What Can Gardening Teach Us About Finances?

What Can Gardening Teach Us About Finances?

Our herb garden

Our herb garden

As an avid gardener (actually, I am a Master Gardener, having completed the University of Tennessee Master Gardener program in 2014) I enjoy working in the yard and helping others experience the joy of gardening. Over the years, as I work outside, I have thought about the relationship between gardening and personal finances. The number of similarities between the two is quite long and we can apply many of the principals of gardening to finances or vice versa. Keep reading to see some examples.

Have A Plan: Drawing your garden plan on paper or using an app is similar to having a financial plan. Both give you an accounting of what you currently have, your current and future needs, what your goals are, any short falls, and what works for your specific situation. A financial plan should simplify your finances giving you a broad overview of your net worth, asset allocation, future income and what you should save to meet your goals. A garden plan sets a budget, how it will be used, size, features, and a list of plants to be used in each area.

Field with wild flowers ready for a wedding

Field with wild flowers ready for a wedding

Dividend Plants: I love these plants because they keep giving a gardener more every year without spending more money. This is similar to stocks that pass some of their earnings on to shareholders in the form of dividends. Dividend stocks may provide growth in the stock price plus regular income. Great "dividend" plants I use in my garden include hosta, daylilly, crocosmia, daffodil, aster, agapanthus, ornamental grasses, and ferns.  With these plants you can dig, divide, and multiply to other spaces.

Diversification: A good garden or landscape will have plants that cascade from tall, medium to short and will provide interest through each season. As one group of plants is blooming the group mingled in with it is developing its flower to take over as the other is spent. Even in winter, there are plants like evergreens with their green foliage or trees with interesting bark or colored branches that brighten a landscape on the dullest winter day. I have created a list of plants that relates to different types investments: Trees are your solid, large cap long-term stocks providing steady growth and shade from the elements. Perennials, like mid and small cap stocks, are medium to small in stature have growing season followed by a rejuvenation period. They eventually come back strong in the spring providing flowers, foliage and some offer fruit. Annuals, maybe similar to an individual stock with the potential for high returns but with more risk, pack punches of color during the spring summer season. But you have to water annuals more (stock that you have to monitor more) and will need to replace them every year. I liken evergreen shrubs and trees to bonds with their evergreen foliage all year long. High quality bonds hold steady through the ups (spring, summer and part of fall) and downs (part of fall and winter) of the stock market and provide regular income.  

Oakleaf hydrangea with hosta underneath

Oakleaf hydrangea with hosta underneath

Rebalance: To the gardener this is the same as pruning or moving plants. With a mature garden there is a chance that a plant may grow too big or dominate a garden bed. When other plants aren't in a bed it will likely lack interest for a large part of the year and make a garden unbalanced. To prevent crowding and monotony a garden should be edited or "rebalanced" to produce bigger blooms and look good for a longer period of time. For investments, rebalancing a portfolio means you sell some investments that did well and buy more of the investments that underperformed. It forces you to buy low and sell high. If you are targeting a 60% stock 40% bond portfolio the stock portion may have increased to 70% or higher because of the 9 year bull market. This increases the risk of the portfolio when we have the next fall in the market. Hopefully, large losses will be avoided when a portfolio is rebalanced back to your original target percentages.

Using the principles of gardening and applying them to personal finances is a fun and creative way to improve our relationship with money. I hope this different perspective helps enhance your financial plan and create a beautiful garden.

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