Whether I am sitting down with professional athletes, retirees, entrepreneurs or business executives, when I speak about the lack of preparedness to my clients, I remind them about the “evil twins” – having little cash and too much debt.
From a small business owner’s perspective, the same disciplines of financial planning must apply to them as they do with the general public: (1) to maintain an emergency cash reserve and (2) have a primary goal to have very little to no debt – or, at least, manageable debt. Because, let’s face it, this year it’s the pandemic; next year, and the year after that, it could be something else.
Always Have Cash on Hand
One of my business owner clients is a real success story. He has spent decades in operating the family business and has done extremely well. In fact, he raised nearly $1 million dollars in cash to purchase another company. But when the Coronavirus pandemic hit, he pivoted, and the money was earmarked instead for keeping his company afloat.
Today, in 2021, he is absolutely ecstatic – and thankful – because of the disciplines we discussed long ago. Obviously, he was ready to buy and use a bunch of cash for it then because he was not going to borrow and have debt.
He has worked that business so hard that when we do come out of the pandemic, it will be stronger than ever before. Clearly, he is going to make more money than he might have because he had cash.
A Crisis of Emotions
Many businesses were hurt from the pandemic. Another client of ours is a franchisor who has four stores and two of them had to close. When I asked him how he was doing, he said: “I am not going to fake it, Jay. It’s been hard.” What’s amazing is he is still smiling. Emotionally, psychologically and financially, he’s been up and down but still in the game.
I showed him how well his account has done with us. Although his company lost 40 percent of its value by losing two of its stores, he still made money since March when the market did well. I said to him, “Your diversified portfolio should give you peace because your only asset is not just your business.”
Looking back, when I was first securities licensed, in 1989, I faced my first major economic correction. Then, 911 hit in 2001, my second crisis, and the markets were down more than 50 percent. Some of our accounts were down 24 percent. Luckily, not all of our clients’ money was in the market. Then, in 2008, it was the housing collapse and the huge bank losses. But with the Coronavirus pandemic, in 2020, it happened so fast we had little time to react. In many respects, this was more painful than any of the others.
I was working out of my basement aggressively making client calls. I know how much they appreciated it now. And I tried to remain upbeat and say, “Don’t bet against America. We’ve gone through this before. The market is either going to go up or it just doesn’t work. And if it doesn’t work, then money doesn’t matter anyway. It is about time, T-I-M-E, not timing.”
Life Disciplines Work
People want guarantees in capitalism. Unfortunately, we don’t have that. So it’s more of a function of your life disciplines that keep you responsible and respectful with both your spending and your saving.
Remember too, your earned income is one of your biggest assets, not only your investment portfolio. After so many years, my net asset is my client base, and if they pull out of the markets so goes our business. Discipline brings stability and structure into a person’s life.
We Have All Learned Something Important
I think the Coronavirus slowed everything down. Personally, I think it exposed family and faith. I look at others who do not have these strengths and it saddens me. I didn’t take many walks with my wife before. As a result, we have outdoor activities, so, in a sense, it slowed me down and brought us closer. I have found an appreciation of nature too. These simple things are important and free.
Our overall spending was down; but we did order in to help our local restaurants. That’s part of needing to spend to get money back out there. It creates margin. You’ve heard of the K-shaped recovery? The upper part consists of the Haves; the lower part consists of the Have Nots. For whatever reason, it is getting wider. That’s a problem. The Haves need to help out the Have Nots. It’s not the billionaires; it’s the people with life disciplines. The market’s been up, they retired, they have more time and they don’t worry about money. Basically, this describes some of our clients.
Hefren-Tillotson helped us through the pandemic by providing the leadership and the technology we needed. I am a phone guy and an in-person guy. What I mean is I can pull up my clients’ confidential information and data more quickly and accurately. That efficiency saves us a lot of time, which allows us to talk to more people.
Because we are a very conservative company that invests in our people, our buildings, our IT and our technology without a bunch of debt, we’re not forced to make sales; we are making meaningful relationships. Like a coach, I now tell others to slow down, be more deliberate with your time; reflect on your life and on what is important; simplify, control the controllables, be aware, be a unifier in this world, and, of course, assume the unexpected.