It feels like it’s been so long since I wrote anything, I’m almost afraid to start up again. I feel rusty. I feel nervous. Did people notice that my columns were missing? Did they care? A myriad of excuses pass through my mind. I still have several days’ worth of administration piled up on my desk. I haven’t returned all of my calls or emails for the day. I promised the Chamber that I’d have financial statements out to them. I have to go home and feed the cat.
To anyone who doesn’t spend time working by my side, it may be easy to conjecture that my unease is an early symptom of burnout. Anyone who has worked intimately with me knows that’s not the case. I’m not working my way into burnout – I’m working to prevent burnout. And I’m doing this by building slack.
Our first year after purchasing Advantage was very challenging. We had to repaper everyone, and most clients didn’t know me yet. We spent so much time on paperwork that they still didn’t really know much about me, besides what I looked like. But then that year was done. The next year, we didn’t have to do that anymore, and so we focused on processes. We upgraded our equipment, bought contact management software with an e-calendar, moved to an electronic filing system, and started reworking portfolios to be more in-line with my own philosophy. But then that year was done, those processes were set up, and those portfolios were restructured.
In the third year we moved office suites to take advantage of the daylight. We also worked methodically through each client profile, matching level of service with compensation, and made sure there was a base financial plan on file for everyone in our highest servicing brackets. That year was intense. But now that year is done.
Now we have up-to-date paperwork on file, consolidated contact information, and electronic access to client profiles. We know what services we need to be accountable for, to whom, and when. And for everything active, there is a precedent from the previous year saved into each client’s file.
Which brings us to year four. This year, every comprehensive financial plan should take 15 hours, instead of 40. This year, once the backlog on my desk is broken down and processed, I will have Time Slack. The ability to use my skills and my knowledge to actively reach out to clients who have advanced planning needs. The capability of working from home on the weekends when I choose to, and not working on the weekends at all if I choose that instead. The option of going home while the sun is still up, cooking a healthy meal for my husband, working on my puzzle or studying, going for a run, and still being in bed by 9. I know I’ll still work really hard. My ambition wouldn’t allow otherwise. But I’ll have the option of rest too, if I want it.
Because as important as having an efficient office is, efficiency is nowhere near as important as resilience. And if you are going to have resilience, you need to have slack.
Slack is an undervalued commodity. As we go out and work hard and get wealthier, our resources tend to be absorbed into the frontier of possibilities. Slack is not necessarily the lack of activity, but it is the ability to loosen off and still be okay. Urban Dictionary defines it (in part) as “idiosyncratic harmony with the flow of life” that “the conspiracy of normality” is trying to discredit. A nicer car. A bigger plane. An acreage. The ability to allocate resources into material goods is praised by our society. What about the ability to un-allocate those resources without blowing yourself up? For that you need to be resilient.
Resilience is your ability to work through change and bounce back quickly and without undue difficulty. And right now, not enough of us have it. A 2014 study by the Canadian Payroll Association suggests that 51% of employees surveyed would find it difficult to meet their financial obligations if their pay was delayed for a single week. That’s not resilient. That’s terrifying. But we can repair it. We can rebuild our resilience as people, as families, and as a society. And we do that by building slack.
For most people, positive slack will focus on three main areas: Cash Flow Slack, Asset Slack, and Time Slack.
Cash Flow Slack is the foundation of resilience. Before you can have Asset Slack or Time Slack, you need to have Cashflow Slack.
When completing a financial plan, we monitor cash flow ratios, including debt servicing ratios and accumulation rates. I normally have specific parameters I like to see here, but in general, a good rule of thumb is to make sure your savings rate is at least 10% of gross household income, and debt maintenance costs (not including principal repayment) are less than 20% of gross household income. More complex ratios can also be analyzed if you break down your expenses further, and guidelines can be set for fixed and discretionary cash flow, as well as working and active capital.
As savings accumulate and you move closer to financial independence, Cash Flow Slack becomes a less prominent need and Asset Slack takes over. Asset slack is the ability to work easily alongside fluctuations in the value of your assets without having to make adjustments to your standard of living.
In its most basic form, Asset Slack can be likened to an emergency fund. For example, having sufficient capital accessible through either a high interest savings account or un-tapped room in a line of credit can add significant resilience during a period of turmoil or change. As a general rule of thumb, three to six month’s family income (I prefer six) should be available to you at any point in time in order to provide a sufficient amount of slack.
In its more complex form, Asset Slack also includes disability and critical illness insurance for accumulators, and a cash wedge strategy and critical illness insurance for decumulators. Like the trim tab on an airplane, Asset Slack will help to stabilize or neutralize external pressures, whereas otherwise significant efforts would be required.
The third layer of slack is Time Slack. Once Cash Flow Slack and Asset Slack are accounted for, Time Slack provides you with the ability to focus your time where you want it to be, not where it has to be. Any interruptions in your regular routine can then be taken with grace and poise, and life continues smoothly without anxiety induced medical conditions.
While accumulators tend to focus on Cash Flow Slack, and decumulators focus on Asset Slack, Time Slack is a goal for everyone. Just a little bit of additional Time Slack can greatly improve your standard of living. Don’t let the “conspiracy of normality” coax you into believing that life has to be a rat race. Allocate a bit of time for studying, meditating, working out or cooking. Your Time Slack can always be reallocated or dropped in a crunch, but your standard of living will be better with Time Slack built in than it is without.
Slack is a commodity that is used to build resilience. Resilience won’t make you rich, but it can help to ensure that you don’t become poor. If you have questions how to build slack into your cash flow plan or asset allocation, or for more information on building a goals-based financial plan, speak with a CERTIFIED FINANCIAL PLANNER® today.
Written by Meagan S. Balaneski, CFP, R.F.P CERTIFIED FINANCIAL PLANNER®
Advantage Insurance & Investment Advisors
Investment Funds Representative
Manulife Securities Investment Services Inc.
The opinions expressed are those of Meagan S. Balaneski and may not necessarily reflect the views of Manulife Securities Investment Services Inc.