Understanding the Economic Cycle

Posted by siteadmin on Wednesday 6th July 2022.

The essence of solid lifestyle financial planning helps us control what is within our control. But also, gives us a degree of sound protection against uncertainties.

One guarantee in life is that there is certainty in the uncertainty. What I mean is that life has a very nasty habit of biting us on the back of the neck when we least expect it.

What we must accept, is that certain things are beyond our control. Whether these are unexpected national or world events, global economic issues or stock market downturns.

Ultimately, we need to ensure that these things do not impact any decisions that we make. And at the very least, we must plan for minimising such issues. So they don't have an affect on our lives.

As we all know and are all experiencing, rising prices, ridiculous costs to fill up our cars and uncapped energy costs feel like things are getting out of hand. Governmental and central bank interventions are starting to come, albeit that their effects will take time.

But this is a classic scenario of the economic cycle in action. In this instance, this being where economic growth post the pandemic and the awful Ukrainian conflict, are creating supply and demand issues, which is fuelling inflation worldwide.

Storms do blow through. Albeit that sometimes, they leave behind damage which ultimately leads to repairs.

In this context, buildings do outlive people. And by far. Meaning that although the structure of the building must be sound and built to withstand the long-term, there’s also the need to ensure that we maintain adequate protection (via insurance and/or shorter term cashflow) for interim repairs that are bound to come along from time to time.

If we over experience the good, which is what has been happening for quite some time (such as low interest rates, good economic growth and strong stock market returns), we cannot prepare ourselves for when mother nature decides to throw us a curveball.

Remember that life is not a rehearsal, and we only get one crack at it. And although the money is important, it’s what we do with it that really counts.

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