So What’s Your Plan?

A lot of people are stressed out about a lot of things right now. Markets are down. Prices are up for many of the things we need to buy. News headlines about possible economic turmoil ahead are making it a confusing time to consider major financial decisions. Add to this the lingering stresses of the pandemic, the health of loved ones, and a job situation – and it makes for a pretty unsettling time.

Yet although we can’t control geopolitical or global market events, we can plan for them. And having a good plan can make all the difference – not simply in how we feel about weathering a financial storm like the current one, but also about its overall long-term financial impact on each of us.

Why It’s Hard To Plan

Yet most of us don’t have a good long-term financial plan. Why not? Primarily, I believe, because planning is not only an act of knowledge; it’s also an imaginative exercise in long-term thinking. And that makes it an unnatural activity for most of us.

If that includes you, don’t feel too bad. Most human beings tend to focus pretty singularly on the here-and-now. It’s just the way our brains are built. After all, the ability to “survive today” is an evolutionarily successful trait. Think about it: if you don’t react in a timely way to the cheetah lurking in the high grasses of the African savannah, you won’t make it to tomorrow anyway; so the long-term outlook doesn’t really matter. In other words, there’s a sound evolutionary basis for our “fight or flight” instinct. The problem is, we no longer live a life of simple survival on the African savannah. We live in a complex, technologically interconnected world where many of the current signals that our brains receive are not actually helpful, while other, critical but longer-term information is largely opaque or difficult for individuals to access.

So the result of our natural mental wiring is that when markets are going up, we want to invest more. When markets are going down, we want to hide. When crypto – or SPACS – makes headlines as the next best way to get rich, our instinct is to jettison the more traditional (and boring) stuff and go all in, because the short-term signals we’re getting are so seductive.

Until, of course, that doesn’t work either. Or worse yet, until we lose it all. Either way, unless we pull out of this short-term thinking, we get whipsawed back and forth, pulled from one thing to another, but never finding something that feels right – or works.

We All Need Perspective

One of the most useful – and most comforting – things we can all learn from periods like the current one is a bit of perspective – and humility – about our natural reactions to short-term stimuli. The fact is that these reactions, our instincts, are frequently wrong. Last year, when the markets were booming, it was hard to imagine that anything was ever going to go wrong. (This despite the fact that professional investors have been talking about the inevitable market downturn for several years now.) And now that we’re experiencing a nasty market decline, it’s easy to imagine that this is the beginning of Armageddon. Yet neither of these extremes reflects all that we know or should anticipate.

Planning, in essence, is an exercise in muting our short-term, instinctive focus long enough to get a better handle, objectively, on longer-term possibilities and risks.

There are big benefits to doing this. The first is that a good plan can give you an emotional perspective on your current experience that you didn’t have before. An emotional perspective can turn what would otherwise simply be a scary experience into an event that you can face with knowledge and confidence. For example, if your retirement plan has already taken the possibility of a deep market downturn into consideration (as all of ours do), then you can still feel confident in your future despite current market jitters.

In addition, a good plan can help you see possibilities for future financial success that are being obscured by today’s headlines. Such an objective view can help you decide to take some of your risk off the table – to “sell high” when markets are way up. And it can help you take advantage of opportunities – to “buy low” when markets are in the doldrums. Both of these actions are hard to take. They require discipline and a long-term perspective.

Everyone Is Different

Investment markets are clearly a major source of stress for many of us currently. But there are other stressors out there – financial and otherwise. You may be struggling with liquidity. You may be experiencing a life change, like a job or career change. You may want to purchase your first house in a rising interest rate environment. You may be thinking about how to structure your retirement cash flow so you don’t need to worry about it. You may be worried about your or your spouse’s health. The list goes on. As a result, your plan needs to address your individual risks, stressors, and opportunities.

Even given similar circumstances and risks, your plan will be unique to you. Different people can stomach different amounts of risk; they also have different priorities and sensitivities, based on their personalities and life experiences. Given this, a good plan is never the result of financial calculation alone. It’s the result of putting financial and other factual analysis in the context of who you are as a person and where you want to go in your life. There is no such thing as a generic Financial Plan.

Next Steps

If you have not tried this before, here are a few steps to consider next:

  • Find a thought partner. Someone you trust, someone you can talk to, and someone who has done this before. Perspective is easier with (and perhaps impossible without) binocular vision.
  • Be honest about what is stressing you out and how you’re feeling about it. You’re not crazy. You’re just human. You need to deal with those feelings because they’re real. Yet acknowledging your concerns and your fears helps give you control over them.
  • From a place of emotional calm, ask yourself: “What do I really want?” Then ask the question again: “Okay, what do I really, really want?”
  • You (and your collaborator) can then gather information, use analysis, and develop a longer-term view of your purpose and your goals. Then you can decide on tactics that are most likely to move you toward those goals.
  • Focus on controlling the things that are in your control—like saving more and spending less. Hope is not a plan.
  • Finally, decide in advance how you will deal with the things that might go wrong, or simply be unexpected – because you know that no plan will unfold exactly as envisioned.

If you’ve been through this exercise before, go back and review your thought process. It should help calm your fears and enable you to make better decisions now. If you haven’t worked through such a planning process before, consider how it can help you, both now and in the future.

And let us know if we can help.

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While the holiday season is ideally a time for family and friends, it is also a good time to review tax strategies for the current as well as the coming year. Tax planning includes possibilities such as tax-loss harvesting, choices of investment vehicles, order withdrawal optimization, and many others. Given the complexity of these considerations, it’s important to work with a trusted financial professional to best understand each approach and its implications. It’s also important to understand the economic climate’s effect on taxes, especially the impact of inflation. What should investors know as they plan for 2024?
You’ve probably done it all your life. First you (or your parents) enrolled you in a good kindergarten. From there, you ‘graduated’ to a solid grade school. Then came an excellent high school, after which you were lucky (and hard-working) enough to be admitted to a top-notch university. It’s been a step-by-step – and well laid-out – progression your whole life. Isn’t that how careers (and lives) are supposed to work? All nicely laid out with one pre-ordained step after the other?

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