A Treatise on Market Crashes

In light of the bloodbath that we’re currently seeing in the stock market, it’s a great time to remember a few important truths:

1) Always remember the Warren Buffett quote:

“Be fearful when others are greedy and greedy when others are fearful.”

It’s much easier said than done, but this idea is so crucial at times like this. And I have to say, I’ve been very pleased with our clients over the last couple of weeks. The overwhelming majority of our folks haven’t been panicking and wanting to get out of the market. The question from most people has been, “Is this a buying opportunity? Should I be putting more money in?”

Almost certainly yes. The clothes that used to be sold at Nordstrom are now being sold at Kohl’s at a nice discount, so it’s a great time to pick up that shirt you’ve had your eye on. Sure, the shirt could eventually move from Kohl’s to Roses where it would be even cheaper, but we don’t know if that will happen or not. Buying it now from Kohl’s is still a good deal.

2) Your retirement plan probably isn’t going to change.

At least that’s true if you’re one of our clients. If you work with us, your plan has been constructed for a time just like this.

If you’re retired or close to retirement, we have some of your money invested in a place with much less risk than the overall market (or possibly a place with no risk at all) so that you still have a place to reliably create income when you need it next month or next year.

If you’re closer to the beginning of your investing life (20s and 30s), this is a great opportunity. All of that new money that you’re putting into your retirement accounts is buying more shares at lower prices, allowing you to reap the rewards over the very long haul.

If you’re somewhere in the middle (40s to mid-50s) we’ve also likely put some of your money in a more conservative place that will allow us to take advantage of the current opportunity to “buy low.”

So no matter where you are on that spectrum, your plan was constructed in anticipation of this type of market event.

3) Market crashes should be annoying, not life changing.

If your plan is constructed as I’ve described in point #2, a market crash isn’t life-changing for you. However, that doesn’t change the fact that it’s annoying.

It’s never fun to see account balances decrease, no matter how solidly constructed your plan may be. So if you know intellectually that your plan is solid, the most important thing to do is guard your emotions.

If it stresses you out to see your account balance decreasing—stop looking at it every two hours.

If watching the news gives you heart palpitations—stop watching it.

If making small talk about the market gives you diarrhea—find other things to talk about.

We’ll do everything in our power to keep market crashes from being life-changing for you. It’s your job to minimize how annoying they are.

Danny DeVito's Pants

Approximately twice a decade, whether I need it or not, I go shopping for clothes.

This past week happened to be one of those twice-a-decade occurrences. And I was reminded why I do it so infrequently.

I came away with four new dress shirts, three pairs of dress pants, and a new pair of shoes…all of which I’m happy with. But the process of finding these items is what drives me insane.

First, I must air my grievance with the pant sizes available. It doesn’t seem unreasonable to me that a 34 waist and 32 length should be a common size. But it’s not. I’m much more likely to find pants in sizes that seem like they were made to fit Danny DeVito.

But even worse than the sizing issues is the lack of organization in the stores that requires me to spend much more time rifling through racks of pants than should be necessary. I’d be fine with the sizes being mixed up and not in a logical ascending numerical order if the pants were at least grouped together by style. Or, you could have pants of varying styles together, as long as they were organized by common waist size.

But instead you get a rack with different styles, waist sizes and lengths all mixed together. So once I find a style I like, I have to keep circling the rack, looking at each tag individually in the hopes that they have my size (and if you’ll recall the Danny DeVito conversation above, they often don’t).

I’m certain that there’s a better way to do this.

But it occurred to me that this disarray is similar to how most people have their finances organized.

I met with someone last week who had four different checking accounts at three different banks, a savings account at two of those banks, and a money market at one of them. She also had four different IRAs (all with different investment companies) a 401K at her current job, a 401K from a previous job that she hadn’t yet rolled over, an account with some various stocks that she’d inherited, and two different vacant lots that she’d purchased at various times but hadn’t actually bothered to do anything with them.

At first I thought maybe there was a method to the madness behind all of these assets, but upon further inquiry, I learned that there wasn’t. She just had a cornucopia of different accounts and investments that had all “seemed like a good idea at the time.”

But the truth is, she’s not that uncommon. If I had a nickel for every financial inventory I’ve perused that’s in complete disarray…I’d have at least enough nickels to buy my next pair of pants.

The more disorganized your financial life is, the more unlikely it is that you can describe to someone what each of your dollars is doing for you. And if you can’t describe it to someone, that means you don’t have a plan (or at least not a very good one).

If your financial life is a discombobulated department store, we can help. Reach out today.

Just pick a costume already...

For the last three years, Lilly has decided what she wanted to be for Halloween a full year in advance.

When she was three years old, she returned from trick-or-treating and proclaimed that very night, “Next year, I want to be Belle!” And she remained steadfast in that decision until the following Halloween.

After completing her round as Belle the following year, she immediately decided to be Cinderella for the next go-round (another decision that she didn’t waiver on), and then after Cinderella, she set her sights on Jasmine (which she’ll fulfill next week at this time).

Amos, on the other hand, isn’t quite as decisive. In the last year, his costume ideas for Halloween 2019 have ping-ponged from Spiderman to Gekko from PJ Masks to Bernie Sanders before finally landing on Bingo from Puppy Dog Pals. (I might have made up the Bernie Sanders part, but when his hair gets too long and unkempt, there are some similarities there).

The thing that’s notable about their respective sartorial decision-making processes is the fact that it’s the complete opposite of how they make decisions on everything else.

Every morning when it’s time to get dressed, Amos has a very strong opinion of what he wants to wear. Very strong. As in, don’t even point to a different shirt in his closet other than the one he’s already decided on.

Lilly, on the other hand, might change outfits three times before heading off to kindergarten for the day.

On the (relatively rare) occasions when they’ve been delightful human beings and get rewarded with the opportunity to pick out a new toy, Amos can walk into the toy section at Target and have a toy in his clutches within seconds. Meanwhile, Lilly will meander around for 20 minutes agonizing over her options.

So Amos is usually incredibly decisive while Lilly is not. But then they completely swap roles when it comes to picking Halloween costumes.

Very often, I see this same phenomenon when it comes to people sticking to a financial plan. Sometimes the people who are the most decisive and disciplined in their everyday lives have no discipline at all with their finances.

I can point out a significant number of people who are remarkably disciplined when it comes to fitness—constantly getting up early to go to the gym and making good nutritional decisions every single day—but who are simply unable to stick to a certain budget or spending plan.

On the other hand, I know people who eat out almost every meal (because they’re incapable of having the forethought for meal planning) and they’re constantly late to work (because they like to sleep and don’t like moving quickly in the morning), but if you tell them to make sure they max out their Roth IRA every year, you can bet that they’ll do it every single year until you tell them to stop without missing a beat.

For whatever reason, being organized and disciplined in other areas of your life just isn’t correlated to behaving the same way financially.

So, here’s three simple tips to make financial discipline easier:

1) Automate. Bill payments, estimated taxes, and retirement contributions can all be automated. If any of these are a struggle for you, make as much of it automatic as you can.

2) Segregate. All of your dollars don’t need to be performing the same job. Keep strict boundaries between different piles of money—for instance, your emergency fund shouldn’t be invested the same way as the money that you’re saving for your kids’ college. And the kids’ college money shouldn’t be invested the same way as your retirement accounts. Keep them separated and make sure each dollar has a specific job description.

3) Delegate. For the aspects of your financial life that don’t come naturally to you, it’s ok to delegate those other people—whether it’s your spouse, a financial advisor, or some other professional.

Every Breath You Take

Most days, I can’t breathe out of my left nostril.

Some days I can’t breathe out of my right.

Sometimes they’re both at a complete standstill like I-95 between Fredericksburg and DC.

This summer, I finally went to an ENT for him to take a look and find out what the problem is. He spent about 30 seconds with a camera in my sinuses before he said, “Well, you have some pretty significant nasal polyps. You’ll need surgery.”

There are, of course, other options, like interminable rounds of medication, but that’s just a band-aid, it won’t actually fix the problem.

So I’m having surgery on Monday. After 4-5 hours of scraping out my nasal passages, followed by a few days of misery and pain medication, I should be respiring again like a human is supposed to.

But let’s talk about how long it took me to get around to having my sinuses checked out in the first place. I can’t pinpoint exactly when the sinus problems officially qualified as being a hindrance to my quality of life, but I’ve been talking about going to an ENT for at least three years. And, of course, the issue would have been a problem for a long time prior to that for me to even get to the point of thinking about getting examined in the first place.

So what took me so long?

Was I scared of the ENT? No, very few things scare me, other than the prospect of a Bernie Sanders presidency or people who own more than three cats.

Was it too hard to get off work to schedule a visit? No, I own the place. I could walk out in the middle of this blog post if I wanted to.

I knew I needed to go and there was no real obstruction to prevent me from going, I just…never got around to it.

And now I can’t help but think about all of the fully-nostrilled (not a word, probably) breaths I could have been taking this whole time.

My procrastination hasn’t put my life in danger. It’s not going to cost more now than it would have cost in 2014. The main consequence is simply that my quality of life could have been drastically improved years ago if I hadn’t waited so long.

This is exactly where most people are with their financial planning.

You know that you need to do it, there’s no legitimate excuse not to do it, you just…haven’t gotten around to it. You’re not on the verge of a financial crisis, there’s no impending life event with financial implications that you need to address, you just don’t have the peace of mind that you could have.

After we get a financial plan in place for folks, at least half of the time, one of the first things they say is, “Wow, we should done this years ago.”

So that makes two of us. If I’d had surgery years ago (as I should have) and you’d gotten a financial plan in place years ago (as you should have), I would have been breathing better and you would have been sleeping better this whole time.

You can schedule a visit here.