Financial Planning Perspectives from the Garden
By Katelyn Murray, CFP®, FBS®, CFT-1™
I spend a lot of time playing in the dirt. Not sure if my upbringing in rural Southwest Virginia is to blame for that, or if I just feel I owe the universe some significant time spent outdoors due to my incessant complaining about the cold all winter. Either way, a few years ago, I got lucky enough to land a much sought-after community garden plot, and I became: a gardener.
Anyone who’s a fan of Oiser Boudreaux in Steel Magnolias understands.
Now if you’ve ever gardened, you know this gig involves a LOT of hard work and patience. (And an affinity for working zucchini into virtually every recipe, but that’s beside the point). For this reason, as I was turning over my summer crops in preparation to plant my fall garden, I began to think about the parallels between gardening and financial planning. Turns out there are more than expected.
This is a long game. You can’t plant a garden today and have tomatoes tomorrow. Plants, like investment portfolios, take time to reach maturity. Did you know that an average watermelon plant takes between 70 and 100 days to produce fruit? Eggplants take over a month to start producing, and some types of tomatoes can take as long as 100 days to harvest. All of this can lead to much frustration on the gardener’s part, who has done much of the work upfront. Sometimes, gardening can feel very much like a waiting game. It’s great for cultivating patience, which is a skill that’s very handy when it comes to financial planning. When you’re investing for the long-term, you’re planting seeds that will be harvested literally decades from now. So you’ll have to get comfortable with the fact that it will be a while before you can enjoy the fruits of your labor.
Plan ahead. Although the growing season when I live runs from roughly April 1st to November 1st, gardening is a bit of a year-round sport for me. (Hey, this is the closest to a “sport” I can genetically get). Through winter, I’m cozied up with a cup of hot chocolate plotting out where to plant what; which crops should be grouped together versus which plants should be kept apart; and planning out the crop rotations between spring, summer, and fall. My community garden has a very impressive fence that’s reasonably successful in keeping deer and vermin from stealing our produce, but if you’re a backyard gardener, you may have a great deal of additional planning to do to solve that particularly pesky problem.
This process of planning the garden is analogous to putting together a financial plan. As part of that process, we ascribe timelines to goals and prioritize different goals we may have for the future. It takes forethought and reflection about who we are and what we want for the future. It also changes from year to year. Just like my garden layout this year has been improved upon compared to last year, my financial plan has also shifted over time as I learn more about myself and what I want out of life.
Pruning is sometimes painful and absolutely necessary. The first year I planted a garden, I was constantly asking my dad, who is an avid gardener– we literally call him Farmer Jon– for advice. One day, I sent him a picture of my tomato plants, which I thought were quite tall and fluffy and impressive. Imagine my shock when he responded and told me to cut them back! I had done all sorts of work to grow these tomato plants (the secret is to mix crushed eggshells in with the dirt), and there he was, telling me to hack away at them mercilessly?! He explained that without proper pruning, the tomato plants would put all their energy towards growing branches and getting bushy, instead of producing actual tomatoes. Reluctantly, I took his advice and strategically removed some of the excess branches. He was right. The plants began redirecting their energy towards producing tomatoes, and I had so many that year, I had to give them away.
This same advice applies to investment portfolios. That’s why rebalancing is such an critical part of your financial wellbeing and longevity. Portfolios, like tomato plants, need to be pruned routinely, to ensure that they can continue to grow over the long term.
Diversification helps. I’m pretty sure this one holds true in virtually every facet of life, but we’ll stay on topic with the garden metaphor. Plants take nutrients from the soil they’re planted in to help them grow, and if you’re always growing the same crops in the same places, over time, the soil will become depleted of those nutrients. Obviously, this is a big problem if you want to continue to grow things.
The solution lies with proper diversification and rotation of crops. For example, corn sucks up a massive amount of nitrogen from the soil, so if you’re growing corn, you also want to be planting legumes. These magical little guys have a unique ability to pull atmospheric nitrogen (N2) from the air and convert it into ammonium nitrogen (NH4), which they then release back into the soil, thus replenishing it.
Diversification is also a good philosophy to embrace in your investment portfolio. By diversifying your portfolio and owning all of the different asset classes in the market, you effectively reduce your risk. Instead of “picking” the same old S&P 500 stocks that deplete the portfolio over time, you’re diversifying across the broader market, and allowing the various asset classes to work together in your favor.
And there you have it, folks! Gardens, like financial plans, encourage us to maintain a long-term perspective and plan ahead, while seeking out diversification and implementing proper pruning from time to time. Much like Farmer Jon, the team here at BKFI is here if you need some help along the way.