Days of Necessity

by JJ Sessions, CFP®

At church yesterday, I noticed a large basket overflowing with fresh vegetables behind a sign inviting everyone to take whatever they wanted. I could tell the offerings had come from someone’s garden (a few being imperfect, oddly shaped, and spotted) and I smiled. I love the symbolism of abundance.

The bounty of vegetables brought back the memory of the story by Aesop The Ant and the Grasshopper. Aesop’s fable recounts a tale of a fun-loving, carefree grasshopper who spends his days chirping and singing, happy to be alive and without any responsibility. “Why not come and chat with me,” he invites the ant, “instead of your hard work?”

“I am helping to gather food for the winter and suggest you do the same,” was the ant’s reply.

The grasshopper says, “Why bother? We have plenty of food!”

The ant continued on his way, weighed down under the food he was carrying. When winter came, the grasshopper found itself dying of hunger, watching as the ants enjoyed the corn and grain that they had collected all summer. The story ends with—Then the grasshopper knew… “It is best to prepare for days of necessity.”

We are fortunate to work with clients who have done a lot to prepare for the future. So let’s focus on how we can enhance what has already been done as we enjoy this season of plenty and abundance. We have had the privilege of a long bull market, an expanding economy, low unemployment, and prosperity for a number of years. We know that economies are cyclical and we can’t always have good days. Sometimes there is purpose in having rainy days.

How are we preparing for the days ahead? There are many things we are currently doing to maintain our clients’ portfolios—from market pricing adjustments and consistent re-balancing efforts, to ongoing discussions of risk tolerance and life goals.

What other things might we consider?

Emergency savings—Make sure you have 6-12 months of cash to cover your net expenses. There is nothing like the security of knowing you could manage your household expenses if layoffs or job cuts were to become a reality.

Insurance—We cover insurance in client meetings regularly and we are doing everything we can to help insulate clients against the risks they face every day. If you feel like you may be at risk in any area, let’s talk about it!

Mental toughness—Our brains often tell us to do the wrong thing when it comes to the stock market. We hear them scream for us to buy when the market is going up and beg us to sell in a downturn.    What we know from research is that unless you have a crystal ball—and you know precisely the day to sell AND the day to buy—doing nothing will do more for your portfolio than trying to “just do something.” Prepare now by considering the facts and having a plan for the next stock market dip. We structure portfolios for our clients’ specific needs with this in mind.

Networking—Have you gotten too comfortable in the job you are in? I know this might be more appropriate for a career-oriented article, but your human capital (the combined value of your education, experience, and ability to earn a living) is one of your greatest assets. Have you stopped doing those things that might benefit you should you need to start looking for another job? Get back in the game and strengthen the relationships you may have been neglecting. This will pay dividends regardless of what the market does.

Pay down debt—Have some credit cards that are accruing points but still have a monthly balance?  Have just a year left on that car loan? Are you really close to paying off your student loans? In the current tax environment, does it make sense to pay off your mortgage? We can help you decide. Take advantage of your relative prosperity and use your money to free up cash flow for the potentially lean times ahead.

Prepare for an emergency—You knew it was coming…the Boy Scout in me just couldn’t resist. For the last few years, FEMA (Federal Emergency Management Agency) and the Department of Homeland Security have recommended building an emergency kit. Primarily they are referring to having a 72-hour supply of food and water, as well as flashlights, first aid kits, and other supplies. You can see their list at www.ready.gov/build-a-kit.

There’s nothing quite like the feeling of being ready for whatever comes next.  Whether it comes next week, next year, or three years from now, following up on one or more of these suggestions will give you that added measure of satisfaction that you’ll be ready for the days when the unexpected occurs.

 


 

JJ Sessions, CFP® is a Partner and Senior Financial Planner in the Twin Cities and Fresno offices of The Planning Center, a fee-only financial planning and wealth management firm.

Please email him at: jj@theplanningcenter.com.

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