Featuring:

Host: Scott Lillis, Regional President, Mid-Atlantic, BNY Wealth

Guest: Lynda Ly, Private Banking Manager, BNY Wealth

[00:00:00] VO: What do you want your wealth to do for you? Welcome to Your Active Wealth from BNY Wealth, where we offer insights that can help support the life you want to live and the legacy you wish to create. We tackle timely topics through the lens of the five strategies that comprise our Active Wealth framework: Invest, Protect, Manage, Borrow and Spend, and provide guidance on navigating the unpredictable to help you build and sustain wealth.

[00:00:30] Scott: Hello, I'm Scott Lillis, regional president for the Mid-Atlantic region at BNY Wealth and host of today's episode. Welcome back to Your Active Wealth. Today, we will discuss how to power your goals through the use of a strategic cash management framework. At BNY Wealth, we like to think about spending through the lens of our differentiated value proposition, which we call Active Wealth. This is the comprehensive advice we provide around five core strategies: Invest, Protect, Manage, Spend, and Borrow, utilizing the same disciplines employed by institutions, also empowering our clients to stay focused on what's important to them while uncovering new opportunities to power their goals. Today, we will dive into one of the five pillars of Active Wealth, in particular, Spend. As we talk through the spend component and what it means to deploy a strategic cash management framework, we want to emphasize that this is entirely unique to each individual, based on the life that they want to live and the legacy that they want to create.

To help explain, I'm joined by Lynda Ly. Given her years of experience advising clients, she has a unique perspective on the spend strategy and how we work with clients on the topic. What we often see is that people put a lot of energy into their long-term investment plans, which is important, of course, but spend much less time planning for their short and medium-term needs. That can make it harder to cover day-to-day expenses or to be ready when the right opportunities come along. Lynda will describe just how impactful a strategic cash management framework can be, and hopefully, you will finish this episode with a better idea about how to deploy this type of thinking into your own wealth journey. So, let's get started, Lynda. You're in these conversations every day. What do clients usually ask when the topic of spending comes up?

[00:02:38] Lynda: That's a great question, Scott. No matter the level of wealth, clients usually ask the same two things. How much am I really spending and how should I be thinking about it? And those are important questions because spending is one of the biggest drivers of long-term wealth. There's no single answer because it's personal and it's different for everyone. What we can do is help clients understand their spending and give them a framework that makes choices easier and more confident.

[00:03:11] Scott: That makes a lot of sense. Instead of worrying about whether you're doing it right or wrong, the framework helps to make sure that you're prepared for whatever comes along. And yet, Lynda, I know we've seen even very wealthy clients feel stressed about this. They may also have very significant assets, but no real cash management plan. Why is that a problem in your mind?

[00:03:31] Lynda: Because most wealth isn't sitting in cash. It's tied up in portfolios, real estate, and alternatives. All great for growth, but it's not liquid when you need it. And life throws curveballs: a medical bill, a home renovation, or an opportunity. It could be a business investment or a piece of art. Without a plan, people can feel forced to sell at the wrong time. Or worse, they miss that chance altogether.

[00:04:03] Scott: Exactly. Emotions take over when there isn't a structure. So, let's talk about the structure. How actually would you set it up, Lynda?

[00:04:12] Lynda: We use what we call the three-bucket approach. It's simple and it works. The essentials bucket is your safety net, usually three to six months of course spending like mortgage, groceries, and utilities. For many clients, this is often covered by salary, bonuses, or from their portfolio income. If the income isn't steady, we can set it so that the account automatically tops off when it runs low keeping things simple.

[00:04:44] Scott: It's for the basics or the sleep at night money. Makes it easy to stop worrying too, right?

[00:04:50] Lynda: Exactly. The discretionary bucket is for bigger, predictable expenses like tuition, a tax bill, a charitable gift, or even a milestone celebration. With the timing clear, you can plan ahead and know that the money will be there when you need it.

[00:05:10] Scott: So that's the bucket for the big bills that you know are coming.

[00:05:13] Lynda: Right, and then there's the growth bucket. This one's for opportunities that aren't certain in timing, but usually bigger in size, like buying a new home, investing in a business, or funding that passion project. And sometimes clients ask, isn't this just part of my long-term portfolio? And the truth is, there can be overlap. You might hold similar investments in both. But here's the point. The buckets aren't one size fits all. Some clients lean heavily on essentials and discretionary, while others carve out growth. It all depends on priorities, your risk comfort, and goals. That's why clients work with their advisor and team so the framework actually fits their life.

[00:06:06] Scott: Thanks, Lynda. I think that makes sense. The three bucket approach for cash management can clearly be really helpful. I've seen how clients with different risk profiles also can have very different cash management needs. For example, for someone who is relatively conservative, think of someone who has most or even all of their investment portfolio in tax exempt muni bonds, they may be able to easily meet all of their income needs from interest payments on bonds within their portfolio. And they may really only need a year or so of expenses in the essentials and discretionary buckets. On the other hand, someone with a portfolio with the goal of a long-term growth over many decades and with a focus on equities, alternatives, and real estate may need to be much more diligent about building a long term or a larger cash cushion. And they may want to have years of expenses allocated to those three cash management buckets. So, Lynda, once the clients set up their buckets, is everything done or do they have to come back and revisit it?

[00:07:08] Lynda: Great question. This isn't something you set once and forget. Priorities change, markets move, life evolves. And that's why it's important to check in at least once a year, or whenever something big changes. It keeps that plan aligned with what really matters in your life.

[00:07:28] Scott: Interesting. So, it's more like a living plan. Flexible, but consistent too. Alright, so once you've set the buckets, what actually goes into each one of them?

[00:07:39] Lynda: For essentials, it's straightforward, checking and savings accounts. Safe, liquid, easy to access. For discretionary, since the needs are larger but predictable, we use options that protect principle and still earn something, like money market funds or certificates of deposit that mature when that cash is needed. For example, you might time one to a tax payment or a tuition bill. For growth it really depends on the client. Sometimes it's about access, and that's where a line of credit can be valuable. Most people should have one in place. You may only use it for a few days, but it gives you time. You're not rushed into selling investments at the wrong moment, and you also have the flexibility to act quickly if the right opportunity comes up, like buying a second home. Other times, it’s about aiming for higher returns, often fixed income like municipal or taxable bonds. And here's the thing, it's not about the product, it's about the purpose. Each bucket has its’ own job.

[00:08:53] Scott: So, it's not about the investment product, purpose first, I really like that. So, Lynda, how does this really play out in real life? What challenges do you often see?

[00:09:05] Lynda: Two big ones. First, clients who lean too heavily on market growth. Earlier this year, when markets were volatile, selling equities was tough. Nobody wants to sell when their portfolios are down 20% just to raise cash. And like you mentioned earlier, Scott, even when clients have growth-oriented allocations, a lot of it isn't liquid, and that can make really stressful. But with a cash management plan, they didn't have to worry about selling investments at the wrong time. That money was already set aside. Another situation, and we see this most frequently, is clients who lump all their cash into one big pool. Without structure, it's hard to know what's for what. But once it's separated into essentials, discretionary, and growth, it clicks. You can see exactly where things stand and that clarity alone makes a big difference.

[00:10:09] Scott: I really like that. The plan really does three things for you. It prepares you, it minimizes stress, and it can even lead to better investment returns. Another question we get a lot, Lynda, is what about the next generation? Parents often ask us to help with their kids and help them handle their wealth, too. How does this framework help them?

[00:10:32] Lynda: We see that a lot. Parents want their kids to see money with structure, not just as unlimited freedom. And kids tell us that they don't want to feel overwhelmed. They want something simple. By walking them through the three buckets, they get a framework that they can actually use. Essentials for everyday needs, discretionary for things that they're excited about and growth for bigger goals. Parents feel better knowing their kids are learning discipline and kids gain confidence managing wealth on their own.

[00:11:08] Scott: I've really experienced that too in my career. Structure builds discipline without taking away freedom. I like that. So, Lynda, if you had to leave listeners with one big takeaway from today, what would it be?

[00:11:21] Lynda: The big takeaway is you get to spend your money. And that should be exciting and not stressful. That plan makes that possible. The essentials are covered, the big bills are planned for, and you've got flexibility for whatever comes next. So, ask yourself, do I know what's in my buckets today? If not, that's a great place to start with your advisor and team. And even something as simple as categorizing your spending, whether you use our Wealth Online portal or another tool you already prefer, that can give you and your team a clearer picture, whether for taxes, planning, or just your day-to-day cash flow. And just as important, check back in. As life changes, your plan should too.

[00:12:14] Scott: That's a great takeaway. And before we close, Lynda, let's connect this back to the bigger Active Wealth framework.

[00:12:21] Lynda: Spend connects everywhere. It ties into borrow when you use a line of credit. It links to invest the way each bucket is structured. Tax and protection strategies influence how we manage cash. Each of the five pillars of Active Wealth: Invest, Protect, Manage, Spend, and Borrow is powerful on its own. But when they work together, the strategy becomes much more impactful. That's what really helps clients reach their goals.

[00:12:55] Scott: I love that wealth should serve your life and not the other way around. Lynda, thanks for breaking this down today. I think listeners will walk away with practical ways to approach spending in a way that's simple, flexible, and hopefully even enjoyable. And remember, wealth isn't just about the future, it's about living fully today while staying prepared for tomorrow. To find out more about our strategic cash management framework, we encourage you reach out to BNY Wealth. Thanks again for joining and we'll see you on our next episode of Your Active Wealth.

[00:13:29] VO: Thank you for listening to this episode of Your Active Wealth. Be sure to subscribe to this podcast on Apple Podcasts, Spotify, or wherever you listen to podcasts, and visit bny.com/wealth to view the latest insights on the subjects that matter most to you.

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