Fertilize Your Finances!

by Marie on October 18, 2012 · 3 comments

We (hubby and I) have gained quite a bit of experience planting bushes, trees and flowers over the years. We planted thousands of pine seedlings from the state nursery on our 40 acre farm. We planted around 3000 spring flowering bulbs on our current 6 acres and in between we have planted everything from rose bushes to azalea bushes to fruit and nut trees to vegetable plants and grass.

Plants thrive or wither depending on how you care for them. So do finances.  Care for your finances as you do your plantings.

Pick the right environment.

You wouldn’t think of planting your petunia in the middle of Interstate 70, so don’t thinking of planting your finances in a hostile environment.

If you and your spouse or family disagree on saving, spending or investing one party may inadvertently sabotage the efforts of the other. If your country has laws that allow seizure of personal property or laws that encourage excessive taxation, you will have trouble growing your finances.

Use good stock.

When you take the time to decide what you want to plant and pick the right environment in which to plant, you don’t want to plant weak stock – get the best example that you can so that it has the best chance of growing well for you.

Likewise with your finances, when you use credit, save or invest, use the most reputable institution offering the best plans that you can find. You don’t want to use a high interest, annual fee credit card without redeeming qualities. You don’t want to get a loan from a shady institution that will charge high interest rates and go out of business in a short time. Nor do you want to invest in a Bernie Madoff type scheme. Invest your time and money in institutions and investments that have ongoing value.

Diversify.

You probably don’t want to fill your yard with all the same kind of plant. Most gardens and landscapes are best with diversity. One plant may do well in the sun, others in the shade. Some plants will survive and thrive in dry rocky soil, while others require rich, damp loam.

It works the same way with finances. Don’t put all of your eggs in one basket, as the old saying goes. Figure out what asset allocation your portfolio should have and invest in those different types of assets. Some asset types do better during inflationary years, some do better in recessions. Pick the right mix of savings, stocks, bonds and other asset types to suit your needs, goals, and your stage of life.

Limit your selections within your diversification.

If you were to buy one of each kind of plant in the spring catalog, you will have a lot of competition in your landscape between the various plants – not only for ground, sun and water, but also for your time, knowledge and attention.

If you invest in too many individual assets, they will also compete for your time, knowledge and attention. Too diverse of an asset base causes you to spend more time and effort in managing and tracking your portfolio. It is typically better to have a few quality investments within each allocation category, instead of having to track and follow tens or hundreds of different stocks or bonds.

Prepare the soil.

Before planting anything, we typically dig a hole much bigger than needed. We mix in the appropriate amendments – needed by the item we plan to plant. Depending on what is to be planted, we might add gypsum or sand (to loosen clay soil), peat or limestone (to change the acidity level of the soil), top soil or potting soil (to provide a better start) and fertilizer. We then re-fill the hole with the mixture. When it comes time to plant, we just open up the proper depth and width hole and pop in the plant or tree.

To prepare your ‘soil’ for growing your finances you can do several things, such as:

  • Discuss and agree on financial goals within your family.
  • Determine your money psychology and learn how to manage any quirks that might impede growth.
  • Set expectations – to let others in your life understand where your priorities lay.

Feed and water.

Plants grow better with fertilizer and require water to tap into the earth’s nutrients.

Your finances grow better with ongoing additions and require monitoring to make sure they are on track. Using the pay yourself first methodology ensures that you actually put aside your intended savings. It is easy to do with automatic payroll transfers to your bank or financial institution. Track your finances using one of the many tools available now, from spreadsheets, to Quicken to Mint.com online.

Prune for growth.

Certain plants require pruning to ensure the next years crop of flowers of fruit. Our forsythia and peach would not bear heavily if we did not prune. Other plants require that weak branches or limbs be trimmed off so that ice or wind damage doesn’t pull them down, injuring the entire plant. Still others, such as western red cedar, are ground hogs and will stretch out their limbs so that nothing else can grow nearby. All require pruning for growth, just as your investments and debts do.

Trim off losing investments to free up the money to buy investments that will grow. Prune down debt to make way for savings to build. Keep your intended asset allocation in balance to reach your goals – by selling off assets in the over allocated sectors and buying new in the under allocated ones.

Protect from harms way.

Deer, squirrels, insect infestations and other hazards can invade and harm your plantings. You must be watchful to protect your tree or bush before it is irrevocably damaged.

Likewise, you should be on guard against high taxes, inflation or investment fees and expenses eroding your finances. Consult appropriate financial planners, advisers and tax accountants to find the best ways to manage your resources to minimize the damage from governments, institutions and the overall economy.

Plan for growth over time.

Unless you want to spend a fortune to buy large specimens of plants and trees, you need to plan your landscaping for growth over time. It takes time for plants, trees and shrubs to reach full size, start small and enjoy the growth.

It takes time to grow your finances, start small and enjoy the growth. Many calculators exist on the internet to show that saving for retirement requires very large savings per month if you wait until later in life, yet require much smaller amounts the younger you start. So squeeze a few bucks out of your check each week to put towards savings – and put it somewhere it will grow.

What other ways are there to fertilize our finances? How do you make your portfolio thrive and grow?

 

{ 2 comments… read them below or add one }

1 Mrs. Pop @ Planting Our Pennies October 18, 2012 at 7:56 pm

Love the “fertilize your finances” metaphor. Clearly we’re plant people and think of our finances in very similar ways. Check out the Debt/Wealth Creation and the Strangler Fig post on our site – you might like it! =)

The only thing I would add, is record measurements once in a while since progress can be hard to see on a day to day basis. For finances, this is like our net worth and investment tracking, and with plants it’s things like fruiting/flowering yield. It makes it pretty clear to tell that a plant might not be healthy if it hasn’t flowered much over several seasons… same thing with an investment that might not be showing a good return over several years.

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2 Marie at Family Money Values October 18, 2012 at 8:02 pm

Strangler fig – read it and commented! Thanks for stopping by.

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