Last month, I floated a contrarian idea: that when the economy begins to slow, it’s time to crack open the champagne. Reason? After years of easy money, speculation, and excess, our economy is now resetting itself . . . and preparing (hopefully) for more rational growth ahead.

I also suggested that a near or actual recession is a great time to question our assumptions. For example, we should ask ourselves (1) whether we’ve been giving clients ethical advice and (2) whether we’ve been ethically managing ourselves. In my prior column, I addressed the first question. Now let’s turn our attention to the second.

Just as clients in a soaring economy often fall prey to over-spending and over-borrowing, their financial advisors can fall into the same traps. They’re making a lot of money, so they trade up to a bigger house, a better car, a boat, and an HD TV as wide as the Montana sky.

Now, don’t get me wrong. There’s nothing wrong with enjoying material things. The problem arises when our consumption outpaces our earnings. In order to feed a big lifestyle, we have to generate more revenue. To generate more revenue, we need to add more products and services and more people to staff. To meet higher payroll, we need to generate more sales per client. To generate more sales, we need to . . . you see where I’m headed.

The danger: When financial professionals get overextended financially, not only is their financial security at risk, but so are their ethical values. Here are four problems that can arise:

  • Getting out of your competence comfort zone and into a product or service that you really shouldn’t touch.
  • Getting out of your client comfort zone and pursuing prospects who aren’t your ideal client type.
  • Becoming too aggressive in how you generate new client appointments, perhaps running afoul of state or federal laws.
  • Engaging in unethical or illegal sales practices in order to make sales you have no business making.

With a recession potentially ahead (or already here), now is the time to “sweat the excess.” Here’s what to do:

First, get real about risks. When you make decisions about making and spending money (for yourself and the business) challenge yourself to think about the downside risks of your decisions. Although having the sky-high lifestyle today is gratifying, can you defend your decisions later?

Second, get real about expectations. If you’ve been spending with abandon, it can be tough to adjust to a slower economy. The key is to reset your expectations and to be thankful for what you have, not anxious about what you don’t.

Third and finally, get real about what constitutes the good life. If your entire being is wrapped up in consumption, then obviously a recession can hit your business – and you – very hard.

A better approach: Get your personal ethics in order. By “sweating the excess” out of your life, you’ll be lean and mean when the economy flashes green.