ARE YOUR FINANCES SNOWED IN?

You can't hear snow fall. You might not see the flurries accumulate if you’re asleep or away from a window. Where did all the snow come from? More important, how do you clear the deluge?

The tax-funded snow plows clear the streets, though perhaps not as quickly as you’d like. You’re left to tackle your own driveway and walkway with your shovel or snow blower. You’re left to tackle your finances too.

Not Again

Winter arrives every year. We know we need to prepare but continue getting surprised by

• the first light snow fall: where are the scarf, boots and ice scraper?
  
• the first snow storm: where’s the shovel and ice melter?
  
• the first cold spell: where’s the extra warm winter gear?

Have you put a shovel in your car? Do you have enough ice melter? Is there fuel for the snow blower and does it start? Did you get your furnace inspected?

We get surprised by our finances too. Do you know where everything is when you need it? Are we on track with our goals? Do we require an inspection or maintenance? It’s easier to think we’re prepared than to prepare.

Forecasts

Meteorologists want to give accurate forecasts but we can’t rely on them even if your favorite station has a weather guarantee. Storms get missed  or become more severe than predicted. Other storms are milder, if they even occur.

Financial forecasts are inaccurate but advisors often find plausible reasons for you to entrust more of your money with them. If investment returns are high, we’re encouraged to invest more to take advantage. If the returns are poor, we’re also encouraged to invest more to offset the poor performance and be ready for future growth.

Example

We were expecting 12 to 20 cm of snow overnight. Since I needed to register for a yoga class at 6:30 AM (not a typo), I got fuel for the snow blower. Nothing happened. Now the forecasters predict 6-12 cm in total. They’re probably right. I’ve already shoveled once. Maybe the snow blower will get a workout after all.

Your Finances

You can hire a snow plow service for the season but you can’t be sure if they’ll be there when you need them. Their profits go down when they provide more service (i.e., when snow falls). Even with the best of intentions, they can’t plow all driveways at the same time or the right time.

Financial advice is similar. Unless advisors charge fees for their advice, they make more when they provide less service. They make more when you invest more and as your investments grow if they charge based on the assets they invest for you. Their expenses pile up even if your assets melt.

Links

• 20 things to do on a Snow Day (Centsible Life)
  
• Reminders from disasters like Superstorm Sandy
  
• Is your life insurance like a shovel or snow blower?
  
• 9/13: prepare your disaster recovery plan now
  
• image courtesy of Igor Zhorov

Podcast 250

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PS When I wanted to use my snow brush, I found it wasn’t in the vehicle.