Everything In Moderation

By Fritz Schafer, with contributions by Chris Schafer. May 31, 2017.

I recently read an article on Ohio State’s quarterback, JT Barrett, and how he is a natural pre-game motivator.  Even as a redshirt freshmen, he had the ability to stand up in front of his team and whip up their emotions into such a frenzy, that he often needs to put on headphones afterwards so he can calm himself down before kickoff.  I can’t imagine him looking into his teammates eyes and saying, “hey guys, just remember, ‘everything in moderation.’”  But even top level athletes like JT need to moderate emotions to be an effective leader of the team.

This saying is also not often associated with marathon running either.  A marathon is 26.2 miles long and most people think there is nothing moderate about that!  There is an active debate on whether or not marathon running is even a healthy activity.  Some believe that the benefits of this extreme level of exercise are outweighed by the additional wear and tear on your body.  In fact a chiropractor friend of mine who specializes in sports medicine and injury prevention will not run more than 4 miles at a time.   At the other end of the spectrum, people setting New Year’s Resolutions should not plan or expect to go from zero to 100% exercise in January.   Take your time changing your routine and plan for the long term.   Everything in Moderation.

What about for financial planning and investing?  Ah Ha!  Now there is a natural fit with this saying. If you ever heard of setting achievable goals, not putting all your eggs in one basket, diversifying your investments, allocating your assets among several categories, saving for a rainy day, etc…, then you can see the wisdom in this saying.  This saying holds true for most everyone.  Think about it, it’s next to impossible for the average investor to find the next Apple or Facebook stock.   Like restaurants, there are more failed startup companies than huge successes like these two giants.   It is certainly wise to moderate your investment risk, and spread out your investments.

However, even this saying has exceptions.   There are situations investors encounter that may require a singular focus in financial planning.   For example, we work with clients that require long-term care late in life, and need to move into a nursing home.   While they have some assets, they do not have enough to pay for care for very long and need to look toward Medicaid to help.    Not all, but many states include IRA assets in determining if you can qualify for assistance from Medicaid.  There are specific strategies that one may reposition IRAs into to help qualify for Medicaid sooner, without having to incur a huge tax penalty.   In these cases, a singular focus may be the best strategy.   The challenge is recognizing when this may be appropriate.  For many veterans the VA Aid and Attendance benefit may also become a significant strategy if they require long-term care.

I recall reading an article which amended the above saying to read, “Everything in moderation, including moderation!”  I think this amendment fits in better with Ohio State’s QB JT Barrett and marathoners, but in certain circumstances also with financial planning too.