D.  Gift Money:

As you go higher in the hierarchy of needs, you develop a need to provide for people or causes that you care deeply for.  This could be some kind of charitable institution or foundation or some family member that you want to take care of.  But the most common use for gift money is to provide for education.  Saving for education early on through long-term vehicles like mutual funds, note and bonds, or trust products, will make it more efficient and easier on the pocket.  Another typical example for this type of financial need is the desire of parents to leave a reasonable amount of estate for their children.  Again, this can be accomplished through long-term instruments.  For people whose investment horizon is short or those who may not have enough resources to accumulate a substantial estate, the best way to create one instantly is to buy life insurance.  On the other hand, for rich individuals who are more concerned with the inheritance taxes that their heirs will need to pay for, a good solution is to get a life insurance coverage equivalent to the taxes that will be incurred by their heirs.

 E.  Dream Money:

Dream money pertains to funds that you need to have for all the things that you dream of being, having, or doing.  These goals can pertain to your retirement, or the kind of lifestyle you want before or after retirement.  Normally these are funds that you will need after you have gone beyond your peak income years.  Therefore, these types of needs will require large amounts of monies.  Long-term vehicles like mutual funds, note or bonds are the best instruments for establishing your nest eggs for this purpose.  While more and more people are becoming aware of the need to save for retirement, very few people realize that a big portion of their retirement funds will be spent on medical needs.  In this regard, it is prudent to set aside funds specifically for the purpose of funding for medical expenses after retirement.

Having a structured approach in prioritizing goals will enable you to build an investment portfolio that’s tailor-fit to your needs and your available resources as well.  The important thing to remember in using this approach is that you need to establish (and maintain) your lower-end targets before going for the higher goals. Having a strong base results to a stable portfolio and keeps you away from situations where you are force to liquidated long-term placements in order to meet an immediate financial obligation.