Over the course of my close to 20 years as a Certified Financial Planner® (CFP) practitioner, the topic that seems to get the most attention in client meetings seems to be whether or not we are heading towards a recession. While I am always happy to review the current economic climate with clients and prospects, I often turn the conversation back to the difference between macro and micro economics.
Our word “macro” comes from the Greek word makro and means “very large in scale,” according to Dictionary.com. Therefore, macro-economics is the big picture. Conversely, “micro” comes from the Greek word mikrós, meaning extremely small. We can argue that the global economy is the macro-picture whereas the United States economy can be the micro-economy. Or, we can consider the US economy the big picture, and our state’s economy as the little picture. However, when I meet with a client, the example that is most often appropriate is the US economy serving as the macro-economic scene and the client’s scenario equating to the micro-economic picture.
In the scope of working with a typical client, the reality is that they could skate through a recession relatively unscathed. For example, just because the broader economy is suffering doesn’t mean each individual is suffering the same degree of pain. Inversely, the economy may very well be humming along nicely, but that particular client enters a personal “recession” due to a corporate restructuring of some variety. In other words, if a client gets laid off from their job due to a corporate restructuring, that individual is suffering economically even while the broader macro-economy is doing fine.
So, while I’m always happy to talk about the macro-level economic picture, what’s important is the micro-economic picture of that client’s financial reality.
One of the benefits I enjoy because of my franchise affiliation with Ameriprise is the community of advisors striving to learn from one another and better themselves and their practice. To that end, Ameriprise publishes an in-house magazine to aid in this endeavor. It was through this publication that another Ameriprise advisor stated, “There are really only three stages to this business: growth, maintenance and decay. However, ‘maintenance’ is a precursor to ‘decay’. So, if you’re not growing, you’re dying.”
As I reflected on that statement, I found it to contain profound truth. As such, it didn’t just apply to the financial planning profession; it applies to every area of my life. In my marriage, I’m striving to grow my relationship with my spouse. If we fail to deepen that relationship, it could be a precursor to a failed marriage. Likewise, I’m continuously seeking to improve my health, otherwise, it will begin to deteriorate. The same can be true of my faith or career.
Therein lines my point.
Despite being able to rattle off all kinds of economic stats, no one can really tell you when the next recession will hit. But that’s the macro-economic view and something we can’t control. We can, however, control our own micro-economic outlook. We can improve our own economic forecast through two simple ongoing steps: comprehensive financial planning and constant professional improvement. Granted neither of these steps guarantees we will avoid a personal economic contraction. However, if we continuously strive to improve ourselves professionally, by extension, we are likely enhancing our value to our employers, possibly making it harder for them to lay us off. There’s no guarantee here, as many get laid off despite their professional growth. However, it can be concluded that if we become stagnant in our professional development, it could be a precursor to professional decay.
So, if you want to improve your odds of surviving the next recession, don’t stop growing.
The views expressed here reflect the views of C. Theodore Hicks II, CFP® as of June 29, 2018. These views may change as market or other conditions change. Actual investments or investment decisions made by Ameriprise Financial and its affiliates, whether for its own account or on behalf of clients, will not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not account for individual investor circumstances. Investment decisions should always be made based on an investor's specific financial needs, objectives, goals, time horizon and risk tolerance. Past performance does not guarantee future results and no forecast should be considered a guarantee either.
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