Fearless Wild Ride

Fearless Wild Ride

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I’m not a fan of rollercoasters. I don’t like that out-of-control feeling. But I’m not immune to peer pressure. In my mid-20s, my swim team headed to Magic Mountain after our morning workout. At first I vowed to stand firmly on solid ground while everyone else went on the loop-de-loop. No upside down for me, but my teammates wouldn’t have it. They coaxed me onto the rollercoaster by telling me it was no different from doing a flip turn in the pool.

Speeding downhill toward that enormous loop, I was ready – I knew what to expect and I made it. That is, until we ratcheted up another incline and over the top to discover…a corkscrew! I was completely unprepared for that sensation and let out a piercing shriek. At the end of the ride, though, I was smiling. Okay, it wasn’t that bad after all.

In 2008 when the financial markets started melting down, it felt like we were screaming down the slope of a rollercoaster with no idea what was ahead. It was scary, but just as my friends had prepared me for the loop-de-loop, I felt prepared to think relatively calmly about my investment accounts and not react with panic.

Know your emotions

It’s easy to think of financial planning as a cool exercise in numbers. You hire a professional to tell you the best thing to do with your money, but then they start by asking you about your hopes and dreams – your aspirations for the future. You’re encouraged to tap into your feelings about risk, change, and uncertainty. It turns out financial planning is an emotional business. The right financial plan is one that takes your state of mind into account, and prepares you to ride the rollercoaster of life with a smile on your face.

To put this into perspective, it’s good to keep in mind that the stock market, and indeed the economy as a whole, is driven by emotions. You’ve probably heard about the “mood of investors” and “consumer sentiment.” Yes, a lot of research and analysis goes into financial decision making, but emotions also play a role in how markets anticipate and react to change. So what does this mean for your financial plan?

Prepare yourself for big emotions

Think of your personal financial plan as a rollercoaster schematic. When you have an idea what kind of loops and twists to expect, you can better prepare yourself for the emotional ride. Your financial planner will educate you about the inevitable ups and downs of the market so you won’t be caught by surprise when you find yourself looking down a frighteningly steep slope. Your financial plan is designed to give practical guidance for managing your assets, saving, and investing for the future. It should also prepare you emotionally.

Crazy panic moments will happen. We’ve had our share of them in the past couple decades. Here’s a way to think about them:

  • Keep your plan up to date – Your financial plan should account for everything you know about your current situation and your plans for the future. If you find yourself worrying about any aspects of your plan, be sure to express those emotions to your financial planner.
  • Stay calm – If a world event or market swing has you freaked out, stop and take stock of what’s happening before you make any moves. If you need more information, your financial planner will give you their perspective.
  • Acknowledge your emotions – You’re probably not alone in your feelings, and it’s critical not to act on impulse. Study after study has shown that sudden actions in the face of market swings can throw your long-term plans off course. Keep the focus on your strategy and things like asset allocation that you can control.
  • Keep track of how you’re doing – Meet with your planner to monitor your progress and the growth of your retirement capital. Remember, staying the course with your financial plan doesn’t mean standing still. You should always be adjusting your plan to your changing reality.

Keep in mind that your financial plan is your financial plan. Another individual or family might have a completely different plan, even if their situation appears the same on paper. Your dreams, aspirations, and attitude about risk are what make yours unique. When you talk to your Arrivity financial planner, don’t be shy about expressing your feelings. 

 

Some questions to think about:

  • What kind of emotions are driving your financial decisions? Watch out for feelings that could sabotage your good judgment like envy, shame, regret, or FOMO.
  • Do you feel like you’re in control of your financial future? If not, ask your financial planner to explain how your plan is structured with you in mind.
  • Do you understand the risk level of your financial plan? Risk is highly personal. You shouldn’t be taking on risk that makes you stressed.  
  • Do you know what actions you would take in the event of unfavorable economic news or a sudden market change? When financial markets are in turmoil, you may be tempted to “do something” to avoid losses. It turns out that doing nothing in a moment of distress often proves to be the better path.

Tell us what you think! If you’ve worked with someone on the Arrivity team to create your financial plan, we’re looking for your feedback. Please take a moment to complete our short anonymous survey HERE.

Please contact us at 206.217.2583 or info@arrivity.com if we can assist you or someone you know with financial planning.

The foregoing content reflects the opinions of Liz Behlke and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns Securities investing involves risk, including the potential for loss of principal. There is no assurance that any investment plan or strategy will be successful.