Ep # 85: Emotions. The Silent Financial Planning Killer
Are we all doomed? It feels like almost everyone is struggling with emotional fatigue right now. When's the last time things felt normal? The negative headlines on safety, war, inflation, politics feel even worse when you're seeing your savings and investments go down and your expenses and spending increasing.
We recognize resiliency is not easy. We are here to review your retirement plan, review it often, and make changes when necessary through our financial planning process. In this podcast episode, we discuss the importance of staying on your financial path so investments don't affect your big picture plan.
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Benjamin Haas 00:03
Hi everyone and welcome to A/B Conversations, where we will help you CFP your way out of it. A podcast where you get into the minds of a couple of Certified Financial Planners on how we think and feel about everyday financial planning questions and what should really matter most to you. A healthier financial life starts...now!
Adam Werner 00:25
Hey there, Ben. How are you?
Benjamin Haas 00:27
Hi Adam. I'm doing well. I'm actually excited about this topic. It's what people need to hear right now.
Adam Werner 00:38
Thanks for having me back on my podcast. Appreciate that.
Benjamin Haas 00:41
Not a problem.
Adam Werner 00:44
Good to be back.
Benjamin Haas 00:45
Good to get you back in.
Adam Werner 00:48
Feels like it's been forever since you and I have done one of these together, so looking forward to it. Yeah, let's get right into it. Today's focus is on the emotional side of what a lot of people are feeling right now and they are not alone. I mean, I am certainly feeling it myself. I don't know about you but I'm hearing more and more from clients that it's the emotional fatigue. Just feeling like it's the never-ending stream of just negative headlines. It's you go to the grocery store, you fill up the gas tank, you're just kind of confronted with increasing costs. By the way, for people that opened up their September statements seeing their values fall once again, it's the perfect storm of just all of these negative things and it's just leading to some burnout kind of emotionally.
Benjamin Haas 01:42
Yeah, it's exhausting. I know it's easy for us to say, look, we expect that when the markets are not doing well, clients are going to struggle a little bit, but it's I mean, you're hitting on it, it's deeper than that. This is a couple years' worth of just really hard things and it goes well beyond just the financial statements. When you're so fatigued, it's our job to go, hey, hang in there. Remember long-term things will work out. Look at all these statistics. We know that probably doesn't help because it's deeper than that. I think we need to dive into that a little bit today and maybe get specific about what we know they're challenged with so that we can try to help with that but it's heavy stuff, man. It's heavy stuff.
Adam Werner 02:27
So even you had made note here that it's not just the last year or so. The S&P 500, the stock market hit its all-time high on January 3 and then we've kind of felt all of the volatility since then. But to your point, this really is going back to I'd say, February, March of 2020, when the COVID shutdown kind of began. That kind of kicked this off where it was just the complete unknown. Just the change of lifestyle for many people not being able to see friends and family, whatever that looks like on everybody's personal side. But it's the change in jobs. I mean, we mainly work with retirees and just that whole mindset of am I going to be able to continue to do what I'm doing in this new environment? It's Russia, Ukraine, the constant inflation. We're now in mid-term election season. So, I know I said it the other day, it makes it difficult to even watch TV, like at home with my kids, when every commercial is a political ad and it just, I don't know, even that just kind of adds to the emotional and psychological fatigue.
Benjamin Haas 03:48
We'll move on from pouring gasoline on a fire.
Adam Werner 03:51
This is not just a therapy session for me is what you're saying?
Benjamin Haas 03:55
But, even if you've been a little immune to certain things, if you really got through COVID, you know, feeling okay, there wasn't a lot of change jobs, you weren't really concerned about safety. It still does feel like death by 1000 cuts on a daily basis and I guess that's what we're really trying to get at. At some point. It doesn't matter how emotionally like together you are, that tank can get pretty empty. I think what we're realizing in conversations with clients is that when that tank is empty, the mind does just wander further into deeper and darker spaces when it comes to our side of financial planning and what that means to them in the future. So, we have to find a way to help with that.
Adam Werner 04:36
Yeah, so I'm glad you said that because that is the point here for us in recording. This is when you and I've seen this when people get to that level where it feels like that level of despair, like feeling defeated. Like there's nothing that I can do to fix a lot of these things that are just happening in the world. The one thing you can maybe control is, I know how my investments are doing so can I do something different? I can't take this anymore. I need to do something different with my investments, whether that's going to cash or it just feels like any activity feels like something. Right? Even if I know, deep down this decision, in the long run, may not be the best. It at least makes me feel good temporarily. Like I'm doing something. I'm not just sitting as a bystander.
Benjamin Haas 05:35
Yeah, so said differently. It doesn't matter how many times people hear it, whether we're saying it or they hear it somewhere else, doesn't matter how many times they see it, we all know that we should be buying low and selling high. Simple advice but it's nearly impossible to follow when you're in that, emotional tank is empty and I don't see the light anywhere. I know this is probably going to take longer to come out of than I ever would have wanted. It just as hard to follow. It's really hard to follow.
Adam Werner 06:09
Yeah, so on that note, I saw this really short, catchy phrase and it just kind of stuck with me. This was maybe a couple of months ago, it was, when in doubt, zoom out. I took that to mean, in your words, let's keep the main thing, the main thing. Let's go back to the planning side of things, what actually truly matters to you and hopefully the conversation can flip from I'm losing money in my investments, let me do something different. To the actual important part of that conversation is, am I still going to be okay in the long run? Is this going to materially change my plan? Am I going to have to work longer than maybe I had anticipated? Are there other maybe expense related cuts that need to happen at some point? I think that's where we want to focus and if at the end of the day through planning we determined, yeah, all of these negative things are happening. But if you're still able to do what you want to do, when you want to do it, then that should (we hope) give people some confidence, some peace of mind to kind of put all of this negative stuff in a box and be able to hopefully get through it a little bit easier.
Benjamin Haas 07:26
So that has to be number one and I'm glad you started there with like, if we're moving to, we know how they're feeling. That's number one on how we can help. We say it's a planning perspective for that reason. We do plans so that we can answer the questions like, can I retire. But our side of that is not just at that moment in time. We're planning for these events; we want to be able to not have to go into the deep details of asset allocation and inflation figures and try to help you understand a 400-level course on investing. It's not. It's to simply answer those questions that really are the back of your mind, when you're seeing your statement go down. What's in your mind? Will I have to go back to work? Do I have to change my lifestyle? We need to be able to focus on answering those questions and luckily for many people, we do know that these downturns, these bear markets, these are sessions that we get one will happen. So we've already planned for that and if we can try to keep that perspective, this is what matters most to you. This isn't being disruptive. We hope that helps.
Adam Werner 08:32
Yeah, and I think part of the disconnect, right? We live and breathe this stuff day in and day out and it's one thing I think for clients to hear it. It's another to actually go through it and believe what we say. It's always the feeling of but this time it's different. These factors are different than 2008 as the other most recent kind of big example of a crisis and that's not wrong, right? The factors may be very different this time around. But historically speaking, the market has always rebounded from any catastrophe and I would think this should be no different. But that doesn't make it easier to get through this trying time that it feels like we're in. Part of our job just often comes down to being open to listening. Holding people's hands through that letting them know that they're not alone, in feeling the way they feel. And I've had enough of these conversations in the last few weeks to really honestly say to a lot of people, you're not alone. This is, to some degree, everybody is feeling this in one way, shape, or form. So just acknowledging that this is a very human thing that we're all kind of dealing with. You're not on an island. You're not feeling these feelings just kind of on your own. But being able to try to talk through things, knowing that it's easier said than done to do nothing, which for most people and I should take a step back and say, it depends on the individual situation. But more often than not, the best thing to do when things are feeling like this is to do nothing. Is to not make a decision that's going to feel like it's self-sabotage somewhere down the line.
Benjamin Haas 10:20
Let's call that the second really big thing that we want to do and how we can help. If it's giving you your planning perspective on this is what you said matters most to you. These things are still intact. They may not feel that way right now. The long-term perspective, that's where we're at. Let's call the second one permission to be patient and, again, I know that's hard. But whether it's the asset allocation side, whether it's, hey, you built this cash reserve, if you don't have to do anything right now, like you said, that is the best thing. I'm not going to get into three bucket theory and how we go about all of this, but I had this conversation today. Somebody retired, they had goals that they were going to live in that house and they were going to age in that house, the projects needed to be done. They're finally able to get done because contractors are finally able to get around to it. She said today, I was really hoping to do this kitchen project next year and now I don't know if I can or should. And I'm thinking, you absolutely should. We planned for that. We've set aside for it. By the way, prices might come down for you by this time next year. That's me trying to be optimistic Ben, but if you can be patient. If you don't have to make those changes, if you don't have to make withdrawals at the wrong time right now, it's okay. It's doesn't make it easier to get through but hopefully, it's not feeling as daunting, again, when you have that perspective.
Adam Werner 11:41
Yeah. So that kind of leads me to the next kind of point we wanted to make and I know you've touched on this in other podcasts to some degree, but it's the recency bias. That is, again, just a very natural human thing. We look through the lens of the most recent events and that typically has the most weight in our mind, dictating how we now act moving forward. The fact that we hit all-time highs in the stock market at the beginning of this year, that's kind of the new watermark. The baseline for where we're now judging where things are now, which again, that's very natural to do that. But when you zoom out, I don't know if you want to kind of go through the stock example, where just changing the perspective a little bit and zooming out on the broader picture, does change how you see the situation. Yeah, and I think we share this to sometimes if you can recognize that this is human behavior, it's natural human behavior. You might have that aha moment of, oh, I see that. I'm actually susceptible right now to that, again, my emotional tank is empty, so this is what I'm doing. I'll use the example because I thought it was really good. If you bought the stock at $10 and it went to $20. You've doubled your money. How do you feel, you're elated? You feel great.
Benjamin Haas 13:05
Yeah, right. You buy a stock, it went from $10, all the way up to $30. You feel amazing because it has tripled but then you get the headline that it's crashed down to $20 crashed because it lost 33%. How do you feel? You might feel miserable that you saw it go from $30 to $20. But in both cases, you ended up at the same spot, right went from $10 to $20. That's a really good example of that recency bias that really puts people in a bad spot because what sells? It's that headline. This thing crashed 33%. The market went up so high 2020 and 2021 while maybe we were still feeling horrible over COVID-19, missing smiles, job changes, stress like crazy. We didn't feel the way that it went up, the margin. Here we come this year and if you haven't zoomed out to your point, it feels horrible but that's a recency bias.
Adam Werner 14:08
And I distinctly remember having conversations at the end of 2020 and the beginning of 2021 where sharing with clients, everything that we were kind of going through in COVID. You think of the returns that we saw in the stock market, it just didn't feel logical. To feel we were feeling just global shutdown, essentially and the S&P 500 went up in that time period. It just didn't quite compute but it was, at the time, great. This is why you stay invested because you just never know how the market is going to react to certain inputs. And that made now with hindsight being 2020, clearly, future returns were being pulled into the present then and now here we are. It's all again, matter of perspective and the starting point. So at least moving forward, we don't know when volatility will subside. We don't know when things are going to feel more normalized in the market. But at some point, some of the variables at play that are driving returns, there will be clarity. There will be resolution and things will start to turn, things will rebound and the fact that we are starting now at a lower point than where we started, the year should make those returns a little bit easier to come by once we get to that point.
Benjamin Haas 15:31
Yeah, I know it's impossible for you and I to put ourselves directly in the shoes of all our clients. But we are pretty sure we knew how they were feeling going through life on a day-to-day basis and 2020, 2021, because we were going through it too. But here, you and I were able to celebrate because we watch it every day. 2020 and 2021 where the world outside our office walls feel crazy. But inside, we're like, okay, at least markets are going up. Now people are paying crystal clear attention to what's going on and we know, it feels horrible. Let's be honest, it has not been pleasant. Every time we felt like we were getting these little rallies, it was March, it was August. What can we do? Go back to planning perspective. It's a great time to look at the retirement plan and focus on that. Hopefully based on your situation, give yourself permission to be patient. Recognize that maybe how you're feeling is just recency bias. Find a way to fill that emotional tank because it's rough man and now we go into winter when people do have that kind of like seasonal depression. And yeah, it could be it could be a trying, couple months.
Adam Werner 16:45
Yeah, I personally, I'm not looking forward to leaving for work when it's dark and then leaving work to go home when it's also dark. That is a seasonal depression disorder and I'm not looking forward to that. So yes, but I guess to reiterate what you just said, without knowing anybody's individual circumstance to give definitive advice. Now is the time to go back review the big picture plan and if there are tweaks that need to be made, then let's figure that out through the planning process and not let investments kind of drive the decision making on the back end.
Benjamin Haas 17:29
Yeah, resiliency is not easy but we're going to need it for a little bit. If you've been invested long enough, if you've been planning long enough, the truth is, you've been through this before and you'll probably be through it again. There's no way. What's that? Going on a bear hunt. Can't go over it. You can't go under it. You can't go around it. We just got to go through it. Yeah, so we're here. We need to talk through it, hand holding is now firmly a part of our job description.
Adam Werner 17:59
You got it.
Benjamin Haas 18:01
All right. Thanks for all the insight. All right. Thank you. We'll make it hang in there.
Adam Werner 18:06
Hang in there. All right, like the Phillies. All right.
Benjamin Haas 18:12
Thanks. Bye. Adam and I really appreciate you tuning in. Please note that the opinions we voiced in the show are for general information only, and are not intended to provide specific recommendations for any individual to determine which strategies or investments may be most appropriate for you. Consult with your attorney, your accountant and financial advisor or tax advisor prior to making any decisions or investment. Thanks for listening!
Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor. Great Valley Advisor Group and Haas Financial Group are separate entities.
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