As the sharp chill of winter fades and the world springs forth new life, I become reflective… not of nature’s majesty and the rejuvenation of all that is green in this world (remember, I am a financial planner), but of the power of how what we plant today can be so rewarding, abundant, and beautiful later. If every year we can sow the seeds in our desolate flower beds, protect them, grow them, and then ultimately enjoy them, why is it so hard for many to do the same during their lives with their investments? Maybe, if we treated our investments like a garden, this task would be simpler.

Sow it
How do we start a money garden today that will provide us with beautiful flowers and delicious ripe fruit later? The answer is simple; we must first plant a seed. In order to make sure that there are plenty of seeds to plant, we must start by living below our means. Only by spending less than we earn can we be sure that there is something left over after the month to plant in our money garden. The surest way to ensure that we live below our means is a simple concept that has been passed down through generations. It is the concept of “Pay yourself first”. By placing 10% of your income into a savings account before you pay any bills, liabilities, or expenses, we make our savings a priority that must be paid before all else. This then forces us to adjust our lifestyle to only 90% of our earnings. As our savings accumulates, we can nurture and protect it so it can blossom and flourish.

The power of how what we plant today can be so rewarding, abundant, and beautiful later.

Protect It
As we plant our money garden, we must protect it from outside intruders that will attempt to take it or emergencies that will force us to use it. The two surest ways to do that is to make sure that we are properly
insured and by keeping an emergency account in reserve in Having the proper amount of insurance on your home, automobile, health, life, and income (through disability insurance) will ensure that we are protected against some of the greatest financial risks that could afflict us. We can never insure against 100% of the risks in life, but this provides a fair level of protection where we need it most.

The emergency account is one of the least used financial tools, in my experience. Keeping a minimum of 3-6
months worth of expenses in a liquid investment, such as a savings account, will ensure that you have the money to pay for unanticipated expenses without having to delve into your investments during an inopportune time, such as a market decline.

Grow It
Just as a flower needs the right mix of sun, water, soil, and nutrients, your portfolio can only flourish over the long run with the right mix of stocks, bonds, real estate, and cash. Our portfolio, like a garden, will have a difficult time growing without any of these essential elements. Once the emergency account is funded with 3-6 months of living expenses, it is time to invest in our diversified portfolio. If our emergency account is short term liquid cash, that can be the cash portion of our portfolio. We now must invest the remainder in stocks, bonds, and real estate. Your age and your tolerance for risk will effect just how these investments are proportioned.

Younger investors should take more risk, have more stocks and real estate, while older or more conservative investors need to focus on a larger holding of bonds. The error almost all unsuccessful investors make is their propensity for all or nothing. Almost every portfolio should have some of each of these asset classes at all times, no matter how well you think the market or economy will perform. It is also important to add to our portfolio regularly, in up and down markets, especially in down markets.

Regular contributions to your investment account will ensure you are averaging out the purchase prices of your investments. It also allows you to purchase more shares when prices are cheaper and fewer shares as they get more expensive.

Finally, when trying to grow your portfolio the most important number is not your return, but what we keep. Similar to a vegetable garden that produces lots of ripe delicious fruit only to be eaten by insects and rodents, we must avoid these critters in our investment account. The critters that can destroy your money crop are taxes and fees. What good is an 8% return if 4% is going out the door in expenses and to the
government? Make sure you minimize these costs as much as possible to keep more of the fruit you have earned.

harvest It
Remember, some day you will want to benefit from your garden. It will eventually be harvest time. Harvest your money garden very carefully and strategically, keeping an eye on expenses and most importantly, taxes. Make sure you are first taking any dividends or interest payments from a taxable account as initial income.

This money is taxed annually anyway, so use it first. Then look to use all taxable accounts that are available. Finally, you should harvest retirement accountsand IRA’s, saving ROTH IRA’s as the last money you touch.
This strategy will assure the most possible money comes back to you when you need it.

enjoy It
Just like a gardener that is awed by the beauty of his elaborate gardens in August or the farmer who enjoys the sweet flavor of his red, ripe tomatoes, you too need to enjoy the beauty that you have created. Too many are happy to just count their money, like keeping score in some game. Your money and your life are not a game. He who dies with the most does not win. Enjoy what you have while you can for you never know when life will throw a plague of locusts your way and your crop will be decimated without your least bit
of enjoyment.

The seasons of the year can be a microcosm of the seasons of our life. Follow these steps to create a money garden that will continue to bloom, blossom, and shower us with fruit through all of life’s seasons. Then you too can one day bask in the satisfaction of having created one of the most beautiful and admired gardens in the whole neighborhood.