Frantic Markets! Here's What To Do Ep. 124

I’m reading a book titled Think Ahead by Craig Groeschel, and one of the premises of the book is to pre-decide how we will react in given circumstances. My first thought was this would be a great book for teenagers to read. Planning beforehand for the outcome we know to be right is better than waiting until we’re under stress to think through what we should do. Under stress we may make bad decisions.

One of the reasons Groeschel said we sometimes make poor decisions is we are fatigued by all the decisions we have to make. He writes, “Experts estimate that we make 35,000 decisions a day.” 

Think about how many basic decisions you made before you even left your house this morning. You had to think about getting up, brushing your teeth, what to eat, what to wear, taking the dog outside, and the list could go on. 

The issue is by the time we get hit with a big decision we may not make our best decision because we have not predetermined our belief system about the topic.

In my previous volunteer work with a local ministry called Jumpstart, I learned that one of the ways prisons control the detained is by limiting the decisions they can make in a given day. Instead of 35,000 decisions they may have 6,000 decisions they can make a day. It stands to reason that the way we can control our outcomes is to limit the amount of mental energy we need to expend on making decisions.

As evidenced by major stock market trading platforms going down on Monday due to large quantities of people placing trades in their equity portfolios, a lot of investors may not have pre-decided what they should do in a market downturn. When we don’t have a plan, we subjugate ourselves to making decisions based on feelings and not on hard facts. The stock market likes predictability and we’ve seen historically unpredictable events transpire recently. 

The cool thing about our financial planning process is we have pre-determined how we should react in a down market so we don’t have to frantically attempt to make wise decisions in the chaos of the moment. In our 3 Roles of Money process we have our “red money” in the market, but we’ve segregated out our “blue money” to use over the next ten years. 

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Episode Transcript

SPEAKER_01 (00:00):
Welcome back to the Excel in Retirement podcast,
where we help good people makewise financial decisions so that
they may excel in retirementwith confidence.
Learn more at clientsexcel.com.
Now to your host, David Treese.

UNKNOWN (00:18):
David Treese.

SPEAKER_00 (00:25):
Okay, well, welcome back to episode 124.
I appreciate you listening heretoday.
Well, I am reading a book titledThink Ahead by Pastor Craig
Groeschel.
And one of the premises of thebook is he advocates for
pre-deciding how we will reactin given circumstances.

(00:47):
And at surface level, my thoughtwas, well, this would be a great
book for teenagers to read,right?
Because we want to avoid badsituations when we're coming up
and Sometimes we haven't facedthose, and so it could be
advantageous for us topre-decide how we're going to
react.
But really, this is beneficialfor all of us, right?
Planning beforehand for theoutcome we know to be right is

(01:11):
better than waiting until we'reunder stress.
That was my takeaway.
And so we want to pre-determinewhat we're going to do based on
our belief system that wedeveloped beforehand.
And under stress, we may makebad decisions.
We all know that when pressureis applied, sometimes people pop
and things go bad.
One of the reasons Groeschelsaid early on in the book that

(01:34):
we make poor decisions is we'rejust fatigued by all the
decisions we have to make.
And so he quotes, or I quote himin saying, experts estimate that
we make 35,000 decisions a day.
And so think about how manybasic decisions you made before
you even left your house today.
You had to think about gettingout of bed, first of all, or

(01:55):
whether you should hit thesnooze button, whether to brush
your teeth, what to eat, what towear.
Did you take the dog outside?
And the list could go on, right?
And these decisions just add upover our day.
The issue is that by the time weget hit with a big decision
that's really impactful and wereally need to make a good
decision, we may not make ourbest decision because we haven't

(02:17):
predetermined our belief systemabout that topic.
Previously, in volunteer workwith a local ministry called
Jumpstart, I learned that one ofthe ways prisons control those
being detained is by limitingthe decisions they can make in
any given day.
Jumpstart is a ministry thathelps folks that are
incarcerated and helps themtransition back out of prison

(02:40):
and live a productive life, andso it's a really cool
organization.
Instead of the 35,000 decisions,though, a prisoner may make
6,000 decisions per day, andIt's a way to control people to
get them manageable, I guess,when they're incarcerated.
It stands to reason, though,that the way that we can control

(03:01):
our outcomes is to limit theamount of mental energy we need
to expend on making decisions.
On Monday, we saw that majortrading platforms at Charles
Schwab and Fidelity went downdue to the large quantities of
people placing trades in theirequity portfolios.
And so a lot of investors maynot have pre-decided what they

(03:25):
should do when the market startsgoing down.
And the S&P went down about 3%and things were getting a little
chaotic there for a while.
When we don't have a plan, wesubjugate ourselves to make
decisions based on our feelingsand not hard facts.
Now, we're emotional creatures,I'll give you that, but we want
to make decisions based on factsbecause feelings can often be

(03:48):
fleeting and they can changevery quickly.
The stock market likespredictability.
You've probably heard thatbefore.
And we've seen historicallyunpredictable events transpire
recently.
We saw a former president getshot recently.
We saw a president drop out ofhis reelection bid.
We haven't known for sure whothe options to vote for in

(04:10):
November are going to be, andwe're only a few months out from
that.
And last week, the FederalReserve decided not to lower
interest rates.
And one of the reasons for notlowering interest rates was
because they believed there wasstrong employment numbers.
But then Friday, a few daysafter that, The latest jobs
report came out revealing thatunemployment was higher than the

(04:31):
Fed was anticipating.
This sent fear throughout theeconomy that a recession may be
near and that perhaps theFederal Reserve isn't going to
be able to orchestrate this softlanding to bring inflation down.
If you recall, the governmenthas been trying to bring
inflation down without causing amajor disruption to the economy.

(04:52):
And so when the unemploymentnumbers were higher than the
government thought, that sentfears that a recession may come
and that the Fed had not done asthey had hoped, in essence.
Then Monday, we saw the stockmarket sell-off.

(05:18):
They had the largest loss since2022.
The S&P 500, as I said earlier,fell 3%.
But as of this recording, themarket is recovering.
This is Tuesday, the day beforethis is released, and so it's
recovering.
And the good news is, as ofright now, the S&P 500,

(05:39):
year-to-date, is still up about11%.
The cool thing about ourfinancial planning process is we
have predetermined how we shouldreact in a downed stock market,
so we don't have to franticallyattempt to make wise decisions
in the chaos of a moment.
In our three roles of money, andI'll link to an article I've

(05:59):
written for Kiplinger on thisthat you can read more about
this on, we have a process inour three roles of money
process, and we color codemoney.
And so our red money is in thestock market.
And we have segregated out ourblue money to use for
distributions over the next 10years.
And what this means is we'regoing to use our blue money as

(06:20):
our income in our first 10 yearsof retirement or whenever we get
ready to take distributions outof our account.
Because we have invested theblue bucket to be as stable as
possible.
Then this allows us to let ourred bucket money ride during
market turmoil.
which is generally what we wantto do because most of us can't

(06:42):
effectively and consistentlytime when to get out of the
stock market and when to getback in.
It's just a fact.
And often I cite WarrenBuffett's philosophy of not to
invest in the stock market ornot to invest in a stock if you
can't hold that for 10 years ordon't plan to hold it for 10
years.

(07:02):
How in the world do we do thatin retirement if we have not
sectioned off a But what we canfigure out is that when it gets

(07:27):
frantic and we get worried, wetend to make bad decisions.
But if we have an allweatherproof plan and we've made
allowances for differentmarkets, we can benefit
ourselves by not having to makethose challenging decisions in
the heat of the moment.
I've written more about this inour book called The Excel or How
to Excel in Retirement so thatyou can live worry free.

(07:50):
And I would be happy to UPS youa copy of that.
Just send us an email at helloat clientsexcel.com.
I hope you have a great day.
Take

SPEAKER_01 (08:03):
care.
Investing involves risk,including potential loss of
principal.
Thank you for watching.

(08:48):
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(09:16):
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