Living in this beautiful city that can at times deliver four seasons in a single day, it’s not hard to spot the analogy between our four climactic seasons and the four stages of financial planning. A fuller understanding of the role that each chapter plays in our wealth creation journey is worth attaining, and exploring the seasons of our financial journey is a great place to begin.
Summer: Growing and gathering
Otherwise known as the accumulation phase, the summer of one’s path to wealth creation also happens to, thankfully, be the longest season. Spanning between the approximate ages of 25 and 60 years, one’s earning years can be likened to financial ‘farming’, making this season of planning the most pivotal phase to get absolutely right. Through careful preparation of one’s crops and adherence to the principle of not reaping more than you sow, the accumulation phase should be a time of amassing wealth before autumn descends. It is likely that one’s earnings will ebb and flow during this phase, just as periods of droughts or floods may affect a farmer’s harvest from time-to-time. During this season of financial planning, risk management tools can be effectively used to safeguard one’s income at a time when the ability to generate earnings is undoubtedly one’s greatest asset. It is during this period of plenty that many are tempted to squander surplus crops, sparing little thought for the colder months which are sure to follow. As the wise farmer stores his grain for winter or for times of less productive yield, so too should we discipline ourselves to invest a portion of our earnings for our twilight years or for times when our earnings may be compromised. Just as low tide follows high, so our long, profusive summer will culminate in the onset of autumn. Careful planning, prudent investing of yields and ongoing maintenance of one’s lands will ensure a successful summer and a farmer who is lord of the harvest.
Autumn: Preserving the harvest
Enter a season of preservation, sustenance and ongoing appraisal. The extent to which one enjoys the autumn of one’s financial planning journey depends heavily on how deliberately one managed the years of earning. The retirement years are often referred to as the preservation phase and, due to an increase in human longevity, this season of one’s life can span a number of decades. Just as a farmer would ensure that his grain is safely stored for the looming winter, so the retired investor should seek less risky alternatives for his investments. Having spent a lifetime ploughing, sowing, reaping and storing a portion of his yield, the autumn months are aimed at ensuring that what has been gathered is kept safe and is apportioned adequately to last the full duration of both autumn and winter. Wise investing, careful spending and regular evaluation will serve to ensure what Percy Bysshe Shelley so beautiful said: “There is a harmony in autumn, and a luster in its sky.”
Winter: Apportioning the surplus
Sound financial planning through summer and autumn may mean that one’s investments will outlast you, making it necessary to prepare plans for the dissemination of one’s wealth to the next generation. Akin to the plans a farmer would develop to ensure the succession of his farm lands, the winter of one’s financial planning journey needs to incorporate deliberate estate planning to ensure a meaningful legacy is gifted to a generation who both understands and appreciates the gift. A well-structured will, open conversation with one’s beneficiaries and plans to ensure a smooth endowment of one’s assets will do much to ensure that this phase of your financial journey is not a winter of discontent. Although leaving an inheritance to one’s children is not inherently a birthright, it is a means of bestowing your children with some of the fruits of your long summer’s labour – the gift being not so much the fruit, but the inimitable reminder that a lifetime of hard work is a forerunner to a bountiful harvest.
Spring: New life for your legacy
Just as spring triggers the promise of new life and regeneration, so one’s passing will initiate the rise of your children and heirs to their rightful places – both as custodians of your legacy and as guardians of their own wealth. Farmers in their own right, the next generation has a pivotal role to play in ploughing, sowing, reaping and storing according to their needs, knowing that their own autumn and winter will arrive in time.
As the farmer prepares his lands according to the seasons in order to reap the healthiest bounty, so too should we prepare and amend our financial plan as we move through the summer, autumn and winter of our days, safe in the knowledge that doing so will lead to yet another glorious spring.