December 25, 2025 • 38 mins
On this episode of Simply Money presented by Allworth Financial, Bob and Brian take a deep dive into the surprising ways your brain might be sabotaging your financial future. From action bias and overconfidence to herd mentality and confirmation bias, they reveal how emotional traps become even more dangerous the larger your retirement nest egg grows. You’ll also hear how childhood money lessons still influence your decisions today—whether you realize it or not. Plus, the guys break down why FOMO and a desire to “do something” can upend a perfectly good financial plan, and how the best value a financial advisor provides may not be what you think.
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Episode Transcript
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Speaker 1 (00:06):
Tonight, an entire show dedicated to the one thing that
impacts your financial future more than anything else, your mind.
You're listening to Simply Money, presented by all Worth Financial.
I'm Bob Sponsler along with Brian James. Tonight, we're gonna
start with some emotional traps that can quietly sabotage your success.
(00:26):
And these emotional traps seem to impact people more and
more the larger your retirement nest egg starts to become.
And if you recognize even one of these traps in yourself,
it could save yourself hundreds of thousands of dollars. Brian,
let's get into it. Yeah, so picture this.
Speaker 2 (00:44):
You've done everything right, You've built your pile of money,
you've saved aggressively, you've done all the right things, you've
checked all the boxes, but you still have that voice
in the back of your head.
Speaker 1 (00:52):
Saying there's not enough. There's not enough, there's not enough.
Speaker 2 (00:54):
That's kind of where we all start. We start with
this notion of scarcity. I don't have enough. I don't
have enough. The comparison I use with people when we're
sitting down doing a financial plan is to say, hey,
look at this pile of money you've grown and now
that you're in your late fifties, early sixties, whatever age,
now think back if you were told at twenty five
that you'd have this much money at this age, what
would you have thought back then? And the answer is always, oh,
(01:15):
my gosh, I thought i'd be in fat city, you know,
if I never thought I'd have this much money. Yet
here we sit worrying that there's just plain not enough.
So let's talk about those psychological hurdles that come in there.
Speaker 1 (01:26):
Well in that sense of scarcity, and I'll just be
open about this. That's kind of how I was raised.
And we can get into that if you want to.
But it was always like you want money, you got
to go earn it, and there's never going to be enough.
There's never going to be enough. I guess it's that
quasi Westside Green Hills mentality, you know, having a paper
route when you're nine years old and just work and
(01:48):
work and working. That's kind of how I was raised.
And it tends to feed into this next bias that
we want to talk about, and that's action bias. And
this is the idea that when things go wrong, thing
goes wrong that will upset that giant nest egg. We
worked so hard to build. You know, say the market
drops ten percent or so in a week, our instinct
(02:08):
is we got to do something. We got to go
into protection mode. And for some of our clients, especially
those used to running a business or managing big teams,
doing nothing or in action feels like failure because, let's
face it, the thing that made us successful to a
large extent is we were the problem solving people. Right
(02:31):
if something went wrong, our job was to fix it,
fix it today, check the box, and move on. And
it doesn't work that way. We can't fix the global
economy in an afternoon. Brian.
Speaker 2 (02:42):
Yeah, psychologically, this is really the same thing as you know,
sometime when you're driving somewhere and you realize that, hey,
i can get off the highway and take the back
roads and it's going to take longer, but at least
I'll be moving rather than sitting on the highway. It
doesn't help you in the long run, It doesn't help
you at all to have taken that step. But in
financial planning actually hurts you. Like you said, so, uh,
you know, we need to need to think of this
(03:04):
in terms of, for example, and then with the market drops.
Just think of in terms of this is something I
should anticipate and I should be I should know how
to how to uh deal with it, versus taking action
to actually do something different in response to it.
Speaker 1 (03:17):
Yeah, the market doesn't respond to hustle. It doesn't care
if we try harder. And that's why sometimes the smartest
move when you peel it all back is do nothing
at all. And that's sometimes very hard for all of
us to comprehend and grasp. Let's switch into another bias
and you know, kind of flipping the script here, a
(03:38):
little bit over confidence. You know, we can get very
over confidence in our ability to handle things or manage
the market, or manage our portfolio.
Speaker 2 (03:47):
Yeah, lots of people feel like, you know what, I've
always been willing to put in that much more effort
than the next guy. And that's how I got the job,
and that's how I've done this and raised my family
and so forth.
Speaker 1 (03:56):
I put that extra effort in.
Speaker 2 (03:57):
So if I just do a little bit more internet research,
I will find that one method, that one investment management
philosophy that has all upside and no downside.
Speaker 1 (04:05):
Nobody says this, but this is nobody says it that way.
Speaker 2 (04:08):
But this is sort of in the back of all
of our minds that I can control more than the
next guy because I am willing to put more work in.
And again, that works in ninety percent of the things
you'll run across in life, but not in financial planning,
financial planning and investing.
Speaker 1 (04:20):
It's all about managing.
Speaker 2 (04:22):
It's ninety percent managing your emotions and ten percent actually
doing things with your investment.
Speaker 1 (04:27):
And this is a good time to point out there's
a there's an independent firm out there called Dowbar. Most
people have never heard of this unless you're in our industry,
but Dalbar basically just tracks investor behavior versus the markets,
and it really tracks how decisions make that are made
by self directed investors versus investors that have a good
(04:50):
financial advisor working for them. What are the results and
these these numbers, Brian, I've been in this industry over
three decades now, and these numbers have never changed. The
average investor out there underperforms the market. You know, a
benchmark apples to apples market return by several percentage points
per year, and it's one hundred percent because of their
(05:14):
behavior and the decisions they make with this overconfidence in
thinking they can outsmart the market. Two to three percent
a year is a big number, and you compound that
over twenty thirty, forty fifty years, we're talking about real money. Yeah.
Speaker 2 (05:29):
And another analogy I like to use it to help
people understand this is whether you're working with a financial advisor,
if you're doing your own thing that person, or you
are the weatherman. It is not the weather man's job
to stop the rain. It is the weatherman's job to
give you a heads up on what might be coming
and how you might want to prepare for it. If
you take that mentality with financial planning and stop trying
(05:50):
to prevent the quote unquote failure of a down market.
And a lot of people think of it that way.
When the market comes down, I did something wrong. I
must have failed somewhere. I will find that point of failure.
Never man, make that mistake again, and lo and behold
two three, four years later, it happens again because we're
focused on the wrong thing.
Speaker 1 (06:05):
So be a weather man.
Speaker 2 (06:06):
Tell people, or tell yourself how to how to deal
with it, not try to prevent it.
Speaker 1 (06:11):
Yeah. Another one that crops up often is this control
what we'll call control illusion. This is another trap again,
especially with people that are used to running things, controlling things,
whether that's a business or a family, or you're a
high level executive that manages people, you are used to
controlling the outcome. And we got to remind people all
(06:33):
the time you could control your planning, you could control
your own behavior, but you can't control inflation, the FED,
or global markets, and that illusion of control that we
all sometimes walk around with that can lead to micro
managing your investments or jumping in and out of things
and trends in the short term, and that's one of
(06:54):
the things that significantly harms returns.
Speaker 2 (06:58):
Yeah, I think one of the concrete pieces of advice
we can give people here is but by control, we
mean we're talking about controlling again your behavior. So a
way you can mechanically do that is make sure that
the dollars you might need in the short run a
year twenty maybe it's twenty four months or whatever. If
you know you've got a certain pile of cash you
need because you're spending it down or to could just
pay the bills, or you've got a big thing you
(07:18):
got to do to the house, college tuition, so on and
so forth, carve that out and make sure that the
market doesn't touch it. That makes it okay for the
stuff that you can't control to impact your longer term investment.
Speaker 1 (07:28):
You're listening to Simply Money presented by all Worth Financial.
I'm Bob sponseller along with Brian James. Let's get into
another trap that we see sometimes and that's one that
we will call status quo bias. Brian, you talked about
this with an actual case example here earlier this week,
talk about what status quo bias can do to negatively
(07:49):
impact our sense of enjoying our retirement.
Speaker 2 (07:54):
Status quo bias is the notion that it ain't broke,
so why fix it, which which most of the time
is usually good. However, when we make this big transition
into retirement, we all tend to hide behind this the
notion of scarcity, that that's where we start. There isn't enough,
isn't enough. I gotta save, I gotta save, I gotta
save and then eventually the light will eventually go on.
Maybe you've done a financial plan or you've put the
(08:14):
pieces together and you realize, you know what, there is
enough I can be done with that. The big hurdle
hiding behind the notion of scarcity is that unwillingness to
start to spend down the nest ey. It is amazing
to me. And I just had this conversation yesterday with
somebody who just had no idea what the money machine
that they had built for thirty forty years, that there's
no concept of what that could spit out for them. So,
(08:35):
for example, a million dollars can easily spit out forty
thousand dollars. You know, a year in terms of income,
two million dollars is eighty thousand. You're talking you created
somebody else with a job in your household that brings
in income. People have a hugely difficult time getting over
that hurdle of spending the nuts that I've been saving
for the winner.
Speaker 1 (08:51):
All right, and then in another emotional trap we want
to call out here and address is what we'll call
the herd mentality. It's common. We don't see it, you know,
too too often with our clients that come in, but
we all feel this. You know, you're our golf buddy
brags about, you know, the big profit they made in
Navidia stock or bitcoin, or you got a coworker that
(09:13):
moved all their money to cash one day before the
market went down four percent, still talks about it and
they want to brag about it. By the coffee machine. Yeah,
we've all been there. And then we get enough exposure
to that kind of stuff and we start questioning our
own plan. Well, wow, I'm not doing anything. My plans
just static and sitting there. I got to do something,
do something. And let's face it, the financial media does
(09:36):
not help either. There's always a new hot trend, a
scary headline. I mean, they're just constantly peppering us with
reasons to be fearful or greedy or both in the
same segment of the same show, you know, Bob.
Speaker 2 (09:50):
When I was a kid, one of the first exposures
I had to investments in stocks and things like that
would this would have been in the eighties and dating
myself a little bit here, was when my dad and
his uncle, his brothers, my uncle's and some of their
friends would all kind of pass around their latest stockbroker
who gave them a tip that worked out and it
was It took it took me a while to figure
this out, but by the time I entered the career,
I realized that there had been like three, four, five
of these guys who got hot one time and gave
(10:12):
everybody a hot stock tip, and that he was the
guy for a while or the lady or whatever, and
then it would all kind of fade away and it
was never good for more than one or two. And
there's nothing wrong with the advice these people are giving,
but it's the wrong approach to make investment decisions based
off of one good, good turnout.
Speaker 1 (10:27):
Here's the all Worth advice. Wealth amplifies your options, your choices,
but it also amplifies your mistakes if you allow emotion
to take over. What did you learn from your parents
about money? We'll look at the impact that may be
having on your behavior. Coming up next, you're listening to
Simply Money, presented by all Worth Financial on fifty five KRC,
(10:49):
the talk station. You're listening to Simply Money presented by
all Worth Financial Bob Sponsller along with Brian James Hey.
If you can't listen to Simply Money every night, subscribe
and get our daily podcast. You can listen the following
morning during your commute or at the gym or taking
(11:11):
your walk around the neighborhood. And if you think your
friends or family could use some financial advice, tell them
about us. As well search simply money right there on
the iHeart app or wherever you find your podcasts. Straight
ahead at six forty three. The hidden force that could
steer your portfolio in the wrong direction. All right, Brian.
(11:32):
We talk a lot about financial planning, tax strategies, and
investment allocation, but what if the most important part of
your financial life was something that happened decades ago at
your kitchen table growing up.
Speaker 2 (11:47):
The money script is what we call this. We've all
had some understanding of financial financial success and or failure
ingrained in us from an early age. Very rarely, it
seems to do families actually talk about this, And my
clients always frequently say that that this is not a topic.
We didn't talk about money.
Speaker 1 (12:05):
It was taboo.
Speaker 2 (12:05):
You just didn't discuss it because you didn't want to
compare yourselves to other people or you know, show the
dirty laundry into that stuff. But it's not very often
at all that somebody will say that they had a
plan from kind of the beginning. So you know, for
me personally, I remember my first exposure at all this
was sitting in front of my dad's Apple two C
at the time, and I was My job was to
program in some fancy calculator or something that he got
(12:27):
out of Money magazine, And that was the very first
time I remember paying attention to what dad was doing,
and why are you putting money?
Speaker 1 (12:33):
Why are we doing this? Why we're not outside playing baseball.
Speaker 2 (12:35):
Well, he was planning for the future, you know, more
so than I think a lot of his peers were
at the time, because he kind of could see on
the horizon that they needed to have a little better plan.
Speaker 1 (12:44):
But that's where mine came from.
Speaker 2 (12:46):
A lot of people just don't have anything in their background,
and that's how we get younger people that make messes
of themselves in early years.
Speaker 1 (12:51):
But how did that money script growing up impact how
you think about money today?
Speaker 2 (12:56):
I honestly, Bob, I came to a conclusion of where
I you know what, I don't think I want to
work for the rest of my life, so if I
may as well get into helping people figure out how
to have to work for the rest of their lives,
because by the time it's my turn, I'm going to
be really goshtarn good at.
Speaker 1 (13:11):
Sounds like you made a good choice. I did, well.
I'll share mine. I mean, mine is a story of scarcity,
and it was all well intentioned. I mean, I'm the
first of three kids in our family, you know, the
first child, so the parents are usually pretty buttoned up
and strict, and you know by the book with the
oldest child. And I vividly remember sitting at the kitchen table.
(13:31):
I'm nine years old, Brian, and my parents are looking
across the dinner table from me and saying, all right,
you're nine years old. Now you're not getting an allowance again. Ever.
You want a candy bar, you want to go to
the movies, you want to go, you know, do whatever,
you got to go earn that money. So there we go.
I'm out having two or three paper routes, and I'm
(13:52):
starting to think every day this all depends on me.
I got to make the money. I gotta work I
got and that has really stuck with me, you know,
till today, and there's always that voice in the back
of my head saying it's not enough, it's not enough,
it's not enough. The only person that's going to take
(14:12):
care of you is you, and that can lead to
some interesting behavior.
Speaker 2 (14:16):
Funny you mentioned paper route that that was also my
first experience with earning money and blowing it. So I
had a paper route up and down Jessup Road that
had three candy stores on it. There was Whistles, Deli,
Supremeut Candy, and something else. I didn't bring home a
dime from that job, so.
Speaker 1 (14:30):
You had literally spent the whole thing.
Speaker 2 (14:32):
I would go get my money and then spend it
on candy before I got back home.
Speaker 1 (14:36):
My middle son would love hanging out with you.
Speaker 2 (14:39):
I've gotten better and I'll do this an All right,
let's talk about it.
Speaker 1 (14:43):
You know a one one that these money scripts a
behavior that this can foster in us, and it's called
money avoidance. This is the belief that money is bad
or that wealthy people are greedy. Folks that have this
money avoidance tendency, they tend to feel guilty about their wealth.
They might give too much of money away as a result,
(15:03):
or underinvest because they feel guilty about having what they
consider to be too big of a nest egg actually
grow more. It could really set us back.
Speaker 2 (15:13):
Yeah, and sometimes I also see it not not so
much greedy where they feel guilty about it, but just
terrified of it. There are there are a lot of
people out there who will bring all their life savings
to us to do a plan and invest, and they
dump it on our doorsteps so that we can manage it,
and then we can't get a hold of them sometimes
to review the plan. It's interesting to me that people
just want to avoid the topic.
Speaker 1 (15:33):
Yeah. Another one that we need to nail down here
is what we'll call money worship, in this belief that
more money will solve all of our problems. And we
see this in folks who keep chasing the next dollar
even when they don't need it. And we kind of
talked about this already this morning, but this afternoon, but
(15:53):
we know people with millions and investable assets who still
feel broke. They feel bad about taking a vacation, They
feel like, you know, if I spend any of this money,
that means I'm gonna run out, and that's not a
good thing either.
Speaker 2 (16:08):
Yeah, and I see this a lot of times where people,
again not necessarily from greed, for whatever reason they get
to they're fixated on the dollar amount. You know, I
had somebody the other day who told me that I'm
going to retire when I hit two million dollars. And
my answer to that is, how did you come to
that exact dollar figure? Why is it that you know
you need two million dollars if they've done a plan
and they've figured out, here's my cash flow that'll exist,
(16:29):
here's what I need to supplement, and the answer is
two million. That's one thing, but for a lot of
people it's simply well, I'm kind of in the ballpark
of that anyway. So I just want to squeeze these
last few years of workout so I can get over
the hump. And a lot of times people end up
sacrificing unnecessarily. Heaven forbid. You do all those things, you
save a little more money, and the market decides to
take a chunk away. Are you really going to work
an extra two three four years put off retirement because
(16:51):
twenty two happened. A lot of people had to make
that decision again because they're worshiping that dollar figure. I
want to see more zeros and commas with my name
on it.
Speaker 1 (16:59):
You're listening to Simply Money, presented by all Worth Financial.
I'm Bob sponseller along with Brian James. Here's another one, Brian,
and we run into this one off in money status
and I think a lot of times this has passed
down to us from parents and grandparents, or peers, And
it's just the idea that our self worth or that
net worth number on that financial plan, the net worth
(17:22):
equates with our self worth. It's our whole identity. And
you see this with people who overspend to quote unquote
look successful to their neighbors and peers. Hey, the guy
parked next to me at the country club has this
kind of car. My car works just fine, it's super nice,
but boy, I gotta have the same car as this
guy next to me. Kind of the whole keep up
(17:43):
with the Joneses mentality, and that can result sometimes in
lifestyle creep and you end up spending more money because
you think you can not because it aligns with your
true financial goals.
Speaker 2 (17:55):
Yeah, and I think a lot of times people run
into I want to do these things. I feel like
I've got the money, my cash flow supports it. You know,
maybe I've got to I've got a strong salary and
a good cash flow coming in, but I haven't sat
down to figure just because I can afford something. Now,
what impact does that have in the future. This actually
works in the opposite direction too. People sometimes have absolutely
no idea what they can get away with, so they
(18:17):
do nothing. The whole point of this is as always
figure out what it is that you need to do
and what resources are required to do it. If just
because you can afford something this year doesn't mean you
should because you may be sacrificing something you haven't yet
thought of in the future.
Speaker 1 (18:30):
Yeah, sometimes people don't actually use this word, but the
sentiment comes across. It's almost like, well, I deserve to
have this because I've worked hard. Well, there's no such
thing as you deserve or it is what it is.
You've got to have a financial plan and follow it. Now.
If your plan suggests that you can do and have
(18:51):
some nice things that are really important to you, then
by all means, let's do it. But not often but sometimes,
And I'm sure you've gotten these calls or emails too.
I think sometimes clients will go out and buy the
RV or buy you know, book the three cruises and
then tell us after the fact because they knew if
(19:12):
they asked us in advance whether this is gonna work,
they knew the answer would be no. So they'll just
tell us after the fact and ask for forgiveness rather
than permissions.
Speaker 2 (19:22):
With you Oh yeah, and the answer, well, this's your
plan it's not my money. You don't need permission to
spend your own money. I'm just telling you what the
outcome might be.
Speaker 1 (19:28):
Here's the all Worth advice. Your biggest financial challenge might
not be math. It might be a childhood story that
you've never questioned or really gotten your emotional arms around. Next,
why reinforcing what you already believe could wreck your financial future.
You're listening to Simply Money presented by all Worth Financial
(19:48):
on fifty five KRC, the talk station. You know you're
listening to Simply Money presented by all Worth Financial. So well.
I'm Bob Sponseller along with Brian James. One of the
most dangerous things in investing isn't inflation, taxes, or even
market downturns. It's your own brain, specifically the way it
(20:13):
filters information to match what you already believe. It's known
in the behavioral finance world as confirmation bias, and boy,
this is a big one that I want to make
sure we dive deep into and tackle tonight.
Speaker 2 (20:26):
Brian, Bob, tell me if you've run across anybody like
this lately, they're absolutely convinced that the market is coming down.
It's at an all time high, and it just can't
go any higher. It's coming down. They got this information
from from articles online. Every article they read is worse
than the last one they read, and it's just kind
of backing up on them.
Speaker 1 (20:43):
What they don't realize, however, though, is Google.
Speaker 2 (20:45):
And social media is doing this on purpose because all
they care about, all those companies care about, is making
sure your eyes stay glued to that screen. So if
this guy's interested in bad news about the market, then
absolutely we're going to serve it up on a platterform
because that'll keep him here looking at these ads. And
that's how we all make money, we being Google and
social media and so forth. That is confirmation bias. They
(21:06):
know that you are seeking out opinions and you'll be
happy to read more things that you already agree with,
so they're going to shove.
Speaker 1 (21:10):
It in your face. Well, and this this is one
of the benefits. You know, you and I have both
been doing this a long time, so we've got many clients.
And I don't know about you, Brian, but you know
I'm going to talk about politics here for a minute,
because depending on who the occupant is in the White
House and who's controlling Congress, and all that I can
almost predict, you know, from each side of the aisle,
(21:34):
the four or five clients that are going to be
constantly in my ear telling me how and why the
entire global economy is going to collapse because so and
so is in the White House and they're purposely ruining
the country. Do you have do you have those little
handful of clients that you know come out of the
woodwork depending on who's occupying the White House at any
(21:56):
given time.
Speaker 2 (21:57):
Okay, I'm I'm gonna hit you with the phrase here Bob,
I rehearsed on the way and know we're going to
talk about this political passion has no place in prudent planning.
Speaker 1 (22:05):
Wow, that's a lot of peace. I'm not even going
to try to repeat that. Thank you, Thank you, Iverharst,
Like I said, anyway, No, yeah.
Speaker 2 (22:11):
Clients, all the time, we all and it's not you know,
there's nothing wrong with this thought process. We're simply looking
for that mechanical button or the lever that we can
say if this, then that, if so and so is
in office and in control and I don't like them,
then that means I should do this black and white
process meaning liquid at everything or go to gold or whatever.
We have this all the time, but in reality, the
history shows that the market could absolutely care less who's
(22:33):
in office. It goes up no matter who's in office,
because that's how the economy works. There are always more
and more people buying more and more things. Again, I'm
talking about the longer term, not the short term swings,
which we can't control or predict. But the economy will
function underneath presidents and leadership of any stripe. And there
is ample history going back through all the way back
through the Great Depression and including the most recent administrations
(22:56):
that it just doesn't matter who's in charge. That causes
short term swings. Heaven knows, we've seen enough of those.
But in the longer term, generally speaking, things go up.
Just don't let the short term whack the dog.
Speaker 1 (23:07):
Yeah, I've already made kind of the cardinal rule mistake
here mentioning politics. So I'm going to use another one
here at the risk of angering even more and more people,
And that's talking about the importance of having both spouses
in a room when we do planning and we talk
about risk tolerance and all that. Because Brian, I don't
know about you, I find almost always the people that
(23:29):
are coming to me with this deep embedded confirmation bias.
Almost one hundred percent of the time, it's men. It's men.
Men in their egos are our egos. We want to
be right, we want to predict the future, we want
to protect our family, all that stuff, and we come
in thinking we already know how it's all going to work,
(23:50):
depending on who's in the White House or what have you,
And we start consuming media sources to just confirm that bias,
where I find that the women are way more level headed,
even keeled, and that can oftentimes balance out a good
financial planning review. By making sure both spouses are in
(24:12):
the room, we're hearing from both spouses and we're kicking
around this confirmation bias, you know, identifying the elephant in
the room and hopefully hunting it down and killing it
so we can move on with more productive conversations.
Speaker 2 (24:26):
If this then that, if this happens, then I know
I'm going to do that that way, I'm forcing it
to be predictable, and I'm forcing myself to pretend and
I'm going to put that in caps, pretend that I
have control over this, because that's that's how as a
man like you said. As a man, I want to
I want to fix things. I want to tackle it,
take it on, take the bull by the horns and
fix the problem. But no, it doesn't work that way.
As matter of fact, that assumption can get us into
(24:48):
a lot of trouble. That confirmation bias comes back to
haunt us in terms of forcing us to think that
we have way more control than we do.
Speaker 1 (24:54):
You're listening to Simply Money presented by all Worth Financial.
I'm Bob sponseller along with Brian James and Brian. It seems,
at least to me, the more money people have, the
more costly a mistake can be if we allow this
confirmation bias to really take hold on major decisions. Do
you find the same thing? Yeah? Absolutely.
Speaker 2 (25:15):
And the thing to remember too, a lot of people
when they've built a good, solid nest egg, you know,
a market to client of one percent can look like
a massive amount of money. If I have ten thousand
dollars and I lose one percent, well I just lost
one hundred dollars. That's not obviously a huge amount of money.
But if I have five million and the market takes
one percent away, that's fifty thousand dollars, but it's the
same one percent, and it's affected by the same streams
(25:37):
of the market no matter how big the investment is.
So the idea there is pay attention to the percent,
it's not the dollar amount. I just had the conversation
and not the other day with a client who's really
worked up over a one percent loss.
Speaker 1 (25:49):
Yeah, I mean, people don't like looking for dissenting views
or anything that goes against that bias. And I think
to talk about you know, we've talked about what not
to do. Let's spend a little time talking about to do.
And I think you got to get different ideas from
different people. People that are intelligent, people that are well read,
people that can check their emotions at the door, and
(26:10):
that helps, you know, kind of filter out some of
that strong bias. And this is where I want to
give kudos to our chief investment officer here at all
Worth and Andy Stout, because he is wonderful at this.
And every so often, I don't know, Brian, every three
or four months, if a headline comes across or something
happens where I'm starting to get a little worked up.
It's always I enjoy having a little dose of reality
(26:32):
fed to me by andy, because he'll pull out the
inflation scorecard, he'll pull out all the data that's actually
is making the markets move in one way or the
one way or another. And when you actually look at
the reasons behind why markets move and how they move
and when they move, it has literally nothing to do
(26:53):
usually with what we see in the headlines or these
articles that we want to consume just to confirm our
own biases. Yeah, I would agree with that.
Speaker 2 (27:02):
It's a great tool that we have to be able
to rely on our own teams internally.
Speaker 1 (27:06):
Of course, again it's important to get a second opinion,
and this is where a fiduciary advisor can provide enormous value.
And we are not here, or a good advisor is
not here to agree with everything that you're thinking, with
your fears or hype or articles that you've read. We
are here to challenge those assumptions and protect you from
(27:28):
blind spots that you might have. Here's the all Worth
Advice confirmation. Bias isn't just a mental quirk. It's a
financial risk and the more wealth you have, the more
damage it can do if you don't identify and address it.
All right, your neighbor just bought Navidia. Should you jump in,
we'll talk about a powerful factor that could pull you
(27:49):
away from your financial plan. Next, you're listening to Simply Money,
presented by all Worth Financial on fifty five KARC, the
talk station. You're listening to Simply Money because not all
Worth Financial. I'm Bob Sponseller along with Brian James. Do
you have a financial question you'd like for us to answer.
(28:10):
There's a red button you can click while you're listening
to the show right there on the iHeart app. Simply
record your question and it'll come straight to us. All right, Brian,
Let's be honest. None of us like to feel left out,
especially when it comes to money. And when your coworker
brags about their bitcoin gains or your neighbor says they
(28:30):
doubled their portfolio in six months, it triggers an emotion
in us that we want to identify. That fear of
missing out or.
Speaker 2 (28:39):
Fomoho fomo fomo fomo fomo can cause a lot of
problems in terms of making terrible financial and otherwise decisions.
So the world of investing that you'll feel some pressure
just from you know, the people you're golfing with or
people at a cocktail party, everybody's talking about, you know,
something that you weren't aware of or didn't do, and
(29:01):
it may or may not be a good idea. But
but what your brain kicks into is have I missed
out on an opportunity? Is there something out there that
I should do, that I should be doing right now?
Speaker 1 (29:09):
And how can I fix that problem?
Speaker 2 (29:10):
Well, so, maybe there's people out there that you know,
you know, you know, somebody's got a solid retirement plan,
They got everything they need, a couple million in assets,
but they read this one article about AI and all
of a sudden, they've pivoted their you know, a good
chunk of their portfolio toward towards the big names and
AI good idea, bad idea? I say, not so much,
because they did that with their heart, with their emotions,
not with their logical brain of does this help my plan?
(29:32):
Do I need this kind of growth? Or am I
just in the casino playing with playing with poker chips?
Speaker 1 (29:36):
All right, well, let's get down to brass tacks here.
I mean, how many of your clients come to you
with this kind of stuff? Hey, I love the plan, Brian,
Everything's fine, But let's I think people get bored. Sometimes
they get bored with their plan because it works so well,
so they just create this fomo emotion again, back to
needing to do something or wanting to do something, or
(29:56):
introducing some juice to the whole situation. Do you have
clients that come to you with that and how do
you deal with it?
Speaker 2 (30:02):
Yeah, I'm going to go the other way on you, Bob.
I'm going to go with myself on that one. We
feel this too as advisors, we run into it too.
So I was actually with my family was considering an
investment and I talked to another advisor here at Allworth
who had some experience with it, and his answer was,
why do you want a.
Speaker 1 (30:17):
More complicated life? And that put me on my heels.
Speaker 2 (30:19):
Because this was a private equity type thing with some
moving parts too and all that, and I hadn't even
thought about that. I was just interested in the you know,
it's just a portion of my portfolio and so on
and so forth. But there's moving parts to any decision
like that that you make. So it is always valuable
to tea just take a breath and figure out what
the big picture is. If I'm going to throw and
let me be clear, I have absolutely no problem with
people wanting to play with the stock market.
Speaker 1 (30:40):
Go ahead, knock yourself out.
Speaker 2 (30:42):
Just don't do it with the notion that I'm going
to double my money next week and all my problems
will be solved. Do it with the idea that this
is an interesting thing and I like the story behind
this investment and I want to participate in it, and
that's fine. Just don't hang your entire financial future on yeah.
Speaker 1 (30:55):
And I'll tell you how I handle this, because if
somebody comes at me and at me and at me long,
I just tell them, hey, fine, let's split it. Let's
split your portfolio into two pieces. And I've done it
this way for over thirty years. We got your serious money.
This is the money you can't afford to lose and
it's got to take care of you for the rest
of your life. And then there's play money. And as
(31:18):
long as they're willing to talk about I'm like, hey,
have at it. Let's slice off a piece of play money.
I'm not going to manage the play money for you.
You go do it this. Go show me how good
you are. Look at all your charts day traded, you know,
buy AI stocks to your hearts, heart's desire, gold, whatever
you want to do, go get in and out of
(31:39):
all of it, get back to me in six months
and let me know how you're doing, because it can
oftentimes if people actually have to go out and do
this and have the time and the inclination and study
all the details and execute on what they think can
be very easy to do. I like to give them
six months to a year to actually go out and
do it and then come back to me and let
(32:01):
me know how it's going.
Speaker 2 (32:02):
Yeah, the serious money permits the existence of the play money,
and so you have to think about it in terms of,
you know, if I want to throw a very small
amount of you know of into something take a.
Speaker 1 (32:11):
Flyers as usually the word word that people use.
Speaker 2 (32:13):
That's perfectly fine, but it shouldn't be treated as something
that's going to change your life. If you're willing to
bet half or more of your portfolio on some crazy bet,
then I'm going to go ahead and say that you're
going to create financial problems for yourself down the road.
On the other hand, if you're willing to invest a
small amount, then even if it doubles triples, it's not
going to change your life. Anyway, So just remind yourself
of how important this really will be to you.
Speaker 1 (32:33):
You're listening to Simply Money, presented by all Worth Financial.
I'm Bob's sponsorer along with Brian James. Brian, let's get
into how that FOMO or fear of missing out emotion
starts to rear its ugly head. What causes people to
feel that? Yeah, well, what causes it is exactly that.
It's the fear. It's you know, somebody's doing something.
Speaker 2 (32:51):
Somebody has found an opportunity that I'm aware of, but
I'm not executing on. Am I missing out? That's where
it comes from. But the very first thing that happens
is it causes you to abandon in your overall plan
if you had a solid financial plan, which you mentioned
it earlier about a solid financial plan can be boring.
Let's call it call it what it is. Right, I've
built my machine. It's in good, solid, running shape. Now
what you know, think of a if you're a person
(33:13):
who's into repairing cars, the most boring thing is a
couple of cars in the garage who that are running
just fine.
Speaker 1 (33:18):
I want a project.
Speaker 2 (33:18):
I want to buy something and beat it up and
fix it and so forth that Again, that's okay with
it with a tiny amount of the portfolio, but you're
going to be you're forcing yourself to do things that
you don't have control over.
Speaker 1 (33:29):
Yeah, that's that's the key point here. The key point
I want to drive home is make sure we separate
play money from serious money and make sure that we
do not do anything that's going to violate the viability
of that serious money, meaning your long term financial plan.
And as long as people are willing to do that,
(33:49):
things tend to work out fine. And if they want
to carve off that piece and get speculative, we just
carve that out of the financial plan so you can
we can always demonstrate for our clients viability of that
financial plan factoring just the serious money piece. So take
three steps here.
Speaker 2 (34:06):
First, ask yourself, does this fit the plan that I've
already put in place or am I just reacting to
that fear of missing out. Second one, look at those
goals again. Maybe if you've built a solid financial plan,
make sure the goals still match what you want because
things change over time, what are you really trying to achieve?
And number three, talk to your advisor or a trusted
accomplice or somebody else that knows the situation and just
(34:27):
get an opinion from an arm's length away.
Speaker 1 (34:29):
Here's the all Worth advice. Chasing heat can often result
in getting burned. A good financial plan keeps you cool. Next,
the most valuable part of financial advice. You're listening to
Simply Money presented by all Worth Financial on fifty five KRC,
the talk station. You're listening to Simply Money presented by
(34:54):
all Worth Financial. I'm Bob Sponseller along with Brian James.
Here's the truth. When people think about financial advice, they
think about investment picks, stat tax strategies, state planning, and
all those things are important, but maybe the most valuable
thing your advisor should be doing behavioral coaching. Brian, Why
(35:15):
do we know this?
Speaker 2 (35:16):
Well, morning Star, which is a big investment research firm
out there, has done some research and they've they've shown
through those studies that good behavior, which means sticking with
that plan and avoiding the urge to try to time
the market, that can add one and a half percent
to two percent in returns annually. And that is that
is not magic, that's guidance. That's somebody standing in arms
length away looking at your situation. And again, this can
(35:37):
be a professional advisor, it can just be somebody who
bounce ideas off of and so forth, but just somebody
to kind of act as checks and balances to your
own decision making skills. That literally results in real dollars
because somebody can pull in the reins on you if
you're about to make about to make a bad decision.
Speaker 1 (35:51):
Yeah. I bring this up all the time, especially when
people are kind of fee avoidant, kind of wanting to
talk about the advisory fees and why do we charge
this and what do they get out of it? I
think the default provision most people are a lot of
people could come to us with as well, if I'm
going to pay an advisory fee of one one and
a half percent, what have you? My investment returns better
(36:14):
be better in excess of that every single year, or
you aren't doing anything. And all these studies have shown
people completely forget about the behavioral impact of being left
to your own devices and making these decisions on your own,
to say nothing of the tax alpha and the other
(36:34):
benefits that come with good financial planning. It's this behavioral
coaching and taking people by the hand and helping them
not make mistakes from which they can't recover. That really
add the value here at the end of the day.
Speaker 2 (36:49):
Yeah, and again there's nothing wrong with being to do
it yourself as well, But you're going to run into
these same things, same situations, even if you're making your
decisions on your own, which again.
Speaker 1 (36:58):
Is a perfectly acceptable way to go.
Speaker 2 (37:00):
I like to think of it in terms of reminding
people that, hey, when the market goes down, that is
not a failure. It's a failure if you lost a
lot more than the market, because you probably weren't invested
in a very diversified manner to begin with. However, just
viewing the normal ups and downs of a market as
up as good, down as bad as a failure. I
would compare that to you know what, if it's raining,
(37:20):
you know, if it's raining outside today, maybe we should
just break up these windows. Think of the money we'll
save on heating if we just don't have any windows
anymore because it's raining today. Therefore the sun will never
come out again. That's not the way to think about it.
A brief period of you know, bumping, his volatility or
losses is to be expected and dealt with, not to
be attempted to be avoided.
Speaker 1 (37:40):
That's the trap that a lot of people fall into. Now,
what we're trying to do here is paint a picture
of why you would want to work with a good,
solid fiduciary advisor. And this isn't meant to be a
commercial for all Worth. I mean, we do this kind
of planning, but other people do it as well. The
key is to find a good fiduciary advisor who can
tell who won't just sit there and tell tell you
(38:00):
what you want to hear, but oftentimes tell you what
you need to hear, because at the end of the game,
at the end of the day, job one here, at
least in my mind, is to make sure all of
our clients have above a ninety percent probability of meeting
all their long term financial goals and not running out
of money in spite of what may come down and
(38:21):
often will come down the road. Here's the all Worth advice.
A great advisor won't just manage your money, they'll protect
you from yourself. Thanks for listening. You've been listening to
Simply Money, presented by all Worth Financial on fifty five KRC,
the talk station
Tonight, an entire show dedicated to the one thing that
impacts your financial future more than anything else, your mind.
You're listening to Simply Money, presented by all Worth Financial.
I'm Bob Sponsler along with Brian James. Tonight, we're gonna
start with some emotional traps that can quietly sabotage your success.
(00:26):
And these emotional traps seem to impact people more and
more the larger your retirement nest egg starts to become.
And if you recognize even one of these traps in yourself,
it could save yourself hundreds of thousands of dollars. Brian,
let's get into it. Yeah, so picture this.
Speaker 2 (00:44):
You've done everything right, You've built your pile of money,
you've saved aggressively, you've done all the right things, you've
checked all the boxes, but you still have that voice
in the back of your head.
Speaker 1 (00:52):
Saying there's not enough. There's not enough, there's not enough.
Speaker 2 (00:54):
That's kind of where we all start. We start with
this notion of scarcity. I don't have enough. I don't
have enough. The comparison I use with people when we're
sitting down doing a financial plan is to say, hey,
look at this pile of money you've grown and now
that you're in your late fifties, early sixties, whatever age,
now think back if you were told at twenty five
that you'd have this much money at this age, what
would you have thought back then? And the answer is always, oh,
(01:15):
my gosh, I thought i'd be in fat city, you know,
if I never thought I'd have this much money. Yet
here we sit worrying that there's just plain not enough.
So let's talk about those psychological hurdles that come in there.
Speaker 1 (01:26):
Well in that sense of scarcity, and I'll just be
open about this. That's kind of how I was raised.
And we can get into that if you want to.
But it was always like you want money, you got
to go earn it, and there's never going to be enough.
There's never going to be enough. I guess it's that
quasi Westside Green Hills mentality, you know, having a paper
route when you're nine years old and just work and
(01:48):
work and working. That's kind of how I was raised.
And it tends to feed into this next bias that
we want to talk about, and that's action bias. And
this is the idea that when things go wrong, thing
goes wrong that will upset that giant nest egg. We
worked so hard to build. You know, say the market
drops ten percent or so in a week, our instinct
(02:08):
is we got to do something. We got to go
into protection mode. And for some of our clients, especially
those used to running a business or managing big teams,
doing nothing or in action feels like failure because, let's
face it, the thing that made us successful to a
large extent is we were the problem solving people. Right
(02:31):
if something went wrong, our job was to fix it,
fix it today, check the box, and move on. And
it doesn't work that way. We can't fix the global
economy in an afternoon. Brian.
Speaker 2 (02:42):
Yeah, psychologically, this is really the same thing as you know,
sometime when you're driving somewhere and you realize that, hey,
i can get off the highway and take the back
roads and it's going to take longer, but at least
I'll be moving rather than sitting on the highway. It
doesn't help you in the long run, It doesn't help
you at all to have taken that step. But in
financial planning actually hurts you. Like you said, so, uh,
you know, we need to need to think of this
(03:04):
in terms of, for example, and then with the market drops.
Just think of in terms of this is something I
should anticipate and I should be I should know how
to how to uh deal with it, versus taking action
to actually do something different in response to it.
Speaker 1 (03:17):
Yeah, the market doesn't respond to hustle. It doesn't care
if we try harder. And that's why sometimes the smartest
move when you peel it all back is do nothing
at all. And that's sometimes very hard for all of
us to comprehend and grasp. Let's switch into another bias
and you know, kind of flipping the script here, a
(03:38):
little bit over confidence. You know, we can get very
over confidence in our ability to handle things or manage
the market, or manage our portfolio.
Speaker 2 (03:47):
Yeah, lots of people feel like, you know what, I've
always been willing to put in that much more effort
than the next guy. And that's how I got the job,
and that's how I've done this and raised my family
and so forth.
Speaker 1 (03:56):
I put that extra effort in.
Speaker 2 (03:57):
So if I just do a little bit more internet research,
I will find that one method, that one investment management
philosophy that has all upside and no downside.
Speaker 1 (04:05):
Nobody says this, but this is nobody says it that way.
Speaker 2 (04:08):
But this is sort of in the back of all
of our minds that I can control more than the
next guy because I am willing to put more work in.
And again, that works in ninety percent of the things
you'll run across in life, but not in financial planning,
financial planning and investing.
Speaker 1 (04:20):
It's all about managing.
Speaker 2 (04:22):
It's ninety percent managing your emotions and ten percent actually
doing things with your investment.
Speaker 1 (04:27):
And this is a good time to point out there's
a there's an independent firm out there called Dowbar. Most
people have never heard of this unless you're in our industry,
but Dalbar basically just tracks investor behavior versus the markets,
and it really tracks how decisions make that are made
by self directed investors versus investors that have a good
(04:50):
financial advisor working for them. What are the results and
these these numbers, Brian, I've been in this industry over
three decades now, and these numbers have never changed. The
average investor out there underperforms the market. You know, a
benchmark apples to apples market return by several percentage points
per year, and it's one hundred percent because of their
(05:14):
behavior and the decisions they make with this overconfidence in
thinking they can outsmart the market. Two to three percent
a year is a big number, and you compound that
over twenty thirty, forty fifty years, we're talking about real money. Yeah.
Speaker 2 (05:29):
And another analogy I like to use it to help
people understand this is whether you're working with a financial advisor,
if you're doing your own thing that person, or you
are the weatherman. It is not the weather man's job
to stop the rain. It is the weatherman's job to
give you a heads up on what might be coming
and how you might want to prepare for it. If
you take that mentality with financial planning and stop trying
(05:50):
to prevent the quote unquote failure of a down market.
And a lot of people think of it that way.
When the market comes down, I did something wrong. I
must have failed somewhere. I will find that point of failure.
Never man, make that mistake again, and lo and behold
two three, four years later, it happens again because we're
focused on the wrong thing.
Speaker 1 (06:05):
So be a weather man.
Speaker 2 (06:06):
Tell people, or tell yourself how to how to deal
with it, not try to prevent it.
Speaker 1 (06:11):
Yeah. Another one that crops up often is this control
what we'll call control illusion. This is another trap again,
especially with people that are used to running things, controlling things,
whether that's a business or a family, or you're a
high level executive that manages people, you are used to
controlling the outcome. And we got to remind people all
(06:33):
the time you could control your planning, you could control
your own behavior, but you can't control inflation, the FED,
or global markets, and that illusion of control that we
all sometimes walk around with that can lead to micro
managing your investments or jumping in and out of things
and trends in the short term, and that's one of
(06:54):
the things that significantly harms returns.
Speaker 2 (06:58):
Yeah, I think one of the concrete pieces of advice
we can give people here is but by control, we
mean we're talking about controlling again your behavior. So a
way you can mechanically do that is make sure that
the dollars you might need in the short run a
year twenty maybe it's twenty four months or whatever. If
you know you've got a certain pile of cash you
need because you're spending it down or to could just
pay the bills, or you've got a big thing you
(07:18):
got to do to the house, college tuition, so on and
so forth, carve that out and make sure that the
market doesn't touch it. That makes it okay for the
stuff that you can't control to impact your longer term investment.
Speaker 1 (07:28):
You're listening to Simply Money presented by all Worth Financial.
I'm Bob sponseller along with Brian James. Let's get into
another trap that we see sometimes and that's one that
we will call status quo bias. Brian, you talked about
this with an actual case example here earlier this week,
talk about what status quo bias can do to negatively
(07:49):
impact our sense of enjoying our retirement.
Speaker 2 (07:54):
Status quo bias is the notion that it ain't broke,
so why fix it, which which most of the time
is usually good. However, when we make this big transition
into retirement, we all tend to hide behind this the
notion of scarcity, that that's where we start. There isn't enough,
isn't enough. I gotta save, I gotta save, I gotta
save and then eventually the light will eventually go on.
Maybe you've done a financial plan or you've put the
(08:14):
pieces together and you realize, you know what, there is
enough I can be done with that. The big hurdle
hiding behind the notion of scarcity is that unwillingness to
start to spend down the nest ey. It is amazing
to me. And I just had this conversation yesterday with
somebody who just had no idea what the money machine
that they had built for thirty forty years, that there's
no concept of what that could spit out for them. So,
(08:35):
for example, a million dollars can easily spit out forty
thousand dollars. You know, a year in terms of income,
two million dollars is eighty thousand. You're talking you created
somebody else with a job in your household that brings
in income. People have a hugely difficult time getting over
that hurdle of spending the nuts that I've been saving
for the winner.
Speaker 1 (08:51):
All right, and then in another emotional trap we want
to call out here and address is what we'll call
the herd mentality. It's common. We don't see it, you know,
too too often with our clients that come in, but
we all feel this. You know, you're our golf buddy
brags about, you know, the big profit they made in
Navidia stock or bitcoin, or you got a coworker that
(09:13):
moved all their money to cash one day before the
market went down four percent, still talks about it and
they want to brag about it. By the coffee machine. Yeah,
we've all been there. And then we get enough exposure
to that kind of stuff and we start questioning our
own plan. Well, wow, I'm not doing anything. My plans
just static and sitting there. I got to do something,
do something. And let's face it, the financial media does
(09:36):
not help either. There's always a new hot trend, a
scary headline. I mean, they're just constantly peppering us with
reasons to be fearful or greedy or both in the
same segment of the same show, you know, Bob.
Speaker 2 (09:50):
When I was a kid, one of the first exposures
I had to investments in stocks and things like that
would this would have been in the eighties and dating
myself a little bit here, was when my dad and
his uncle, his brothers, my uncle's and some of their
friends would all kind of pass around their latest stockbroker
who gave them a tip that worked out and it
was It took it took me a while to figure
this out, but by the time I entered the career,
I realized that there had been like three, four, five
of these guys who got hot one time and gave
(10:12):
everybody a hot stock tip, and that he was the
guy for a while or the lady or whatever, and
then it would all kind of fade away and it
was never good for more than one or two. And
there's nothing wrong with the advice these people are giving,
but it's the wrong approach to make investment decisions based
off of one good, good turnout.
Speaker 1 (10:27):
Here's the all Worth advice. Wealth amplifies your options, your choices,
but it also amplifies your mistakes if you allow emotion
to take over. What did you learn from your parents
about money? We'll look at the impact that may be
having on your behavior. Coming up next, you're listening to
Simply Money, presented by all Worth Financial on fifty five KRC,
(10:49):
the talk station. You're listening to Simply Money presented by
all Worth Financial Bob Sponsller along with Brian James Hey.
If you can't listen to Simply Money every night, subscribe
and get our daily podcast. You can listen the following
morning during your commute or at the gym or taking
(11:11):
your walk around the neighborhood. And if you think your
friends or family could use some financial advice, tell them
about us. As well search simply money right there on
the iHeart app or wherever you find your podcasts. Straight
ahead at six forty three. The hidden force that could
steer your portfolio in the wrong direction. All right, Brian.
(11:32):
We talk a lot about financial planning, tax strategies, and
investment allocation, but what if the most important part of
your financial life was something that happened decades ago at
your kitchen table growing up.
Speaker 2 (11:47):
The money script is what we call this. We've all
had some understanding of financial financial success and or failure
ingrained in us from an early age. Very rarely, it
seems to do families actually talk about this, And my
clients always frequently say that that this is not a topic.
We didn't talk about money.
Speaker 1 (12:05):
It was taboo.
Speaker 2 (12:05):
You just didn't discuss it because you didn't want to
compare yourselves to other people or you know, show the
dirty laundry into that stuff. But it's not very often
at all that somebody will say that they had a
plan from kind of the beginning. So you know, for
me personally, I remember my first exposure at all this
was sitting in front of my dad's Apple two C
at the time, and I was My job was to
program in some fancy calculator or something that he got
(12:27):
out of Money magazine, And that was the very first
time I remember paying attention to what dad was doing,
and why are you putting money?
Speaker 1 (12:33):
Why are we doing this? Why we're not outside playing baseball.
Speaker 2 (12:35):
Well, he was planning for the future, you know, more
so than I think a lot of his peers were
at the time, because he kind of could see on
the horizon that they needed to have a little better plan.
Speaker 1 (12:44):
But that's where mine came from.
Speaker 2 (12:46):
A lot of people just don't have anything in their background,
and that's how we get younger people that make messes
of themselves in early years.
Speaker 1 (12:51):
But how did that money script growing up impact how
you think about money today?
Speaker 2 (12:56):
I honestly, Bob, I came to a conclusion of where
I you know what, I don't think I want to
work for the rest of my life, so if I
may as well get into helping people figure out how
to have to work for the rest of their lives,
because by the time it's my turn, I'm going to
be really goshtarn good at.
Speaker 1 (13:11):
Sounds like you made a good choice. I did, well.
I'll share mine. I mean, mine is a story of scarcity,
and it was all well intentioned. I mean, I'm the
first of three kids in our family, you know, the
first child, so the parents are usually pretty buttoned up
and strict, and you know by the book with the
oldest child. And I vividly remember sitting at the kitchen table.
(13:31):
I'm nine years old, Brian, and my parents are looking
across the dinner table from me and saying, all right,
you're nine years old. Now you're not getting an allowance again. Ever.
You want a candy bar, you want to go to
the movies, you want to go, you know, do whatever,
you got to go earn that money. So there we go.
I'm out having two or three paper routes, and I'm
(13:52):
starting to think every day this all depends on me.
I got to make the money. I gotta work I
got and that has really stuck with me, you know,
till today, and there's always that voice in the back
of my head saying it's not enough, it's not enough,
it's not enough. The only person that's going to take
(14:12):
care of you is you, and that can lead to
some interesting behavior.
Speaker 2 (14:16):
Funny you mentioned paper route that that was also my
first experience with earning money and blowing it. So I
had a paper route up and down Jessup Road that
had three candy stores on it. There was Whistles, Deli,
Supremeut Candy, and something else. I didn't bring home a
dime from that job, so.
Speaker 1 (14:30):
You had literally spent the whole thing.
Speaker 2 (14:32):
I would go get my money and then spend it
on candy before I got back home.
Speaker 1 (14:36):
My middle son would love hanging out with you.
Speaker 2 (14:39):
I've gotten better and I'll do this an All right,
let's talk about it.
Speaker 1 (14:43):
You know a one one that these money scripts a
behavior that this can foster in us, and it's called
money avoidance. This is the belief that money is bad
or that wealthy people are greedy. Folks that have this
money avoidance tendency, they tend to feel guilty about their wealth.
They might give too much of money away as a result,
(15:03):
or underinvest because they feel guilty about having what they
consider to be too big of a nest egg actually
grow more. It could really set us back.
Speaker 2 (15:13):
Yeah, and sometimes I also see it not not so
much greedy where they feel guilty about it, but just
terrified of it. There are there are a lot of
people out there who will bring all their life savings
to us to do a plan and invest, and they
dump it on our doorsteps so that we can manage it,
and then we can't get a hold of them sometimes
to review the plan. It's interesting to me that people
just want to avoid the topic.
Speaker 1 (15:33):
Yeah. Another one that we need to nail down here
is what we'll call money worship, in this belief that
more money will solve all of our problems. And we
see this in folks who keep chasing the next dollar
even when they don't need it. And we kind of
talked about this already this morning, but this afternoon, but
(15:53):
we know people with millions and investable assets who still
feel broke. They feel bad about taking a vacation, They
feel like, you know, if I spend any of this money,
that means I'm gonna run out, and that's not a
good thing either.
Speaker 2 (16:08):
Yeah, and I see this a lot of times where people,
again not necessarily from greed, for whatever reason they get
to they're fixated on the dollar amount. You know, I
had somebody the other day who told me that I'm
going to retire when I hit two million dollars. And
my answer to that is, how did you come to
that exact dollar figure? Why is it that you know
you need two million dollars if they've done a plan
and they've figured out, here's my cash flow that'll exist,
(16:29):
here's what I need to supplement, and the answer is
two million. That's one thing, but for a lot of
people it's simply well, I'm kind of in the ballpark
of that anyway. So I just want to squeeze these
last few years of workout so I can get over
the hump. And a lot of times people end up
sacrificing unnecessarily. Heaven forbid. You do all those things, you
save a little more money, and the market decides to
take a chunk away. Are you really going to work
an extra two three four years put off retirement because
(16:51):
twenty two happened. A lot of people had to make
that decision again because they're worshiping that dollar figure. I
want to see more zeros and commas with my name
on it.
Speaker 1 (16:59):
You're listening to Simply Money, presented by all Worth Financial.
I'm Bob sponseller along with Brian James. Here's another one, Brian,
and we run into this one off in money status
and I think a lot of times this has passed
down to us from parents and grandparents, or peers, And
it's just the idea that our self worth or that
net worth number on that financial plan, the net worth
(17:22):
equates with our self worth. It's our whole identity. And
you see this with people who overspend to quote unquote
look successful to their neighbors and peers. Hey, the guy
parked next to me at the country club has this
kind of car. My car works just fine, it's super nice,
but boy, I gotta have the same car as this
guy next to me. Kind of the whole keep up
(17:43):
with the Joneses mentality, and that can result sometimes in
lifestyle creep and you end up spending more money because
you think you can not because it aligns with your
true financial goals.
Speaker 2 (17:55):
Yeah, and I think a lot of times people run
into I want to do these things. I feel like
I've got the money, my cash flow supports it. You know,
maybe I've got to I've got a strong salary and
a good cash flow coming in, but I haven't sat
down to figure just because I can afford something. Now,
what impact does that have in the future. This actually
works in the opposite direction too. People sometimes have absolutely
no idea what they can get away with, so they
(18:17):
do nothing. The whole point of this is as always
figure out what it is that you need to do
and what resources are required to do it. If just
because you can afford something this year doesn't mean you
should because you may be sacrificing something you haven't yet
thought of in the future.
Speaker 1 (18:30):
Yeah, sometimes people don't actually use this word, but the
sentiment comes across. It's almost like, well, I deserve to
have this because I've worked hard. Well, there's no such
thing as you deserve or it is what it is.
You've got to have a financial plan and follow it. Now.
If your plan suggests that you can do and have
(18:51):
some nice things that are really important to you, then
by all means, let's do it. But not often but sometimes,
And I'm sure you've gotten these calls or emails too.
I think sometimes clients will go out and buy the
RV or buy you know, book the three cruises and
then tell us after the fact because they knew if
(19:12):
they asked us in advance whether this is gonna work,
they knew the answer would be no. So they'll just
tell us after the fact and ask for forgiveness rather
than permissions.
Speaker 2 (19:22):
With you Oh yeah, and the answer, well, this's your
plan it's not my money. You don't need permission to
spend your own money. I'm just telling you what the
outcome might be.
Speaker 1 (19:28):
Here's the all Worth advice. Your biggest financial challenge might
not be math. It might be a childhood story that
you've never questioned or really gotten your emotional arms around. Next,
why reinforcing what you already believe could wreck your financial future.
You're listening to Simply Money presented by all Worth Financial
(19:48):
on fifty five KRC, the talk station. You know you're
listening to Simply Money presented by all Worth Financial. So well.
I'm Bob Sponseller along with Brian James. One of the
most dangerous things in investing isn't inflation, taxes, or even
market downturns. It's your own brain, specifically the way it
(20:13):
filters information to match what you already believe. It's known
in the behavioral finance world as confirmation bias, and boy,
this is a big one that I want to make
sure we dive deep into and tackle tonight.
Speaker 2 (20:26):
Brian, Bob, tell me if you've run across anybody like
this lately, they're absolutely convinced that the market is coming down.
It's at an all time high, and it just can't
go any higher. It's coming down. They got this information
from from articles online. Every article they read is worse
than the last one they read, and it's just kind
of backing up on them.
Speaker 1 (20:43):
What they don't realize, however, though, is Google.
Speaker 2 (20:45):
And social media is doing this on purpose because all
they care about, all those companies care about, is making
sure your eyes stay glued to that screen. So if
this guy's interested in bad news about the market, then
absolutely we're going to serve it up on a platterform
because that'll keep him here looking at these ads. And
that's how we all make money, we being Google and
social media and so forth. That is confirmation bias. They
(21:06):
know that you are seeking out opinions and you'll be
happy to read more things that you already agree with,
so they're going to shove.
Speaker 1 (21:10):
It in your face. Well, and this this is one
of the benefits. You know, you and I have both
been doing this a long time, so we've got many clients.
And I don't know about you, Brian, but you know
I'm going to talk about politics here for a minute,
because depending on who the occupant is in the White
House and who's controlling Congress, and all that I can
almost predict, you know, from each side of the aisle,
(21:34):
the four or five clients that are going to be
constantly in my ear telling me how and why the
entire global economy is going to collapse because so and
so is in the White House and they're purposely ruining
the country. Do you have do you have those little
handful of clients that you know come out of the
woodwork depending on who's occupying the White House at any
(21:56):
given time.
Speaker 2 (21:57):
Okay, I'm I'm gonna hit you with the phrase here Bob,
I rehearsed on the way and know we're going to
talk about this political passion has no place in prudent planning.
Speaker 1 (22:05):
Wow, that's a lot of peace. I'm not even going
to try to repeat that. Thank you, Thank you, Iverharst,
Like I said, anyway, No, yeah.
Speaker 2 (22:11):
Clients, all the time, we all and it's not you know,
there's nothing wrong with this thought process. We're simply looking
for that mechanical button or the lever that we can
say if this, then that, if so and so is
in office and in control and I don't like them,
then that means I should do this black and white
process meaning liquid at everything or go to gold or whatever.
We have this all the time, but in reality, the
history shows that the market could absolutely care less who's
(22:33):
in office. It goes up no matter who's in office,
because that's how the economy works. There are always more
and more people buying more and more things. Again, I'm
talking about the longer term, not the short term swings,
which we can't control or predict. But the economy will
function underneath presidents and leadership of any stripe. And there
is ample history going back through all the way back
through the Great Depression and including the most recent administrations
(22:56):
that it just doesn't matter who's in charge. That causes
short term swings. Heaven knows, we've seen enough of those.
But in the longer term, generally speaking, things go up.
Just don't let the short term whack the dog.
Speaker 1 (23:07):
Yeah, I've already made kind of the cardinal rule mistake
here mentioning politics. So I'm going to use another one
here at the risk of angering even more and more people,
And that's talking about the importance of having both spouses
in a room when we do planning and we talk
about risk tolerance and all that. Because Brian, I don't
know about you, I find almost always the people that
(23:29):
are coming to me with this deep embedded confirmation bias.
Almost one hundred percent of the time, it's men. It's men.
Men in their egos are our egos. We want to
be right, we want to predict the future, we want
to protect our family, all that stuff, and we come
in thinking we already know how it's all going to work,
(23:50):
depending on who's in the White House or what have you,
And we start consuming media sources to just confirm that bias,
where I find that the women are way more level headed,
even keeled, and that can oftentimes balance out a good
financial planning review. By making sure both spouses are in
(24:12):
the room, we're hearing from both spouses and we're kicking
around this confirmation bias, you know, identifying the elephant in
the room and hopefully hunting it down and killing it
so we can move on with more productive conversations.
Speaker 2 (24:26):
If this then that, if this happens, then I know
I'm going to do that that way, I'm forcing it
to be predictable, and I'm forcing myself to pretend and
I'm going to put that in caps, pretend that I
have control over this, because that's that's how as a
man like you said. As a man, I want to
I want to fix things. I want to tackle it,
take it on, take the bull by the horns and
fix the problem. But no, it doesn't work that way.
As matter of fact, that assumption can get us into
(24:48):
a lot of trouble. That confirmation bias comes back to
haunt us in terms of forcing us to think that
we have way more control than we do.
Speaker 1 (24:54):
You're listening to Simply Money presented by all Worth Financial.
I'm Bob sponseller along with Brian James and Brian. It seems,
at least to me, the more money people have, the
more costly a mistake can be if we allow this
confirmation bias to really take hold on major decisions. Do
you find the same thing? Yeah? Absolutely.
Speaker 2 (25:15):
And the thing to remember too, a lot of people
when they've built a good, solid nest egg, you know,
a market to client of one percent can look like
a massive amount of money. If I have ten thousand
dollars and I lose one percent, well I just lost
one hundred dollars. That's not obviously a huge amount of money.
But if I have five million and the market takes
one percent away, that's fifty thousand dollars, but it's the
same one percent, and it's affected by the same streams
(25:37):
of the market no matter how big the investment is.
So the idea there is pay attention to the percent,
it's not the dollar amount. I just had the conversation
and not the other day with a client who's really
worked up over a one percent loss.
Speaker 1 (25:49):
Yeah, I mean, people don't like looking for dissenting views
or anything that goes against that bias. And I think
to talk about you know, we've talked about what not
to do. Let's spend a little time talking about to do.
And I think you got to get different ideas from
different people. People that are intelligent, people that are well read,
people that can check their emotions at the door, and
(26:10):
that helps, you know, kind of filter out some of
that strong bias. And this is where I want to
give kudos to our chief investment officer here at all
Worth and Andy Stout, because he is wonderful at this.
And every so often, I don't know, Brian, every three
or four months, if a headline comes across or something
happens where I'm starting to get a little worked up.
It's always I enjoy having a little dose of reality
(26:32):
fed to me by andy, because he'll pull out the
inflation scorecard, he'll pull out all the data that's actually
is making the markets move in one way or the
one way or another. And when you actually look at
the reasons behind why markets move and how they move
and when they move, it has literally nothing to do
(26:53):
usually with what we see in the headlines or these
articles that we want to consume just to confirm our
own biases. Yeah, I would agree with that.
Speaker 2 (27:02):
It's a great tool that we have to be able
to rely on our own teams internally.
Speaker 1 (27:06):
Of course, again it's important to get a second opinion,
and this is where a fiduciary advisor can provide enormous value.
And we are not here, or a good advisor is
not here to agree with everything that you're thinking, with
your fears or hype or articles that you've read. We
are here to challenge those assumptions and protect you from
(27:28):
blind spots that you might have. Here's the all Worth
Advice confirmation. Bias isn't just a mental quirk. It's a
financial risk and the more wealth you have, the more
damage it can do if you don't identify and address it.
All right, your neighbor just bought Navidia. Should you jump in,
we'll talk about a powerful factor that could pull you
(27:49):
away from your financial plan. Next, you're listening to Simply Money,
presented by all Worth Financial on fifty five KARC, the
talk station. You're listening to Simply Money because not all
Worth Financial. I'm Bob Sponseller along with Brian James. Do
you have a financial question you'd like for us to answer.
(28:10):
There's a red button you can click while you're listening
to the show right there on the iHeart app. Simply
record your question and it'll come straight to us. All right, Brian,
Let's be honest. None of us like to feel left out,
especially when it comes to money. And when your coworker
brags about their bitcoin gains or your neighbor says they
(28:30):
doubled their portfolio in six months, it triggers an emotion
in us that we want to identify. That fear of
missing out or.
Speaker 2 (28:39):
Fomoho fomo fomo fomo fomo can cause a lot of
problems in terms of making terrible financial and otherwise decisions.
So the world of investing that you'll feel some pressure
just from you know, the people you're golfing with or
people at a cocktail party, everybody's talking about, you know,
something that you weren't aware of or didn't do, and
(29:01):
it may or may not be a good idea. But
but what your brain kicks into is have I missed
out on an opportunity? Is there something out there that
I should do, that I should be doing right now?
Speaker 1 (29:09):
And how can I fix that problem?
Speaker 2 (29:10):
Well, so, maybe there's people out there that you know,
you know, you know, somebody's got a solid retirement plan,
They got everything they need, a couple million in assets,
but they read this one article about AI and all
of a sudden, they've pivoted their you know, a good
chunk of their portfolio toward towards the big names and
AI good idea, bad idea? I say, not so much,
because they did that with their heart, with their emotions,
not with their logical brain of does this help my plan?
(29:32):
Do I need this kind of growth? Or am I
just in the casino playing with playing with poker chips?
Speaker 1 (29:36):
All right, well, let's get down to brass tacks here.
I mean, how many of your clients come to you
with this kind of stuff? Hey, I love the plan, Brian,
Everything's fine, But let's I think people get bored. Sometimes
they get bored with their plan because it works so well,
so they just create this fomo emotion again, back to
needing to do something or wanting to do something, or
(29:56):
introducing some juice to the whole situation. Do you have
clients that come to you with that and how do
you deal with it?
Speaker 2 (30:02):
Yeah, I'm going to go the other way on you, Bob.
I'm going to go with myself on that one. We
feel this too as advisors, we run into it too.
So I was actually with my family was considering an
investment and I talked to another advisor here at Allworth
who had some experience with it, and his answer was,
why do you want a.
Speaker 1 (30:17):
More complicated life? And that put me on my heels.
Speaker 2 (30:19):
Because this was a private equity type thing with some
moving parts too and all that, and I hadn't even
thought about that. I was just interested in the you know,
it's just a portion of my portfolio and so on
and so forth. But there's moving parts to any decision
like that that you make. So it is always valuable
to tea just take a breath and figure out what
the big picture is. If I'm going to throw and
let me be clear, I have absolutely no problem with
people wanting to play with the stock market.
Speaker 1 (30:40):
Go ahead, knock yourself out.
Speaker 2 (30:42):
Just don't do it with the notion that I'm going
to double my money next week and all my problems
will be solved. Do it with the idea that this
is an interesting thing and I like the story behind
this investment and I want to participate in it, and
that's fine. Just don't hang your entire financial future on yeah.
Speaker 1 (30:55):
And I'll tell you how I handle this, because if
somebody comes at me and at me and at me long,
I just tell them, hey, fine, let's split it. Let's
split your portfolio into two pieces. And I've done it
this way for over thirty years. We got your serious money.
This is the money you can't afford to lose and
it's got to take care of you for the rest
of your life. And then there's play money. And as
(31:18):
long as they're willing to talk about I'm like, hey,
have at it. Let's slice off a piece of play money.
I'm not going to manage the play money for you.
You go do it this. Go show me how good
you are. Look at all your charts day traded, you know,
buy AI stocks to your hearts, heart's desire, gold, whatever
you want to do, go get in and out of
(31:39):
all of it, get back to me in six months
and let me know how you're doing, because it can
oftentimes if people actually have to go out and do
this and have the time and the inclination and study
all the details and execute on what they think can
be very easy to do. I like to give them
six months to a year to actually go out and
do it and then come back to me and let
(32:01):
me know how it's going.
Speaker 2 (32:02):
Yeah, the serious money permits the existence of the play money,
and so you have to think about it in terms of,
you know, if I want to throw a very small
amount of you know of into something take a.
Speaker 1 (32:11):
Flyers as usually the word word that people use.
Speaker 2 (32:13):
That's perfectly fine, but it shouldn't be treated as something
that's going to change your life. If you're willing to
bet half or more of your portfolio on some crazy bet,
then I'm going to go ahead and say that you're
going to create financial problems for yourself down the road.
On the other hand, if you're willing to invest a
small amount, then even if it doubles triples, it's not
going to change your life. Anyway, So just remind yourself
of how important this really will be to you.
Speaker 1 (32:33):
You're listening to Simply Money, presented by all Worth Financial.
I'm Bob's sponsorer along with Brian James. Brian, let's get
into how that FOMO or fear of missing out emotion
starts to rear its ugly head. What causes people to
feel that? Yeah, well, what causes it is exactly that.
It's the fear. It's you know, somebody's doing something.
Speaker 2 (32:51):
Somebody has found an opportunity that I'm aware of, but
I'm not executing on. Am I missing out? That's where
it comes from. But the very first thing that happens
is it causes you to abandon in your overall plan
if you had a solid financial plan, which you mentioned
it earlier about a solid financial plan can be boring.
Let's call it call it what it is. Right, I've
built my machine. It's in good, solid, running shape. Now
what you know, think of a if you're a person
(33:13):
who's into repairing cars, the most boring thing is a
couple of cars in the garage who that are running
just fine.
Speaker 1 (33:18):
I want a project.
Speaker 2 (33:18):
I want to buy something and beat it up and
fix it and so forth that Again, that's okay with
it with a tiny amount of the portfolio, but you're
going to be you're forcing yourself to do things that
you don't have control over.
Speaker 1 (33:29):
Yeah, that's that's the key point here. The key point
I want to drive home is make sure we separate
play money from serious money and make sure that we
do not do anything that's going to violate the viability
of that serious money, meaning your long term financial plan.
And as long as people are willing to do that,
(33:49):
things tend to work out fine. And if they want
to carve off that piece and get speculative, we just
carve that out of the financial plan so you can
we can always demonstrate for our clients viability of that
financial plan factoring just the serious money piece. So take
three steps here.
Speaker 2 (34:06):
First, ask yourself, does this fit the plan that I've
already put in place or am I just reacting to
that fear of missing out. Second one, look at those
goals again. Maybe if you've built a solid financial plan,
make sure the goals still match what you want because
things change over time, what are you really trying to achieve?
And number three, talk to your advisor or a trusted
accomplice or somebody else that knows the situation and just
(34:27):
get an opinion from an arm's length away.
Speaker 1 (34:29):
Here's the all Worth advice. Chasing heat can often result
in getting burned. A good financial plan keeps you cool. Next,
the most valuable part of financial advice. You're listening to
Simply Money presented by all Worth Financial on fifty five KRC,
the talk station. You're listening to Simply Money presented by
(34:54):
all Worth Financial. I'm Bob Sponseller along with Brian James.
Here's the truth. When people think about financial advice, they
think about investment picks, stat tax strategies, state planning, and
all those things are important, but maybe the most valuable
thing your advisor should be doing behavioral coaching. Brian, Why
(35:15):
do we know this?
Speaker 2 (35:16):
Well, morning Star, which is a big investment research firm
out there, has done some research and they've they've shown
through those studies that good behavior, which means sticking with
that plan and avoiding the urge to try to time
the market, that can add one and a half percent
to two percent in returns annually. And that is that
is not magic, that's guidance. That's somebody standing in arms
length away looking at your situation. And again, this can
(35:37):
be a professional advisor, it can just be somebody who
bounce ideas off of and so forth, but just somebody
to kind of act as checks and balances to your
own decision making skills. That literally results in real dollars
because somebody can pull in the reins on you if
you're about to make about to make a bad decision.
Speaker 1 (35:51):
Yeah. I bring this up all the time, especially when
people are kind of fee avoidant, kind of wanting to
talk about the advisory fees and why do we charge
this and what do they get out of it? I
think the default provision most people are a lot of
people could come to us with as well, if I'm
going to pay an advisory fee of one one and
a half percent, what have you? My investment returns better
(36:14):
be better in excess of that every single year, or
you aren't doing anything. And all these studies have shown
people completely forget about the behavioral impact of being left
to your own devices and making these decisions on your own,
to say nothing of the tax alpha and the other
(36:34):
benefits that come with good financial planning. It's this behavioral
coaching and taking people by the hand and helping them
not make mistakes from which they can't recover. That really
add the value here at the end of the day.
Speaker 2 (36:49):
Yeah, and again there's nothing wrong with being to do
it yourself as well, But you're going to run into
these same things, same situations, even if you're making your
decisions on your own, which again.
Speaker 1 (36:58):
Is a perfectly acceptable way to go.
Speaker 2 (37:00):
I like to think of it in terms of reminding
people that, hey, when the market goes down, that is
not a failure. It's a failure if you lost a
lot more than the market, because you probably weren't invested
in a very diversified manner to begin with. However, just
viewing the normal ups and downs of a market as
up as good, down as bad as a failure. I
would compare that to you know what, if it's raining,
(37:20):
you know, if it's raining outside today, maybe we should
just break up these windows. Think of the money we'll
save on heating if we just don't have any windows
anymore because it's raining today. Therefore the sun will never
come out again. That's not the way to think about it.
A brief period of you know, bumping, his volatility or
losses is to be expected and dealt with, not to
be attempted to be avoided.
Speaker 1 (37:40):
That's the trap that a lot of people fall into. Now,
what we're trying to do here is paint a picture
of why you would want to work with a good,
solid fiduciary advisor. And this isn't meant to be a
commercial for all Worth. I mean, we do this kind
of planning, but other people do it as well. The
key is to find a good fiduciary advisor who can
tell who won't just sit there and tell tell you
(38:00):
what you want to hear, but oftentimes tell you what
you need to hear, because at the end of the game,
at the end of the day, job one here, at
least in my mind, is to make sure all of
our clients have above a ninety percent probability of meeting
all their long term financial goals and not running out
of money in spite of what may come down and
(38:21):
often will come down the road. Here's the all Worth advice.
A great advisor won't just manage your money, they'll protect
you from yourself. Thanks for listening. You've been listening to
Simply Money, presented by all Worth Financial on fifty five KRC,
the talk station
Simply Money News
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