The new year is well under way, and many of us are still wondering, “What now?” Planning has taken on a whole new meaning in this unpredictable environment. How can investors prepare for what they can’t easily predict?
“A crisis can be a good opportunity to make strategic changes. But we have to remember that behind all the negative headlines are people, our friends and neighbors, who have had their lives, jobs, retirements and dreams for the future affected. Many people are having to make some very tough decisions,” says Bob Mathis, CEO of Peachtree Planning Corporation. “It’s important that, during times like these, people have an integrated view of their financial world and that they get control over their situation and make sure they’re continuing to make progress toward their goals.”
Smart Business learned more from Mathis about maintaining a level head — and a practical strategy — in a volatile market.
What are some of the big issues people are facing?
When you get into a market crisis, you get to see, sometimes pretty dramatically, what happens if you haven’t built a sound foundation in your financial plan. When people are faced with things they can’t control, such as losing jobs or having their investment accounts lose value, it’s made much worse when they don’t have adequate liquidity or savings. Every financial decision you make impacts not only one area, but also every other area of your finances as well. Coordination is key. No matter how dire the situation, there is always a path out. Most of us need someone to help us find that path.
Is it too late to set up a valid plan?
I think there’s always a way out. Whether you’re an individual or a business, you need to reassess your goals and objectives, take stock of where you are right now and what challenges you’re facing. This is a good time to meet with a competent planning professional who can help you analyze your situation and show you different alternatives. You’ll find that every decision you make can impact other areas. Sometimes you need someone to stand back and help you look at the whole picture to make the right step. Each financial decision is interrelated and what may look like the right move in one area may negatively impact other more important things and endanger your plan’s success.
Are there certain moves that investors should avoid?
There’s always the ‘plan d’jour,’ depending on what’s going on. For the most part, the things that made sense 25 years ago make sense today. We’ve always stressed protection and worst-case-scenario planning. Hopefully clients who have followed that advice are feeling confident that they can ride out the storm.
It seems in the past few months, many investors were saying, ‘Let’s just get to the election and see what happens when we get a new leader,’ and then, ‘Let’s see what happens when the new President is in.’ Sooner or later we all have to face facts and look at our current situations and decide on the right path to follow.
How will this economy affect future planning?
You always think the crisis that you’re in now is unlike anything else that’s ever happened in the past. Although we are in a different economic circumstance and probably a fairly deep recession, we’ve had recessions before. We’ve had wars, depressions, terrorist attacks and financial crises in the past. Everyone should understand that, going forward, we’ll see innovation, we’ll see growth, and we’ll see prosperity. The United States of America is not going out of business. I don’t know where the market is going to be six months from now, but five years from now, expect it to be much higher. Investors will have made solid profits and entrepreneurs will have started new companies. People will have jobs that haven’t even been invented yet.
In order to understand the effects of your financial decisions, streamline costs and plan for your future, you need an organized and integrated view of your financial decisions across your business and life. This will help you maximize protection, minimize costs and provide an impenetrable barrier to protect your business and personal assets.
What changes can be made right now?
Get organized. Get protected. Get focused. You have to know exactly where you stand and what challenges you face in order to develop a solid plan. You need to make sure all your protections are in order, that your life and your income are protected. You want to take a close look at cash flow — how do you reduce debt, increase savings — to put yourself in a position where you can come out of this stronger. Having an integrated view of your financial world gives you control over your progress in meeting your business and personal wealth building goals.
For high net worth individuals, this is a very good time to implement some estate planning strategies because of the decline in market values and assets. It’s a good time to make sure that your wills and estate documents are up to date. You may have had a strategy based on something that’s not valid anymore, so it’s a very good time to look at all of your tax and estate planning. Whether you are looking to grow, sell, retire or leave a lasting legacy, having a plan that ties it all together will make it simpler for you. Investors can learn more from us in the months to come about how to thrive in each of these scenarios — even in uncertain economic times.
BOB MATHIS is the CEO of Peachtree Planning Corporation. Reach him at (404) 260-1600 or Robert.Mathis@peachtreeplanning.com.