Our daughters are going to be seniors in college next year, and a client asked me how it felt to be an empty nester.
My response: "We have daughters; we are constantly on a high state of alert."
Yes, we have girls who feel the extent of their lives deeply and enjoy regularly communicating those feelings to us. Yet when something challenging happens, they show a remarkable resilience. In an uncertain world, this adaptability will serve them well.
In our financial lives, we all could use this lesson. After more than 30 years in this profession, I know that no client situation is ever a straight line. Clients have lived with devastating illnesses, lost partners and children, and have encountered game-over business setbacks. The dirty secret of financial planning is not doing everything right, but that good planning is handling those things that inevitably will go wrong in a manner that allows you to bounce back.
In their book, "Resilience,'' Andrew Zolli and Ann Marie Healy describe hardiness as "1.) the belief that one can find a meaningful purpose in life; 2.) the belief that one can influence one's surroundings and the outcome of events, and 3.) the belief that positive and negative experiences will lead to learning and growth."
This hardiness is critical in developing your financial plan. A client was worrying how to find something to replace work when he retires. But he loves his career and has tremendous job security. Why replace something when you already feel a sense of purpose with another thing with which you may feel far less fulfilled?
If we can create a mechanism to manage some of the extremes of a job, you can work longer in it, meaning that you don't need to save as much because your portfolio won't have to support you for as long. If we create a margin of safety for the things we can't control by owning an appropriate amount of life, health and disability insurance, then the unexpected can still be handled.
A client was describing how difficult life was after her divorce. Her cash flow changed dramatically and she was struggling with lifestyle modifications. While her marriage hadn't been very good for a long time, it afforded her luxuries that seemed to compensate for her husband's described mistreatment. As we worked with her to determine what financial modifications she may need to make, she was initially resistant. But over time, she saw that by cutting back in certain areas, she had more influence over her entire life. She became more comfortable with these changes. As she shed overhead, she also let go of an uncomfortable persona that this way of living had created.
We can't create a financial life without setbacks. But we can establish ways to recover more effectively. Exploring the situation from various angles helps see what is and isn't changeable. Establishing credit lines, understanding spending patterns and maintaining some cash creates a margin of safety. But as we sometimes counsel our daughters, resilience works best when you pause to evaluate the bumps in the road before moving on.
Spend your life wisely.
Ross Levin is the founding principal of Accredited Investors Inc. in Edina. His Gains & Losses column appears on the last Sunday of the month. His e-mail is ross@accredited.com.
