It can be an anxiety-producing market. It’s up, it’s down. It’s working people’s nerves. A market that lost over a year of gains with extended volatility will do that. There are a lot of things that are out of our control, and people can get very squirrely when they feel out of control of their money.
This is very understandable, and we take that concern seriously. Our clients’ financial security is paramount to us. So, during times like these, we talk with clients about what history tells us about the market, where it is today, and where the crystal-ball-gazers think it’s going. We tell a lot of stories—about good financial decisions, bad financial decisions, and the process of financial planning.
This might be the most impactful thing we do as financial advisors—focus on the process, even when clients may not be sure where things are headed.
If you are thinking. “Why process?” the 1980s hero’s journey chestnut, The Karate Kid can be instructive. If you haven’t seen it, go right now—the original with Ralph Macchio is my personal preference. It’s a wonderful, if somewhat hokey, time capsule.
The story is filled with satisfying tropes of personal growth and achievement despite long odds. Daniel is a scrawny teenager who moves thousands of miles to a new school where he doesn’t really fit in. He gets bullied by scary, jacked martial arts guys. He finds a mentor in Mr. Miyagi, who teaches Daniel important life lessons through martial arts. I won’t spoil the ending for those who haven’t seen it but let’s just say that his nemesis Johnny Lawrence has a pretty bad day.
The success story at the end of your personal financial movie is that you have stayed the course with your financial plans. That you are more like Daniel and less like Johnny. Here’s what Daniel learns and how it can help you with your money during a challenging market cycle:
Discipline and Practice: Just as Daniel learns the importance of discipline and consistent practice in mastering karate, the same applies to financial planning. He waxes the car repeatedly. Practice, practice, practice. Over time, sticking to practice makes you stronger and more skilled. Same with financial planning. It is discipline and practice that gets you to your financial goals.
Sometimes clients like to hide during volatile markets. We ease them out from their shells, repeat our financial process discussions, and adjust as needed. And then we do it again.
Patience and Long-Term Perspective: Daniel's journey in karate teaches him patience and the value of long-term growth. He gets frustrated along the way and questions the process. But the training montage (look it up) shows that he comes around. The results speak for themselves. Similarly, financial planning and management requires patience and a long-term perspective. It involves setting goals, creating investment plans, and allowing time for compounding to work its magic.
Patience is especially applicable to your relationship to risk. Part of the financial planning practice is repeatedly reexamining your risk appetite to see if your self-appraisal changes. Can you handle what is going on? If you feel the need to do something right now, how do you avoid doing something impulsive? Panic is not your friend. Daniel did not learn and use the Crane Kick (look it up) because he panicked.
Balance and Moderation: In karate, balance is crucial for effective movement and defense. Similarly, in financial planning, maintaining balance is essential. It involves trade-offs between spending and saving, risk and reward, short-term and long-term goals. Finding the right balance ensures stability and maximizes overall financial well-being.
Accountability and Guidance: Many people are self-taught, sure. It’s valid. But it is a lot harder to be accountable to just yourself. It’s also a situation of “you don’t know what you don’t know.” Daniel wasn’t forced to be accountable to Mr. Miyagi but, once he learned to respect the process, he realized the old man had a lot of wisdom to offer. He uncovered many things he didn’t know about himself. Similarly, we serve as our clients’ personal Miyagi, holding up the mirror and reminding them of the financial goals they want to accomplish and providing our expertise and knowledge to help them do it.
A fee-only, fiduciary financial planner is the best kind of Miyagi. We show you that financial planning is not a mystery, but you are likely to have a better outcome if you can be the Daniel of your own financial management movie.
Despite everything I said, you may still be anxious. If your advisor doesn’t seem too worried, and you feel yourself getting anxious to the point that you feel like you must do something right now, schedule a call with us.