This year has been a reminder of how quickly the seasons can change. In Eau Claire, we experienced sub-50 degree weather no more than two weeks before temperatures jumped to a warm and balmy 85 degrees. Around the same time, I attended the annual Eau Claire Memorial Day Parade and watched my son march with his high school band as he wrapped up his junior year.
Watching Abe march was a reminder of the changes that lie ahead. For many years, I felt like I had all the time in the world to save and plan for the day when my firstborn would apply to college, decide on his plans after high school, and embark on his own journey of independence in search of his “True North.” Well, that time has flashed before my eyes.
You hear it all the time, from parents, grandparents, aunts, and uncles. When I was young, I believed it, but time moved more slowly, and I felt like I had all the time in the world. However, the compounding effect of time kept accelerating, and here I am today, the father of a 17 year old son and a 13 year old daughter, with grey hair to show for it.
The seasons and years of our lives can be compared to our financial journey. With well over 20 years in the financial services industry, I have heard a financial plan compared to a “financial pyramid” or a “financial house”. The common theme is the importance of a solid foundation, because without one, our plans can fall apart in the midst of adversity and uncertainty.
Another analogy for your journey toward financial security is the changing seasons. Each season represents a new chapter in our financial lives, where priorities shift but continue to build on the season before it.
Spring
When I think about spring, I think about newness, growth, and hope. A common springtime ritual is visiting your local greenhouse or nursery in search of fresh dirt, mulch, and seeds to provide a foundation for your landscape and home.
The foundation of your financial plan can also be compared to springtime. This is when you put in the hard work so you can eventually enjoy the fruits of your labor. Like preparing a garden, much of this work can feel ordinary or even boring. It includes establishing an emergency fund, protecting against risk with appropriate insurance coverage, and developing consistent savings habits so you have resources available when unexpected challenges arise.
To illustrate the power of establishing good habits early, consider three investors.
Andy starts saving with his first job. He invests $500 per month for 20 years and then stops saving altogether.
Bob doesn’t feel like he has discretionary income when he starts working. Ten years later, he begins saving $1,000 per month and continues for the next 20 years.
Cindy waits 20 years before saving. Realizing she needs to make up for lost time, she invests $3,000 per month for the next 10 years.
Assuming an 8% annualized rate of return, Andy’s account grows to $651,099 despite investing only $120,000. Bob invests twice as much as Andy, yet his account grows to $595,923. Cindy contributes $360,000, more than both Andy and Bob, but finishes with $553,750.
This illustrates the value of establishing good habits early. The habit may feel small and insignificant at the time, but it can have lasting and compounding effects.
Summer
After establishing a solid foundation early in adulthood, many people eventually reach a point where they feel more secure. This often happens as careers advance, debt is paid down, and income grows.
This is a point when you feel like you are no longer just surviving financially. Instead, you can begin to allocate more of your income towards additional goals that previously felt out of reach. These goals might include moving to a larger home, saving for college, increasing retirement contributions, or diversifying your savings outside of traditional retirement plans.
The key to success in the “summer” season is to continue the good habits that you established in the spring and build on them. This will help to ensure that you are prepared for the fall and winter.
Fall
Fall represents a season of transition. I’m sure many of you have observed how active squirrels become by the middle of October in anticipation of the first freeze. They are frantically taking a tally of their rations for the winter, methodically storing their summer’s bounty in a safe place.
This season in your financial life can be likened to your preparation for retirement. Perhaps you have retirement accounts scattered across several employers and need to organize them. It’s a time to make sure they are properly positioned for your retirement needs and to look closely at your spending habits to understand what you need to live on each month.
Do you have adequate health insurance coverage? If you are retiring before you are eligible for Medicare, you need to understand the health coverage options that are available to you. Which accounts you receive income from could affect premium subsidies under the Affordable Care Act.
The bottom line is that fall is a time for planning and preparation. It’s a time to organize and take a tally of years of hard work and disciplined habits, and make sure you’re prepared to enjoy the fruits of your labor.
Winter
In the Midwest, we know that winter brings colder air and longer nights. As you move through the holiday season and into the new year, it can also be a time for reflection and perspective.
At North Point Advisor Group, we strive to understand your “True North.” Your True North is what guides you. It is the values, people, and causes that matter the most to you. Ultimately, it is likely why you established good financial habits in the first place.
As you enter the winter season of your financial journey, you may begin considering, “What’s next?” You’ve saved, prepared, and positioned yourself well financially.
This is the time to ensure important legal documents, such as wills and powers of attorney, are in place. It’s also a time to consider your legacy. Are there people or organizations you hope to impact when you’re no longer here? Would you prefer to see that impact while you’re living?
Ensuring that your wishes and goals are carried out could be as simple as naming beneficiaries on all your accounts, or it may require more advanced planning strategies. This is an important season for you because even the best plans can fall apart if simple steps aren’t taken, like naming a beneficiary.
I often encourage clients in this season to have conversations with family and loved ones. Money can be a difficult topic to discuss, but it’s important that those closest to you understand your plans and wishes.
No matter which season of life you find yourself in today, the important thing is recognizing that each season prepares you for the next. The habits you build in spring create opportunities in summer. The work you do in summer helps prepare you for fall. And the planning you do in fall allows you to enjoy the peace and purpose of winter.
As I watched Abe march in the parade this spring, I was reminded once again of how quickly time passes. The seasons of life arrive whether we’re ready for them or not. While we can’t slow the passage of time, we can make intentional decisions today that help us navigate the seasons ahead with greater confidence and clarity. That’s what financial planning is ultimately about: helping you stay focused on your True North, no matter what season you’re in.
