Warren Buffet once said that you only find out who has been swimming naked when the tide goes out. Over my short 46 years of life, I’ve seen the tide go out more than I can count on both hands. Some have been recessions and some have been more personal. The current crisis would be one example and we have all looked around and found a few “exposed” folks around us. It has been a very sad reality of our current time. Not all of them were the chronically broke type either. So how do you prepare for times such as these? We have a few principles we have followed over the years that have helped make us more sturdy financially and have helped us get through these tough times.
First, live within your means and save for the rainy day. Too often when a windfall comes, we run out and spend it. The spending may be on badly needed items or items needed for growth, but savings are also necessary for solvency. Every company should plan for some failure, for some unforeseen event. So how much should a company save for these hard time or unforeseen setbacks? We aim for six months of expenses – this includes payroll, paint, sundries, rent – the whole nine yards. Why so aggressive? Would you want hire a contractor who always makes their decisions based on financial needs? Neither would I! Having fiscal solvency allows us to make decisions based on principles, not on the urgency of the present needs.
Second, you have to expect growth and set aside money to finance that growth. If we are looking down the corridor of time and see the need for an estimator in six months, we start paying them now by setting aside an estimator’s paycheck into saving so when we do decide to hire, we both have the finances and are not stressed out trying to bring a new office worker online. It buys us a little breathing space to teach our new hire and to give him some time to settle in without the stress of having to “earn his keep” right away. Funny thing is, they usually come online quicker without the stress.
Finally, we like to have a big Christmas parties around here. After all, God gave us His only son and Christmas is the beginning of that story. We haven’t quite figured out how to give as generously as God, but we certainly try to emulate Him. We can only do this by being responsible and setting aside funds to bless those who have worked hard all year to make it all happen year in and year out.
To sum it up, the reasons you save are security, growth, and generosity. If you would like to discuss this topic further whether for your business or household, I would love to buy you lunch and talk it over – just give the office a call.