Financial Planning for the Financial Planner

Here is a piece from Marcee who has helped me with my financial planning over the last many years.  She doesn't do a lot of writing to my knowledge so this story about her personal family experience in the Thanksgiving Season was worth passing on--ENJOY!!

We are watching the slow disintegration of Europe's political and financial safety net that it so carefully constructed after WWII to ensure that it would never have a reason for war within its borders again.  It is clear that there is no escape from the global consequences, though we cannot discern what those consequences will be.  We are living in an era of epochal change (think "fall of the Roman empire" or "discovery and exploitation of America").  We don't have a choice in the matter and there's nowhere to hide where we would be protected from the fallout.

The likelihood that the future won't look the way you imagined it is quite high.  That doesn't mean that you'll be tossed onto the garbage heap of life, and have nothing to look forward to but some version of the End of the World as We Know It (as depicted in so many movies) but it does mean that you shouldn't cling to your expectations or your sense of what's due you.  Life isn't fair, and for most of history people have had to live with what we consider to be extreme uncertainty.  We were the unfortunate generation that came to believe that life owed us everything, and that "every day in every way things are getting better". Not so.  We are now having to come to terms with the reality that we are no different from any other generation of people who have lived on this earth, and no more in control of our lives than they.

However, we do have control over the choices that are presented to us (there are always choices) and it is in making prudent choices that we can affect our personal outcomes and those of the people closest to us.  For some time now I've been talking about FLEXIBILITY and CUSHION.  You'll need both to successfully navigate the rapids  we find ourselves in.  

FLEXIBILITY
This is a key virtue to cultivate as you face various decisions in life.  Flexibility holds prior expectations lightly, looking for the solutions that will provide continuing choices and cushion in the future, rather than insisting on holding onto specific elements of your life (where you live, what you spend your days doing, how carefully you monitor your cash flow, how often you buy a new car, etc.).  Some of us are better at being flexible than others, but all of us will need to be flexible in this era we find ourselves in.  It's the difference between being in a rubber life raft as you're going through rapids and being in a wooden boat that can break up on the rocks.

CUSHION
Cushion isn't as important as flexibility but it sure makes things easier!  There are clear-cut steps that you can take to increase your cushion.  You've probably heard or read these in the media, because in truth, everyone needs to be focusing on these:

1. Increase your savings bucket - not necessarily increasing the money in your bank savings account, but adding to, rather than withdrawing from, your liquid assets.  This is where your specific decisions make a difference - how much to spend on that new car, what to consider reasonable in terms of college tuition, whether or not to take that big trip.  Will your choice require you to use some of your savings?  If you make a different choice, could your savings be left alone?  Consider all your options; think creatively; don't rely on money to attain satisfaction.

2. Reduce debt, or better yet, eliminate it.  As long as you have money going out every month to repay debt, that money is not available for other things - a classic example of reduced flexibility.  The satisfaction of paying off debt is much greater than the satisfaction of having a new car or a new pair of shoes or whatever you bought with debt.

3. Look at your regular expenses and eliminate the things that you won't miss.  An example is the fees charged by your bank.  It may be a hassle to change banks, but if it saves you $10 or more per month, it can be worth it.  Look for other areas where your money is going for things that don't matter to you, but you haven't been concerned enough to make changes.  NOW is a good time to act.

Security comes, not from having plenty of money set aside, but from being able to change course to avoid the rocks.  Having a cushion can't give you security if you don't combine it with a flexible attitude, because your cushion can disappear quickly.  History is full of stories of people who had plenty of assets, but lost them all due to circumstances beyond their control.  My grandparents were such people - they both came from extremely wealthy families in Russia, and lost everything in the Revolution, ending up living in an apartment in Chicago.  That was a huge change from living on estates of thousands of acres with whole villages of servants!  But their lives weren't miserable - my grandfather was a respected professor, they had a vacation home in Michigan which brought them much peace and satisfaction, their lives had purpose and meaning.  As they say here in Mexico, Animo! Be encouraged! Life is always a challenge, but full of wonderful surprises.  But practice prudence, and think strategically, beyond your current desires.
May you have a heartwarming Thanksgiving!
Marcee Yager, CFP (R)