Episode 9 Stability Planning Part 4: Know Thyself
Welcome to the return on lifestyle podcast with Ray discount, though from Pravada wealth management in this podcast. We help you overcome financial worries and make sense of planning investing insurance and banking. Join us for this journey as Ray draws from his expertise and interviews brilliant minds to help you enjoy life. The best is yet to come. Hello and welcome to return on lifestyle with Brady skull. So from Pravada wealth management today, we are covering part four of a four part series about stability, planning, and the title is know thyself. Good morning Ray. How're you doing well, sir? Thanks for asking. I always strive to know myself. Right. I mean, that's that's a very philosophical approach today's podcast. What does know thyself mean to you Ray, very very deep. Yeah. Yes. So the fourth installment, you know on this a call knowing yourself. Let's take a look here where we've been I we talked about the four factors. And that's really a way of analyzing what you own a way of understanding how it works. Then we talked about rules based investing which is essentially investing. Like you drive when it's terrible weather outside pullover when the weather's great. Hey, just don't get a speeding ticket. And then our last installment Mermoz reason installment on stability planning was income targeting. Which really is we're. Reverse engineering, you're investing. So that you can create the income you need based upon the different levels of what you need, and we discuss a bit about risk premium and risk pooling, and we can go into that a little bit more in future podcasts about more of the mechanics of what happens. But the reason the fourth insight of the fourth installment of stability planning is no thyself is because we think that finance and retirement planning and investing is all about what's out there. It's all about numbers and definitions and markets and tax laws and news events, but you know, what? The majority of your financial success is based upon your personal behavior. What you can control in your behavior is based on. I believe two things in that is your knowledge in your personality. Well, we're going to work on your knowledge as with this podcast about it's about, you know, understanding those first three top. Fix our investment knowledge. And I try to look at it from a new angle if you will make it interesting and put everything into a different paradigm. But the second thing about your behavior is to understand and to know your own personal personality, your who you are in your personal story. And a lot of people don't know that there's a book by guy Daniel, Goldman was his name GO L E M A N. It was called emotional intelligence, and they did a study. And I don't know about you, Eric, but I really love cookie, you know, use carbohydrates in general donuts cookies. And so they did this study. We're who's really kinda struck me in that is that they took a kid who is in kindergarten. We'll say second kindergarten and second grade young and unite before we started the podcast we're talking about you got a grandchild almost four right three or four years old. I've got a daughter five years old and she's going to be going into kindergarten soon. She's in the pre K thing right now. And so what they did was they took kids young kids. And they said, okay, listen kid. You can have this cookie. Now that we're sitting right here in front of you. But if you can sit here and look at that cookie for twenty-five, thirty minutes. I can't remember exact amount of time if you can wait and not eat it. We'll give you two cookies. So the question is, can you defer, can you delay gratification? And what they found was is that the kids who were able to delay or deferred that gratification that had that self control in a follow there. Life path ended up having a higher level of emotional intelligence and emotional intelligence the base of the book is that is what's leading to your success. And so that's what I talk to you about today is knowing yourself is emotional intelligence and knowing your own financial behaviors your financial personality in your own financial story. Really really well. And I love that study. I've talked about that a little bit before. But let's face it. This is a it's a cookie and it's twenty minutes, thirty minutes. Whatever the timeframe is. But when you're talking about your financial future, you're not talking about waiting twenty or thirty minutes, you're talking, you know, results are going to be ten twenty thirty forty years down the road. So it it sounds really good. But practically how do you do it on this level? Great question. You're right. You're right. That is the biggest issue is that the decisions were making now kind of don't bear much fruit at all much like staring at a cookie for twenty. Minutes. Compounding takes time market volatility. You know, you put your money into whatever you're investing in it goes up ago's down. And you're like, well, I'm back where I started twelve months later. And that's the story often times of a lot of folks in your right? There is a long time horizon. Oftentimes, practically the way we're able to do that. There's really three things I'd recommend in the first one. And this is really kind of key is to hire a fiduciary in. So the word fiduciary gets bandied about it seemed to be a hot topic very in vogue. But a fiduciary what it means is someone who is required to put your needs in front of their own. And the best way to understand. You know, what a fiduciary is perhaps it's to tell you what a fiduciary is. And what if ado -ciary isn't when you go to your doctor, your doctor has taken on a Hippocratic oath to do. No harm. Their job is to do. What's best for you? They're not pill sales people, you know. They're not. Pushing the latest fad or the most popular medical testing because that's how they're paid. That is someone who has put your best interest, and they hold themselves as an industry to very high standard Nella mask. It. Are they perfect in every way, shape and form the medical profession? You're not so much not so much. You know, there is there's definitely always going to be need for in the medical profession for there to be policing in for there to be organizations within without that make sure that we are getting the very best healthcare. We can because they're going to be some bad apples, and it's true in the financial world. So hiring a fiduciary is important and there's two functions especially specifically to talk about knowing yourself. There's two functions that I see that a fiduciary needs to be able to do for you. Number one. Eric, you're married. Correct. Yes, sir. Okay. Good. Well, so with me will end up happening is we'll have an event we're going to go out to dinner. Inner with friends. Right. And so what ends up happening is. I'm hanging out. It's you know, an hour before we have to leave him. My wife starts getting ready, and I like to give her a space while she gets ready because you know, it's it's a, you know, takes a long time. There's a process let's say that. Let's yes. Very well said it's a process. So what happens is we have to leave in. Let's say ten minutes, and she's finally she looks fantastic. And so now, I've got ten minutes to get dressed. And quite frankly, I only need four, you know, because there's not a process with me. It's pretty much. Hey, I look great. In fact, oftentimes I'll think we'll do I have to get more dress up than I am now. Of course, she tells me. Yes. So we go in you know, I go in. I take my five minutes take my time because I want to make it look I tried I walk out. And I'm sure this is never happened to you, Eric, you're very stylish, individual, handsome, and so forth. You know, that's pretty much a given. But will end up happening is a little walk out of the bedroom. And my wife look at me and she'll say. No, no. That's not good go back in there. And oftentimes should go back in. And we'll look in the closet, and she'll find something that can solve a whatever. Prominent it. Typically is socks don't match your shoes. That are don't match the belt. You know, how it is fashion. Not my strongest suit appreciate it. I just it's not what I do. Well, the reason my wife is able to do that is because she's going to be sitting next to me at dinner. We share the same last name. She's got some skin in the game. And so that accountability that honest talk, you know, hashtag real talk. When someone's able to say, hey, listen, Eric, that's not working. And having a fiduciary someone to say, no, no, we're not doing that. And this can really save you from heartbreak because perhaps the biggest thing that if ado -ciary does for you is talk you out of really bad decisions is not what they tell you to do is the exclusion of all of those different mistakes that people make financially I don't want to go through a long laundry list. But one of my favorite things to do is when I can convince a client to not do something. And I beg them. Give me a ring. You know? So the will ring it's Dr so-and-so, and he says, hey, I've got this up at his opportunity to find gold off the coast of Alaska through sunken ships and so forth, and your you kind of like stop for a second. Like is this a joke, but you tell them because you're putting their needs first. And you're able tell them this is what you need to do the second thing. So that married couple that accountability that honest, real talk is important than secondarily is a teacher. We have to realize that when you hire a financial professional really they have to have the heart of a teacher, and that someone who can inform you educate you. But also contest you in measure your success. In other words, help you understand what you know. And help you understand what you don't know. One of the things that's great with the interwebs. Is that podcast like these Facebook, pages blogs? Able to put a lot of content out and one of the things that is interesting is that people in my business in the financial planning world. We've got continuing education and probably if you're listening to podcasts. Whatever profession you're in you constantly have to get recertified. Learn something new proved that you knew what you are new. And that's because we realized that knowledge leaks and information leaks, and we've got to fill it back up. Well, when it comes to your own financial life. We really don't have anybody who's telling us. Hey, we need some continuing education. And that's what a fiduciaries for in also to we need to have somebody who can fill in the gaps because you don't know what you don't know to quote, Don Rumsfeld. You know, there's just unknown unknowns. And that's what a fiduciary is for one of the things that were that combines is, you know, the count ability in the education something called logical fallacies, and that's where we have biases and those biases are there really difficult to in yourself a very easy to see in another person. And just having that fiduciary says, hey, you know, why you're using something that we call recency bias in in. Here's what that is. And I'd like to do a series of podcasts of my favorite biases that plague us because it's it's important to know. Yeah. Great. Yeah. Hiring a fiduciary step one higher fiducia for those reasons that I just mentioned is super important to knowing yourself, it painful at times liberating at times. And, but when what happens is you walk away with a sense of Clare like, oh, I get it. I get it. And that's very very important just going back to the the whole married thing. I mean, I think that was a great example you, and I've talked about this before our wives are fantastic and amazing. I've got some colorblind issues. So I have no problem with her pulling certain shirts out, you know, and saying no, this is a better option. And I kind of was picturing that when you said, those aren't the greatest shoes or they don't match that belt. It kind of goes back to what you're doing with when somebody brings you an idea like hunting for golden sunken ships off Alaska how. How does this fit in with the rest of your outfit? Right. How does this fit in with the rest of your plan? Okay. This part of your plan says you wanna have enough money to last through the age of one hundred and five years old if you now take a large chunk of that and go for buried treasure in sunken ships in Alaska, how does that fit with that plan in which one do you like better, right? I mean, it's yeah. They're not fitting together something's going to break or something's gotta give and being able to talk through those things with somebody who has no emotion involved in it but invested interest in your success. I think that's what we're really talking about here with a fiduciary. Yeah. And you said the word emotions, and the funny thing is is in I mentioned emotional intelligence, it really it's all about emotions, and it's all about understanding the fact that we are an I'll say this because this is key. We like to think of ourselves as intelligent rational beings, sentient free will so forth. So on the reality of it is that we make emotional decisions. And then we rationalize them with logic. You know? So I mean that when we talked about consumerism some of our earlier podcasts, we see this amazing new car that we wanna purchase and it just so cool looking. And then what do you do you make a list of why I need a corvette instead of a minivan, and how corvettes save me gas because I drive so fast. Right. Time money while there we go. So you know, that's that's how we are. And because of that we find ourselves in these loops where emotions take over. And so are introduce -ciary is awesome. And they can act like a true accountability partner with your best interest in mind teacher and instructor that can say, hey, this is where your gaps in your knowledge are the other thing you need to know. And this is a little bit basic almost, but I think it's actually missing too much in people's lives. And that is knowing your risk tolerance. And you mentioned the word emotions let me just start there. I remember where I was when the S and P five hundred hit six six six in two thousand nine it was a very emotional time. Especially in my business. I wouldn't expect everybody on this podcast to remember. But for me, I'm like, wow, this is a really bad day. And I was on vacation. I'm just kind of like in a fog because I'm like what in the world's happening to the world turns out that was the bottom. We didn't know it at the time. We never do and looking back. Now, it's easy for me to forget, the deep dark feelings you've got when you're trying to have fun in the sun at the beach. And it is a it is just a bad event. The reason I bring that up is because it's important to go to your adviser. And to look at that wrist of that risk tolerance score if you will. But I really want advise everyone to consider going beyond the monikers the words the word salad if you will of conservative moderate, moderately, conservative, moderately, aggressive aggressive. Those words have almost no meaning anymore. And so what we do here is we use a quantitative software program takes about ten minutes to complete in it produces a risk number, and that risk number is something that you can say, okay. This wrist number signifies that you willing to suffer through this percentage of dip for. For the benefit of potentially reaching this reward, if you will, and then we can have a conversation, and we can actually analyze your portfolio based off that number fits you. And when people can see on paper the statistical risk in return swings of their portfolio over the next six months. It helps them to kind of guard themselves and say, okay. This is the conversation. We're having now and because it takes ten minutes and because it's quantitative and there's a real number. We can continually have that conversation because you know, what happens is you change your risk tolerance changes depending on a lot of different factors. Whether it's how much money you've got the Bank. Currently what's going on in your life. How pessimistic or optimistic the news out there is and some of its core some of its things just your conservative personality or you're an aggressive personality. But having that conversation talking about it is a huge thing. Just putting out there on the table helps you to say, okay? Here's the plan in here are. The bandwidth if you will evolve Tilleke and it helps put emotions looking forward not looking backwards. But looking forward saying, this is what I'm kind of galvanizing myself for and and it's okay. It's okay. If you find that the market is not up as high as the other people could possibly be up more aggressive portfolio. It's okay to come back and say, hey, you know, what markets up I'm feeling more risk tolerant. And that's when we have conversation. Isn't that interesting? You know, when the market's up your more risk tolerant markets down. You're not there in lies the crux of it. So not only getting the fiduciary, but also testing your own risk tolerance. And checking in with it and really quantifying it helps you to kind of get those emotions under check to know yourself. And then finally, and I was finally because really none of this matters until you've done the first two until you've got a partner in crime through a fiduciary, so to speak an accountability partner in a an instructor. Then what you end getting your risk tolerance down, Pat. Then you need to take a look and you need to figure out where. Everything is and why you have it before we were talking on the recording. Ironically, you talked about the fact that you've got quite a bit of stuff some we'll call junk in your garage. Totally absolutely tons of stuff you're handy. Right. Like, you can build things and fixing. Yep. But yet Alon goods what ends up happening is over the years. I'm not by the way. So what happens with me is there's something to fix almost. Always don't have what I need. So I run to Lowe's, Home Depot, the hardware store and get it. And I tend to get a three pack and I use one well sometimes too because I don't know how to use the first one on a break. So used to of whatever that isn't. I've got one just kind of sitting there. I needed again a year later forget where I put it. So I run and so pretty soon I've got five of of whatever it is. Let's say zip ties. Yes, zip ties are always good duct tapes. Good assortment of screws and so forth. Well, what ends up happening with a guy. Like me is when you're younger in life you start out life. You've got a junk drawer, right? And then that junk drawer turns into your junk claw your junk garage. You know, you get stuff in your garage. You don't know what it is? And then finally as you get older in life more successfully by more property of a shed or barn. Exactly storage right now storage storage unit. Yeah. Or you pay one hundred fifty bucks store all this junk. Well, what ends up happening is is it can get kind of overwhelming. What happens also to in people's lives? Is it gets overwhelming when it comes to their finances because you start of crewing and snowballing money assets liabilities, but also to benefits things like HSA's and things like FSA's, these are health savings accounts, you know, and things like that 4._0._1._K's foreign Casey left behind a different employer pensions that were not really quite worth much because you only work there for ten years. So when I sit down with clients one of the things that brings perha-. Perhaps the most sense of like, a, you know, that weight coming off of their shoulders is when we can take all of this data input it in one place and organiz their junk drawer junk garage or really their entire state the barn. The the shed all of it. And in doing that, the sense of clarity. There's a TV show on Netflix, which I haven't watched, but it's all the rage. There's a lady from Japan. Her name is Marie condo. And all she does is she goes into people who are semi hoarders. And she helps them to find out. What's important? Find out what brings them joy and helps them to get rid of the rest. And so that spring cleaning in that organizing of what you've got that clarity that brings you get to know yourself. But you also get to know where you really are. And that alone it really just when it comes to emotions it gives you sort of this positive feedback in it starts. Positive momentum. If you haven't already done it. The key though, too is is if we're going to do it do it in a way that is idiot proof do it in a way. That's that. You do at one time, and it's very easy to maintain. That's the problem with organizing. Your garage is you've got to get a system in place. And will we use here is we use what we call the Pravada wealth dashboard. And it's an online place where we can aggregate all of the assets investments that you have with me as your adviser. But also investments in cash accounts and other benefits that you have elsewhere, and it's able to aggregate from lots of different places and create this database for you this organized one-stop online situation where we can build financial plans that are truly informed and so-. Hiring a fiduciary knowing your risk tolerance. And then finally nowhere everything is. And why you have it you do those three things and you start to raise your emotional intelligence. You start to know yourself. And after a while you realize you got a lot of cookies the. We like cookies we do we do. But I will say this. You know, this is a podcast. You're listening to don't take any advice from this podcast. I don't know anything about person that's listening to this. This is something that you really got to sit down face to face talk with somebody. And and naturally if you'd like to learn more feel free to reach out to us. Yeah. That would be fantastic. It's a great idea. And I will tell you this Ray if you come out with the Pravada wealth garage organizer down. I'll be the first person in line, brother. I mean, it's you're absolutely right. I got tons of stuff in there. And a lot of it's good. And a lot of it could probably just go away. And I need somebody to help me through that. And so this Marie lady. She's sounds pretty good. But I'm not gonna I'm not gonna I'm not gonna let my wife. Listen to this podcast because she'll hire her right off the bat. Just to get my stuff organized. I need all that. Right. I just need it all, but no. I really don't you're right. All right, right. This is a great podcast. I appreciate your time. Thank you, sir. All right. Thank you. And thank you for listening to the return on lifestyle podcast with discuss. Oh of not subscribe to the podcast yet. Please click the subscribe now button below this way. When Ray comes out with a new podcast it'll show up directly on you're listening device. This makes it much easier to share these podcasts with your friends and family. Thanks again. For listening today for everyone to provide a wealth management. This is Eric Johnson reminding you to live your best day every day, and we'll see you next time. Thank you for listening to the return on lifestyle podcast. Click the subscribe button below to be notified when. New episodes become available. The information covered in posted represents the views and opinions of the guests and does not necessarily represent the views or opinions of Proventil wealth management. The content has been made available for informational and educational purposes. Only the content is not intended to be a substitute for professional. 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