisors, please reach out to your financial advisor to learn more.

Read Part 3: Investments


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Daniel Fan, J.D., LL.M., CFP®, Senior Managing Director – Head of Wealth Planning
About the Author
Daniel Fan, J.D., LL.M., CFP®, Senior Managing Director – Head of Wealth Planning
Daniel Fan serves as the Senior Managing Director – Head of Wealth Planning for First Foundation Advisors. In this role, he oversees the firm's Wealth Planning department and advises clients on sophisticated wealth strategies. Mr. Fan has over 15 years of experience as a Wealth Planner and specializes in evaluating and optimizing all clients' wealth plans to meet their financial needs. He works closely with all teams across First Foundation and ensures he delivers a personalized experience to support all clients. Prior to joining the firm, Mr. Fan was a Senior Vice President, Director of Wealth Planning and Insurance at First Bank Wealth Management, where he implemented the financial planning process for all business segments. He also worked as the Vice President, Regional Director, Senior Wealth Strategist at Union Bank Private Wealth Planning and as a Senior Vice President, Senior Wealth Planning Strategist at Wells Fargo Private Bank. Mr. Fan is a Certified Financial Planner® and holds his Juris Doctorate and Master's in taxation from Pepperdine University School of Law and Golden Gate University respectively. He earned his Bachelor's degree from the University of California, Los Angeles. Read more