Make Hay While the Sun Shines
Like most farming families, we’re putting up hay this time of year and oh how I wish I had a nickel for every time I hear someone comment about “making hay while the sun shines”. The old adage means to make the most of your opportunities while you have the chance. (For you non-farmers out there, you can’t make hay in the rain.) In farming, you put up hay during the hot, sunny days of summer to prepare for the cold winter months. Similarly, we can prepare our financial lives now for inevitable recessions in the future.
There’s always news about impending recessions – that’s how the media makes money. And the truth is, there’s always a recession coming, we just can’t accurately predict its timing or severity. We know recessions are a natural part of a healthy economic cycle as rain and winter are a natural part of our weather seasons. Just like farmers can’t control the rain, we can’t control the market. We can, however, take a lesson from the farmers and make hay while the sun shines and prepare for a recession.
It’s a great time to:
build up your emergency fund. You should always have an emergency fund for when the unexpected occurs. A healthy emergency fund is especially important to those who have jobs that tend to experience layoffs in recessions, such as manufacturing, construction, and technology.
take a look at your debt and track much you’re spending. This will help you determine how large your emergency fund should be and alert you if you’re overspending or have more debt than you can handle.
check-in on your investment allocation. Make sure that your portfolio allocation is suited to your unique goals and remember that the best allocation is the one that you can stick with.
have a plan in place to rebalance your portfolio when it gets out of line. If the stock market goes up, there should be a plan in place to sell stocks to keep your portfolio at the target allocation you’ve established, lest it inadvertently become too risky. On the flip side of that, mentally prepare yourself to do the opposite during the next recession: buy stocks while the market is down.
Rain and recessions happen. The important thing is to focus on what you can control and not spend too much precious time worrying about what you can’t. We’re here to help you while the sun shines and when it doesn’t. Contact us any time.