What's keeping your financial planner up at night.

“I have been through some horrible things in my life, some of which actually happened.”

 ~Mark Twain

Amid a particularly bad day on the stock market a couple of weeks ago, I got an email from one of my longest-standing clients with the subject “We are fine - read at your leisure.”  Inside he told me the school where he teaches had been closed due to the COVID-19 outbreak, but how great it had been to take advantage of the time by playing board games and watching movies with his wife.  He gave me some inspirational quotes and said he wanted to make sure that between all of the reassuring of clients that I’ve been doing, I also take time to be with my family and take care of myself.   

He went on to tell me he wasn’t stressed about the stock market, because even in the worst-case scenario they could cut their lifestyle to get by.  As I read his message, I couldn’t help but be amazed by his optimistic tone, then the closing paragraph explained it... He reminded me of the time ten years ago when he was diagnosed with cancer and told he had only two months to live, but look how that turned out.   

Talk about perspective.  

If you haven’t seen Breaking Bad, the main character Walter White is also a teacher with terminal cancer (who, unlike my client, starts cooking meth, but that's beside the point) and in one of my all-time favorite scenes he says:

“I have spent my whole life scared.  Frightened of things that could happen, might happen, might not happen.  Fifty years I spent like that. Finding myself awake at three in the morning.  But you know what? Ever since my diagnosis, I sleep just fine. I came to realize it’s fear that’s the worst of it.  That’s the real enemy.”

Ironically, a few weeks ago I started waking up about 3 am every morning doing more than my fair share of worrying.  What if my 80-year-old parents get sick? What if this market crash really is different and doesn’t recover? Will the food in our pantry last for more than two weeks?  Is our emergency fund big enough? Unfortunately, this is how our brains are wired. They try to predict every possible worst-case scenario and how to avoid them to increase our odds of survival.  While this was helpful keeping our ancestors from getting trampled by a wooly mammoth, our operating system hasn’t updated fast enough to process the likes of Twitter and cable news.  

If I had paid attention in high school anatomy class (I didn’t), I would have remembered that the brain is divided into a few sections, each with a different job.  While the big sections of your brain are dedicated to doing all sorts of complicated things, there is a much smaller portion located just above our spine called the limbic system in charge of our fight or flight response.  This part of the brain is so basic that scientists also call it the “reptilian” brain because it has the decision making abilities of a lizard. So whenever we detect an existential threat, like a saber-toothed tiger or a pandemic map of Italy on CNN, our reptilian brain takes over. Unfortunately, our brains are actually quite bad at calculating exactly how real threats are, just like the classic example of our fear of flying when around a thousand people die a year in planes, while over a million a year die in cars.    

This same wiring that gives people the urge to buy a truckload of toilet paper is also our worst enemy when it comes to investing.  When your account balances start dropping during market turmoil, the lizard in the back of your head starts screaming “don’t just sit there, run!!!”, the exact opposite of what you should be doing.  Unfortunately, many people who listened to that voice and sold in 2008 locked in their losses. By the time the fear subsided, the market had gone back up without them. The problem is, it’s hard to rationalize with a lizard, no matter how convincing and logical your arguments may be.  

As my inner reptile took over a few weeks ago, my wife started noticing I wasn’t sleeping and I realized I had better figure something out to keep it in check.  I’m usually not one to stress, so I started doing a little research on what I could do to normalize things a bit. Everything I found seemed so basic that it didn’t even seem worthwhile, but I was willing to give it a shot.  I decided to try two things: reducing my news intake and going for a thirty-minute walk every day.  

When the recent madness in the world started unfolding, my wife and I started making a habit of watching the nightly news every evening, and I also found myself checking Google’s news feed and Twitter every hour or two throughout the day.  So I started limiting myself to reading the news once each morning, mostly relying on the Wall Street Journal’s “What’s News” bullet-point summary, and some relevant articles to keep me up to speed on issues that may affect clients.  

For my second resolution, each evening after work I loaded up our one-year-old son in his stroller and walked through our neighborhood.  Going for a walk always seemed inefficient; like something for old people to do with too much time on their hands. Why not go to the gym to get in twice the work out in half the time?  But very quickly I began to see the wisdom in it. As my son ecstatically points out each bird, deer, horse, dog, and animal along the way, it’s pretty hard not to live in the moment.   

I quickly realized that forcing me to live a little more in the moment is exactly how these new habits, as silly as they seemed at first, allowed me to outsmart my inner lizard.  And the difference was night and day. Within just a few days I was sleeping through the night, and even my wife commented how quickly my stress levels had gone down.  

No doubt there are people going through horrible things in the world right now, but in my case, Walter White hit the nail on the head... nothing bad had actually happened, it was the fear of what might happen causing my sleepless nights.