I have to admit, I love the week between Christmas and New Year. The hustle of the holidays is replaced with the serenity of the season, and there is a peace that falls over the Osborn household – with all of its members tucked snugly in bed.
I also love this week because I’m a financial geek. What better time to run all the numbers for the saving, investing and spending that just occurred, tally the lessons learned and tweak the plans for the year to come? As it turns out, lessons learned and plans to tweak top my personal list.
Lesson 1 – Investing should not be confused with gambling, nor saving.
This was not so much a personal lesson learned as a concept confirmed. With the stock market in near freefall earlier this year, many investors forgot that the stock market isn’t about gambling on the short-term ups and downs (and more downs) of stocks, its about buying companies with long-term plans and prospects. And money that might be needed within the foreseeable three to five years belongs in savings accounts, no matter how low the rates.
Lesson 2 – It isn’t always “the other guy”
In the latter half of 2009, the LaPorte Savings Bank decided to close its Trust Department, and suddenly the plight of the other guy’s unemployment became my own. For decades, I had preached the necessity of maintaining six months of emergency savings, and now I was the one drawing on that sermon. I was also known for a homily or two on investing no more than 10 percent in the stock of your employer. While confession may be good for the soul, my portfolio is not quite as forgiving on my excess allocation. The 10 percent threshold is not only about investment diversification, but it is about basic economics of not having your paycheck and your portfolio dependent on the same source. Emotions and loyalty should never drive investing.
Lesson 3 – Everyone needs a plan and plans always change.
Did I mention my son became a college freshman about the time my final paycheck arrived? While I couldn’t have planned for these specifics, I had planned for the unknown. By creating a financial plan intertwined with my life’s plan, we were able to simply change course instead of having to abandon ship. It was a stark reminder that financial and investment planning are not luxuries tied to the income and assets of the moment. They are mandatory tools required for everyone, regardless of stature or station in life.
Twelve months ago the foundation of my plan was being an employee with a steady paycheck and benefits. Today the foundation is built on the exciting (and scary) uncertainty of building my own wealth management firm. My plan for 2010 may be quite different from the one I had 12 months ago, but maintaining and massaging my plan remains the foundation of my success (and sanity).
And so, here I sit during one of my favorite weeks of the year. The house around me is filled with family, the ground is covered with new fallen snow and my office is all aglow with my computer screen filled with Excel spreadsheets and Quicken budget software.
May this time of year be equally filled with the peace of the moment and the promise (and plans) of the new year to come.
D. DRUMMOND OSBORN, CFP is a lifelong LaPortean and Director of Wealth Management at OSBORN Wealth Management, a Registered Investment Advisor, where he focuses on investment management, financial planning and trust advisory services. Visit him on the Web at www.osbornwealthmanagement.com or e-mail him your questions and comments at drummond@osbornwealthmanagement.com.
