This Financial Planner’s Playbook
This Financial Planner’s Playbook
The sky is falling, markets are down, inflation is up, and these are the times our clients generally need us the most. Now, I and my colleagues, at the end of the day are in the advice business. We dole out advice in just about every financial circumstance imaginable. In many cases, we go to our years of experience and fundamentals. As professional financial planners, one of the beauties of our vantage point is we can go to the well of many others who are going through similar circumstances to draw observations and advice.
Let’s fast forward for a moment to present-day market sell-offs. I thought it would be helpful to hear from the president of a sizeable advisory firm as to exactly what I am doing personally with my finances during these exact times. I like to abide by the mantra do as I do, not just as I say.
In the spirit of my 1st place and (as of writing this undefeated) Philadelphia Eagles, here is Andrew Rosen’s playbook during tough market conditions.
Financial Playbook
- Do not panic- The first thing I do in any difficult situation is not to panic. An air force pilot friend of mine said the first thing they teach you in flight school when things go wrong in the air is to literally sit on your hands for 30-60 seconds. Sounds crazy right? If we go with our knee-jerk reaction you are likely to panic and overcorrect. I think the same thing holds true with finances. We get very emotional and when we panic, we constantly make decisions our rational brain knows are wrong. So, lesson one – take deep breaths and don’t panic, I remind myself of this all the time.
- Don’t look- Now this probably is not taught in flight school, but in finances, I’ll advocate it all day every day. During tough times there are 2 types of people. The people who look constantly, and those that rather ignore things. In my experience, the less you look at things the less you dwell over them and the less they infiltrate your thoughts. So, although I know what markets are doing, I personally haven’t looked at my own accounts in months. I know they are down, and I know they’ll rebound so why put myself through any angst I don’t need to?
- Think logically- This kind of coincides with the previous points, but it is worth honing in on this concept. I find during every market downturn, you have two options. First, you can think irrationally. You can play all sorts of doomsday scenarios about how this time is different. Naturally, this leads to panic and generally poor decisions. Second, you can go back to fundamentals and logic. For instance, have the markets ever permanently gone down? Nope! Have they rebounded 100% of the time and constantly hit all-time highs? Yup! Can I outsmart the markets and time them? Not I say the fox! Thus, my playbook is straightforward, I go back to the basics and remind myself this too shall pass.
- Buy Buy Buy- Now I say this not because I am a huge Backstreet Boys fan. Rather, this financial planner has taken every liberty possible to continually “buy the dip.” I buy into the markets religiously monthly. When I have a three-pay month, guess what I do? You got it, buy buy buy. But Andrew, what if the markets go lower? So what, I know what I know, which is anything I am buying when the markets are down is at a huge discount, and boy do I love discounts!
- Build up emergency funds- I don’t know what the next 3-9 months will bring and neither do you. Now I always tend to leave a comfortable amount in my liquid savings accounts, but during these times of uncertainty, I really calibrate things a little more closely. I’ve literally written down all my big expenses for the rest of the year, and even into next year. I have a number I want to leave in cash in case things worsen before they get better.
- Lessen debt paydown- One of the strategies I implement during these trying times is to adjust my debt paydown. Now, to be clear the only debt I have is mortgage debt. In normal times I’ll throw a few extra dollars at my mortgage to pay it down a little quicker. These days I’d rather build up cash and/or invest more dollars than overpay 3% fixed debt. Now of course if I had ramped credit card debt I’d think differently, but if all you have is a super low responsible debt I see no reason to put a lot of resources there.
- Optimize my cash- Now this is not always relevant in every market sell-off, but these days it is. I am currently getting over 2% on my cash in a high-yield savings account. During times of uncertainty, I really like to maximize cash sitting earning 2% in savings, while minimizing what I have wasting away in my day-to-day checking account.
- Be mindful of large expenses- Generally, I try to be a year ahead of large expenses. When I get my bonus, I calculate all foreseeable larger expenditures for the year ahead. With only 3 months left in the year (holy moly) I am already starting to see what those expenses are going to be next year. I’ve started to categorize expenses into two categories. First, is expenses I still plan to proceed with, like vacations or kids camp next summer. The other category is other expenses I was planning on doing, but now taking a hard look at. These are things like small home projects that are more aesthetic that I know I can wait on.
- Continue living my life- There is plenty of stress going around for all of us. Imagine our shoes as we are reminded daily about what is going on, how people are feeling, and quite frankly coaching people through difficult times. That said I take a page from Finding Nemo and simply keep swimming. I know I have a solid financial plan, and plenty of emergency funding, and this too shall pass. Due to all this, I make a conscious choice to continue living my life and enjoying it. I’m reminded constantly about all the tragedies in this world, and this helps shape my mental outlook. There are things I can control and can’t. I can’t control the markets and economy (although if I could I would), but I can control my choice to continue living my life to the fullest. I have a lot of blessings in my life to be thankful for. That said I don’t plan to let every time there is a difficult market condition ruin my life otherwise 25% of the time, I’d be miserable.
- When in doubt rerun a plan- The final piece of my playbook I wanted to share with you today is to go back to fundamentals. These are great times to rerun a financial plan to see that you are still on track, or if things need to be course corrected. Kind of like going to the doctor when you are worried. They’ll run you through all sorts of tests and give you an output that says either you are still fine, you need to adjust some things, or yes, it is time to be worried. I can tell you as someone who runs tons of financial plans most people, we run them through, even in market downturns are still sitting pretty.
Ready set hut
There are ten things I 100% am doing personally with my own finances. I’m taking every lesson I’ve learned, studied, observed, taught myself, been taught, and applied it not only to the advice I give others but also to my own personal financial situation. Hope it can shed some light on how I view things and welcome any questions or feedback.
Oh, and if all else fails tune in on Sunday and you’ll get to enjoy my Philadelphia Eagles… E-A-G-L-E-S!
Stay wealthy, healthy, and happy.
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