MAINTAIN YOUR STRONG FOUNDATION

I decided to tackle the project of cleaning up my massive photo library from the past decade. It has been quite a walk down memory lane to times that were much different than they are today. While doing so, a friend called for some financial advice. He has been working on some investment opportunities but his employer just notified him that his salary would be substantially cut until the current crisis was over. He didn’t want to miss out on the opportunities but was concerned about the increased risk such investing would place on his suddenly uncertain finances.
 
As I pondered his predicament I came upon the photos I took while remodeling our current office building. When we bought it, the building had been vacant for years, so we decided to do a major rebuild. I wanted to include a state of the art conference center so in the back section we planned to tear out nine separate offices to make room for it. I gave the go-ahead to the engineer, not fully appreciating what would be involved.
 
The new conference room would be 37 feet wide without any internal support, so the engineer called for a massive steel beam to support the heavy roof. Two huge sections of the concrete floor were then cut out and dug down a couple of feet. I was told the enormous weight the beam would support required a very large foundation.
 
After the holes were dug, they were filled with a web of rebar and steel and filled with five tons of concrete. I didn’t understand the need but I trusted the engineer and was glad he was planning a long future for my building. If you enter that beautiful conference room today, the massive steel beam and its heavy supports are skillfully hidden behind decorative wood pillars. Many people compliment the beautiful room, while being oblivious to the hidden foundation that holds it all together.
 
I told my friend that I am always excited at the prospect of new investing opportunities. But my advice to him was that, like my office building, he needed to first assure his family’s financial foundation was solid. Investing must always be weighed against the risk of losing that which we already have. In some situations, like during a crisis, the risk can be too high. Protecting the foundation is often not the most glamorous or fun part of financial planning, but it is the most important.
 
A handful of stocks have really been on fire this year, constantly hitting new record highs. There is a huge temptation for people to want to jump on board that speeding train. There may be good opportunities for sure, but in times of such uncertainty I would encourage everyone to first make sure their financial foundations are solid. If you want to invest in that train go ahead, but only if you can honestly say that if it winds up in a big heap, your family’s financial condition will still be sound.