WEBVTT - WTD When Markets Decline #165 0:00:00.080 --> 0:00:02.320 Welcome to How the Money. I'm Joel and I and 0:00:02.440 --> 0:00:23.360 Matt and today we're discussing what to do when markets decline. 0:00:25.000 --> 0:00:28.720 Schedule markets declining. It is inevitable, right, It's not a 0:00:28.720 --> 0:00:30.800 matter of if that happens, but it's more of a 0:00:30.800 --> 0:00:33.319 matter of when that happens. So during this episode, we're 0:00:33.320 --> 0:00:35.479 gonna talk about some things that we can do before 0:00:35.520 --> 0:00:37.640 that happens. We're gonna talk about how to respond to 0:00:37.800 --> 0:00:41.040 those changes as they're happening in regards to our investments, 0:00:41.040 --> 0:00:44.120 but not just our investments, are personal finances as well. 0:00:44.120 --> 0:00:47.000 We're going to cover a variety of little topics here. Yeah, 0:00:47.040 --> 0:00:50.159 when Marcus declined, it has far ranging impacts and not 0:00:50.240 --> 0:00:53.000 just on how much money you have in your investment portfolio, 0:00:53.080 --> 0:00:55.600 but it has wide ranging economic impacts. And so there's 0:00:55.760 --> 0:00:57.840 all sorts of things we have to take into consideration 0:00:58.160 --> 0:01:00.360 when markets do decline. And so yeah, we're and get 0:01:00.360 --> 0:01:03.000 into a bunch of that today, dude. But before we do, 0:01:03.120 --> 0:01:05.880 let's talk about Airbnb because it has been a minute. 0:01:06.360 --> 0:01:08.959 If you remember, it was episode one thirty seven, that's 0:01:08.959 --> 0:01:11.200 when we kind of announced that I had my Airbnb 0:01:11.319 --> 0:01:13.000 up and running and it had been going for a 0:01:13.000 --> 0:01:15.240 couple of months at that point, and even before that 0:01:15.400 --> 0:01:17.840 was it episode three that we talked about like should 0:01:17.880 --> 0:01:20.200 we host an airbnb? We've been talking about it for 0:01:20.200 --> 0:01:22.360 a long time, way back in the day. Well, a 0:01:22.480 --> 0:01:25.160 reason I think we've been fascinated with airbnb is because 0:01:25.200 --> 0:01:26.679 some of the appeal of it is that it's a 0:01:26.720 --> 0:01:28.680 way to make some money on the side. Was something 0:01:28.880 --> 0:01:30.560 potentially that you already have, right if you have the 0:01:30.600 --> 0:01:32.840 space in your home. But specifically, one of the ways 0:01:32.840 --> 0:01:35.640 that it's different from these different gigs like driving for 0:01:35.800 --> 0:01:37.800 lift or uber is that it's something that you can 0:01:37.840 --> 0:01:42.039 do without much time or effort put into it right completely, Well, 0:01:42.040 --> 0:01:45.440 turns out that's not the case. It So we had 0:01:45.440 --> 0:01:47.680 our airbnb up and running for you know, for a 0:01:47.680 --> 0:01:50.680 lot of last year, and I tell you what, dude, 0:01:50.800 --> 0:01:53.280 I really enjoyed it. I really enjoyed getting to meet 0:01:53.280 --> 0:01:56.280 all the different folks, get inviting folks into the space 0:01:56.280 --> 0:01:58.360 in our home that we had specially set up for them. 0:01:58.760 --> 0:02:01.600 Basically playing host, drinking alcohol in the front lawn with 0:02:01.640 --> 0:02:05.320 people at an ungodly hour in the morning. Well, that 0:02:05.360 --> 0:02:08.400 happened one time, and it was when they're leaving and 0:02:08.480 --> 0:02:09.679 do you wanted me to have a taste of the 0:02:09.720 --> 0:02:12.359 special liquor from Scottland. I think of Scotland. It wasn't 0:02:12.360 --> 0:02:15.160 a scotsh but it was from Scotland. That will be 0:02:15.200 --> 0:02:18.440 one of my more memorable moments as an Airbnb host. 0:02:18.760 --> 0:02:20.600 But as much fun as all that was, it still 0:02:20.680 --> 0:02:23.920 took a lot more time than we realized, starting with 0:02:23.960 --> 0:02:26.520 communicating digitally with folks when Kate handled all of that, 0:02:26.639 --> 0:02:29.480 but to meeting them in person, showing them the space 0:02:29.840 --> 0:02:33.000 all the way to flipping the space and cleaning it. 0:02:33.000 --> 0:02:35.000 It was more like a part time job, which is 0:02:35.040 --> 0:02:36.720 not what we were hoping for. We were hoping that 0:02:36.720 --> 0:02:38.680 it would end up being something a little more hands off, 0:02:39.160 --> 0:02:41.520 and yeah, that just wasn't the case for us. Yeah, 0:02:41.560 --> 0:02:44.520 you're really getting into kind of the hospitality industry. It 0:02:44.639 --> 0:02:48.079 seems from the outside looking in, just completely different than 0:02:48.520 --> 0:02:51.160 a full time, annual least sort of rental that we 0:02:51.200 --> 0:02:54.480 are typically set up on. You're like charting new territory, 0:02:54.720 --> 0:02:57.240 getting into new waters with the airbnb, and yeah, it 0:02:57.240 --> 0:02:59.360 did seem to suck up a lot more of your 0:02:59.360 --> 0:03:01.200 time than you thought it would. Like you just mentioned 0:03:01.200 --> 0:03:03.440 a traditional lease, that is what we found to be 0:03:03.480 --> 0:03:05.720 the solution, right, And so we were looking for a 0:03:05.760 --> 0:03:09.120 way to eliminate all of the additional time that is 0:03:09.160 --> 0:03:12.320 involved with every single guest that came and stayed out 0:03:12.320 --> 0:03:14.960 our place. Well, with the traditional lease, you don't really 0:03:15.000 --> 0:03:16.440 have to do much of that because they take care 0:03:16.440 --> 0:03:17.720 of the place. They know that, you know, they know 0:03:17.720 --> 0:03:18.960 how to get in. You don't have to show them 0:03:18.960 --> 0:03:21.880 where to park like all those things, and so that, yeah, 0:03:21.880 --> 0:03:23.959 that's that's the solution. So right now we've got a 0:03:24.000 --> 0:03:26.800 guy down there for two months, and let me just 0:03:26.840 --> 0:03:29.960 tell you how great that that has been. Right not 0:03:30.080 --> 0:03:32.720 having to, you know, worry about meeting new guests that 0:03:32.760 --> 0:03:34.200 are showing up, and you know, for Kate to not 0:03:34.280 --> 0:03:35.960 have to worry about flipping the space and making sure 0:03:35.960 --> 0:03:37.520 that it's ready on time for the new guests to 0:03:37.520 --> 0:03:40.200 show up, and added this additional sort of level of 0:03:40.240 --> 0:03:42.560 stress that we realized we weren't willing to take on 0:03:42.680 --> 0:03:44.520 in our lives. I will say though, that there is 0:03:44.520 --> 0:03:47.000 a trade off. We aren't making quite as much money 0:03:47.040 --> 0:03:50.000 as we were when we had it listed on Airbnb. However, 0:03:50.440 --> 0:03:53.600 it is worth the pay cut. Yeah, you know, it 0:03:53.600 --> 0:03:55.360 made me think about the episode that you and I 0:03:55.400 --> 0:03:58.600 did about calculating your hourly wage and knowing kind of 0:03:58.640 --> 0:04:01.480 what you're worth in that regard, And it did seem like, 0:04:01.520 --> 0:04:04.400 with all the hours you were pouring into Airbnb, you're 0:04:04.480 --> 0:04:07.960 devaluing your time because it was taking so much more 0:04:08.000 --> 0:04:11.160 time than you thought it would. You basically became a 0:04:11.200 --> 0:04:14.320 host and a cleaning person and a communicator, and all 0:04:14.360 --> 0:04:15.880 the hours you put into it, if you were to 0:04:16.080 --> 0:04:19.920 factor in the additional you make over kind of instead 0:04:19.960 --> 0:04:22.719 going for short term leases of a couple of months, 0:04:22.960 --> 0:04:24.600 I think you're going to find that what you were 0:04:24.680 --> 0:04:27.600 actually making in running the place. And this differs from 0:04:27.640 --> 0:04:30.680 city to city, circumstance to circumstance. Some people can make 0:04:30.720 --> 0:04:33.160 a killing doing airbnb, or if you do it at 0:04:33.160 --> 0:04:35.280 a bigger level and you've got multiple airbnbs and you've 0:04:35.279 --> 0:04:37.520 got a system in place, then you can do really 0:04:37.520 --> 0:04:41.119 really well. But sometimes just doing one can be really 0:04:41.120 --> 0:04:43.880 really hard. Um, and it does seem like you weren't 0:04:43.880 --> 0:04:45.839 making enough money to make it worthwhile. I mean, we 0:04:45.880 --> 0:04:47.800 did calculate it, and that's why that's why we made 0:04:47.839 --> 0:04:51.120 that decision. Basically, we clearly identified that this is not 0:04:51.240 --> 0:04:53.960 worth our time, and we could have automated check in 0:04:54.040 --> 0:04:56.000 and we could have gotten a cleaner, but all that 0:04:56.040 --> 0:04:57.920 eats into your costs, right, and that would have brought 0:04:57.920 --> 0:05:02.080 the net income from the airbnb down substantially. And so 0:05:02.160 --> 0:05:04.000 I think I mentioned on the episode where we talked 0:05:04.000 --> 0:05:06.719 about hosting the airbnb when it was finally up and running, 0:05:06.760 --> 0:05:09.720 that those previous two months we had made a little 0:05:09.720 --> 0:05:12.600 over sixteen hundred dollars a month, which was pretty solid. 0:05:12.800 --> 0:05:14.760 But last year there were also some slower months where 0:05:14.760 --> 0:05:18.280 we're making closer tow and so on average it came 0:05:18.279 --> 0:05:21.040 out to be about fourteen hundred dollars a month, and 0:05:21.240 --> 0:05:24.040 we currently have the basement rented out for twelve dollars 0:05:24.080 --> 0:05:26.039 a month, and so we're making two hundred dollars less 0:05:26.080 --> 0:05:29.279 a month. But like I said, man worth every penny. 0:05:29.400 --> 0:05:31.040 We have our life back. It's not something we have 0:05:31.080 --> 0:05:32.719 to worry about, and so Joel, the reason I wanted 0:05:32.760 --> 0:05:34.960 to mention this is because if you are hosting an 0:05:34.960 --> 0:05:38.039 Airbnb and maybe you're feeling burned out a little bit, 0:05:38.200 --> 0:05:42.200 well consider not necessarily a full on traditional lease where 0:05:42.200 --> 0:05:43.880 someone is gonna be there for a year. In our case, 0:05:43.920 --> 0:05:45.640 I'm not sure if somebody would want to be there 0:05:45.680 --> 0:05:47.160 for a full year because we don't have a full 0:05:47.240 --> 0:05:49.880 kitchen that you know, it's not quite completely set up 0:05:49.920 --> 0:05:53.040 to be a super long term rental, but it's perfect 0:05:53.040 --> 0:05:55.240 for someone in town for a little bit working on 0:05:55.240 --> 0:05:58.000 a project anywhere between two three or four months something 0:05:58.040 --> 0:06:00.520 like that. And for us, it has been a fantastic 0:06:00.560 --> 0:06:03.719 decision to kind of put the airbnb on hold. Yeah, 0:06:03.720 --> 0:06:05.679 and you gotta be willing to pivot in a moment 0:06:05.720 --> 0:06:07.400 like that, right where you kind of start to get in, 0:06:07.440 --> 0:06:09.320 you kind of start to see how it's working and 0:06:09.360 --> 0:06:11.200 you realize it's just not working out the way that 0:06:11.279 --> 0:06:13.760 you wanted it to. And I think we mentioned on 0:06:13.760 --> 0:06:17.440 the episode Matt about hosting an airbnb how potential government 0:06:17.440 --> 0:06:20.240 shifts and policy can change whether or not you're able 0:06:20.240 --> 0:06:22.279 to even rent an airbnb. So if you're going to 0:06:22.279 --> 0:06:24.080 start hosting an airbnb, you kinda have to be ready 0:06:24.120 --> 0:06:27.919 to shift anyway because of the potential changes in regulations 0:06:27.960 --> 0:06:30.040 where you live. But at the same time, I think 0:06:30.080 --> 0:06:32.039 you need to be willing, just like you did, to 0:06:32.120 --> 0:06:33.920 shift if it's just not working out for you in 0:06:33.960 --> 0:06:35.800 the way that you had hoped. So I think, yeah, 0:06:35.839 --> 0:06:38.080 hosting an airbnb works out for you know a good 0:06:38.120 --> 0:06:40.200 many people, but also just doesn't work out the way 0:06:40.240 --> 0:06:41.920 a lot of people wanted it to. And you really 0:06:41.920 --> 0:06:43.960 have to think about it as getting into the hospitality 0:06:44.000 --> 0:06:47.600 industry and being a landlord of a longer term lease 0:06:47.720 --> 0:06:49.960 is just so much simpler really in the day to day. 0:06:50.080 --> 0:06:51.720 But I'm glad for you guys getting all that time 0:06:51.760 --> 0:06:53.520 back in your life. And you know what, a couple 0:06:53.560 --> 0:06:56.320 hundred bucks totally worth the trade off? Yeah, exactly. Do 0:06:56.320 --> 0:06:57.920 I mean the way we have it currently set up 0:06:58.200 --> 0:07:01.160 completely sustainable or is Airbnb? It just felt like it 0:07:01.279 --> 0:07:02.760 was something that we were not going to be able 0:07:02.760 --> 0:07:04.680 to keep up with at least, you know, in this 0:07:04.720 --> 0:07:07.400 stage in our life. Turns out adding a part time 0:07:07.480 --> 0:07:09.720 job to our full plates in addition to a new 0:07:09.760 --> 0:07:13.560 baby doesn't really fly and not a recipe for success. Exactly. Yeah, 0:07:13.600 --> 0:07:15.640 all right, Matt, Well, let's mention the beer that we're 0:07:15.640 --> 0:07:18.360 having on the show today. We're fortunate enough to have 0:07:18.680 --> 0:07:22.560 a beer called Bretta Weiss from Firestone Walker Brewing Company, 0:07:22.760 --> 0:07:25.440 and this one was given to us by our friend Josh. 0:07:25.840 --> 0:07:28.080 Cannot wait to share this one on the show today 0:07:28.120 --> 0:07:30.400 with you, my friend, Yeah, man, And this is our 0:07:30.440 --> 0:07:32.840 fourth and final beer, and this one in particular is 0:07:32.840 --> 0:07:35.360 going to be really good. I said this one for last. Yeah, 0:07:35.440 --> 0:07:38.240 I'm excited about a buddy. All right, Well, um, we'll 0:07:38.240 --> 0:07:40.120 give our tasting notes on this one at the end 0:07:40.160 --> 0:07:42.920 of the episode. But Matt, let's get onto the subject 0:07:43.000 --> 0:07:46.280 at hand. We're talking about what you do when markets 0:07:46.320 --> 0:07:49.680 are declining. And it's true markets decline from time to time, right, 0:07:49.680 --> 0:07:52.600 we're talking about stock markets, the general economy. There are 0:07:52.640 --> 0:07:56.760 cycles of expansion in cycles of contraction, and when Marcus decline, 0:07:56.840 --> 0:08:00.280 it's a normal occurrence. But it doesn't feel normal. When 0:08:00.320 --> 0:08:03.680 the headlines start to turn dark and gloomy on us, right, 0:08:03.720 --> 0:08:06.080 we start to feel as if we should be changing 0:08:06.160 --> 0:08:08.840 something in our lives anything. All the talking heads on 0:08:08.880 --> 0:08:12.200 TV begin to proclaim more difficulty in the future. And 0:08:12.640 --> 0:08:14.680 we're not like those guys, Matt. We're not here to 0:08:14.960 --> 0:08:17.120 predict a recession or anything like that. And we would 0:08:17.160 --> 0:08:18.920 say that you should be reticent when you hear anyone 0:08:19.280 --> 0:08:23.040 making specific market predictions or saying that they know something 0:08:23.120 --> 0:08:26.080 is coming. But we will see a market decline at 0:08:26.120 --> 0:08:28.880 some point. It's part of the natural cycle of things. 0:08:29.120 --> 0:08:31.960 And so what should we do when that eventual market 0:08:31.960 --> 0:08:34.560 decline arrives. Where should our head be and what sort 0:08:34.559 --> 0:08:36.720 of actions should we be taking? Well, that's what we're 0:08:36.760 --> 0:08:39.760 gonna talk about today. Yeah. Well, the reality is is 0:08:39.800 --> 0:08:42.400 that the stock market is at an all time high 0:08:42.720 --> 0:08:46.000 currently right. In addition to that, we've also seen the 0:08:46.040 --> 0:08:49.120 prices of real estate like they've boomed over the last decade. 0:08:49.160 --> 0:08:50.959 We you know, we recently talked about how a lot 0:08:51.000 --> 0:08:54.160 of folks have likely never experienced the value of their 0:08:54.160 --> 0:08:56.640 homes dropping. A lot of our listeners have never seen 0:08:56.679 --> 0:08:59.120 the value of their four own case go down. This 0:08:59.200 --> 0:09:01.839 is a little really siding, right, And unfortunately, I think 0:09:01.920 --> 0:09:05.440 that most folks overall sentiment is that things will always 0:09:05.480 --> 0:09:08.640 be better tomorrow than they are today. Yes, over the 0:09:08.679 --> 0:09:11.800 long term, values will increase, but we need to be 0:09:11.840 --> 0:09:15.720 a little wary when everyone around us is overly optimistic. 0:09:15.760 --> 0:09:18.360 It reminds me of a warm Buffet quote where he 0:09:18.360 --> 0:09:21.520 says to be fearful when others are greedy, and be 0:09:21.679 --> 0:09:25.520 greedy when others are fearful. These are wise words from 0:09:25.679 --> 0:09:28.560 the He's currently the fourth richest man in the world. 0:09:28.679 --> 0:09:30.760 That's not too shabby. Yeah, And so if we want 0:09:30.760 --> 0:09:33.000 to do well with our money over time, we need 0:09:33.040 --> 0:09:36.480 to think about how we can stomach a market decline 0:09:36.679 --> 0:09:39.880 before it begins. Yeah, and so again, we're not predicting 0:09:39.960 --> 0:09:42.240 anything's coming or around the pike, and we don't trust 0:09:42.240 --> 0:09:44.880 people that do say that. That kind of stuff that's 0:09:44.920 --> 0:09:48.960 headline making material, that's panic conducing stuff that just doesn't 0:09:49.040 --> 0:09:53.120 fit into a personal finance podcast that is all about 0:09:53.200 --> 0:09:55.960 helping people make wise decisions. But it's also important to 0:09:55.960 --> 0:09:58.280 talk about kind of the history of market cycles and 0:09:58.280 --> 0:10:01.240 and the fact that these sorts of corrections do occur 0:10:01.679 --> 0:10:04.679 on a fairly consistent basis. So statistically, Matt, let's talk 0:10:04.679 --> 0:10:07.480 about the good news. First, stock markets rise on average 0:10:07.760 --> 0:10:10.560 seventy seven percent of the time. That's good news, right, 0:10:10.600 --> 0:10:13.920 I like his odds. Yeah, how often do bear markets 0:10:13.920 --> 0:10:16.640 come around? Though? A bear market is, if you're not familiar, 0:10:17.400 --> 0:10:21.400 decline in stock prices, and those happen roughly every three 0:10:21.480 --> 0:10:24.720 point six years, so three times a decade you're going 0:10:24.760 --> 0:10:27.400 to experience a bear market. The great thing about bear 0:10:27.480 --> 0:10:29.400 markets when you look at them statistically, is that they 0:10:29.640 --> 0:10:32.280 really only last around ten months overall. And that's great 0:10:32.280 --> 0:10:35.960 news too. So if we at least know that, on average, 0:10:36.000 --> 0:10:39.000 we're going to experience a bear market every three to 0:10:39.080 --> 0:10:41.280 four years and then it only lasts ten months. It 0:10:41.320 --> 0:10:44.000 kind of can help us get that mental preparation going 0:10:44.280 --> 0:10:46.680 to be able to endure it before it actually happens. Yeah, 0:10:46.679 --> 0:10:48.720 and a little more history for folks. While there have 0:10:48.840 --> 0:10:52.959 been twenty five bear markets, since there have only been 0:10:52.960 --> 0:10:57.440 fourteen recessions. They happen about half as frequently, although they 0:10:57.480 --> 0:11:01.360 represent obviously a bigger decline and worse economic conditions. But 0:11:01.559 --> 0:11:04.680 knowing these numbers and knowing this history, it's really helpful. 0:11:05.040 --> 0:11:08.240 By familiarizing ourselves with the historical outcomes, this can help 0:11:08.280 --> 0:11:11.400 us to get through these tougher economic times. You know, 0:11:11.440 --> 0:11:14.600 this is a perfect example of where knowledge is power. Yeah, 0:11:14.640 --> 0:11:17.440 it's important to acknowledge also that going through a bear 0:11:17.559 --> 0:11:21.720 market or even a recession doesn't just impact the amount 0:11:21.920 --> 0:11:24.360 of money that you have in your investment accounts, in 0:11:24.360 --> 0:11:26.640 your four oh one k R i R. A unemployment 0:11:26.679 --> 0:11:29.160 often goes up. Most of us tend to find ourselves 0:11:29.200 --> 0:11:32.240 on more unstable ground no matter where we're at financially 0:11:32.280 --> 0:11:35.320 currently or where we are in our careers. So after 0:11:35.320 --> 0:11:37.120 the break, we're going to talk about how to handle 0:11:37.160 --> 0:11:39.200 your investments in the case of a market decline, but 0:11:39.280 --> 0:11:42.040 also how to think about your job and your personal 0:11:42.080 --> 0:11:53.640 finances to all right, Joel, we're back from the break. 0:11:53.720 --> 0:11:56.040 Let's talk now about what to do when markets decline 0:11:56.360 --> 0:11:59.640 in regards specifically to your investments, the money that you 0:11:59.679 --> 0:12:03.040 have invested in the market before the market declines. You 0:12:03.040 --> 0:12:05.640 want to make sure that you have your plan written down. 0:12:05.960 --> 0:12:09.080 An investment plans so important despite what the market is 0:12:09.120 --> 0:12:11.920 doing right now and where your emotions are currently. If 0:12:11.920 --> 0:12:14.360 you have a plan that you can stick to, it's 0:12:14.360 --> 0:12:17.000 gonna help you to stay the course. So you should 0:12:17.000 --> 0:12:19.640 take the time now to set some realistic goals for 0:12:19.720 --> 0:12:23.000 how much you can sustainably contribute and the allocation you 0:12:23.040 --> 0:12:26.120 feel comfortable with. Just be careful of being overconfident and 0:12:26.120 --> 0:12:29.319 picking an unsustainable strategy right Like, for instance, you might 0:12:29.360 --> 0:12:32.920 be able to right now invest thirty of your paycheck, 0:12:33.160 --> 0:12:35.720 and while that is amazing, you know, will you be 0:12:35.760 --> 0:12:38.680 able to stay that course, especially once things get harder 0:12:38.920 --> 0:12:41.959 and so answering some basic questions about when you'll need 0:12:41.960 --> 0:12:45.080 that money and how uncomfortable you would feel if you 0:12:45.160 --> 0:12:49.160 experienced a thirty decline in the value of your retirement 0:12:49.160 --> 0:12:51.480 funds like those are things that you need to consider, 0:12:51.760 --> 0:12:54.560 and you know, Joel, actually writing it down will help 0:12:54.559 --> 0:12:56.680 you to stick to that plan no matter what the 0:12:56.720 --> 0:12:59.640 market conditions are. Yeah, Matt, and you mentioned the percentage 0:12:59.720 --> 0:13:01.960 of your income that's going towards investments, and that's definitely 0:13:01.960 --> 0:13:03.840 a consideration that needs to be a part of any 0:13:03.880 --> 0:13:06.200 investment plan that you write out. But at the same time, 0:13:06.240 --> 0:13:08.599 you also need to think about what you're invested in 0:13:08.600 --> 0:13:11.160 in your retirement accounts. And we have no problem with 0:13:11.480 --> 0:13:14.680 younger individuals who are in the wealth building phase of 0:13:14.679 --> 0:13:20.480 their life being exposed to the stock market in equities, 0:13:20.840 --> 0:13:23.360 but there are also a lot of people that would 0:13:23.360 --> 0:13:27.720 see their stomach turn if they had a thirty portfolio drop, 0:13:27.960 --> 0:13:30.160 and so those are the kind of people who need 0:13:30.200 --> 0:13:33.920 to allocate their money differently inside their investment account. They 0:13:33.920 --> 0:13:37.440 need to be looking instead into a more balanced approach 0:13:37.480 --> 0:13:40.439 to their investments. But it's so important to ask those 0:13:40.520 --> 0:13:43.559 questions ahead of time, to put your mind there as 0:13:43.559 --> 0:13:46.240 to what kind of behavior you think you might exhibit 0:13:46.480 --> 0:13:50.080 were the market to experience like severe losses to that extent, 0:13:50.440 --> 0:13:52.400 and having that written plan is just so useful in 0:13:52.440 --> 0:13:55.199 guiding you forward when you do get into the middle. 0:13:55.280 --> 0:13:58.480 The heart of more difficult circumstances. Yeah, well, let's talk 0:13:58.600 --> 0:14:01.160 now about modifying your plan, right, And so this is 0:14:01.400 --> 0:14:03.360 sort of more of a pre emptive step as well. 0:14:03.400 --> 0:14:06.160 But if you're no longer in the growth stage of investing, 0:14:06.400 --> 0:14:09.720 you might want to consider shifting to more conservative investments. 0:14:10.440 --> 0:14:13.559 And so, in the simplest terms, this means having less 0:14:13.559 --> 0:14:16.920 of your invested assets in stocks and more in bonds 0:14:17.320 --> 0:14:20.240 or even cash if you have an immediate need of 0:14:20.280 --> 0:14:22.880 those funds. So this smooths out the ride and will 0:14:22.880 --> 0:14:26.800 make wild market swings less impactful on your portfolio. This 0:14:26.880 --> 0:14:30.480 approach will allow you to comfortably whether a downturn and honestly, 0:14:30.520 --> 0:14:32.440 Jill like an even easier way, like if you want 0:14:32.440 --> 0:14:34.160 to hit the easy button, just look to the different 0:14:34.200 --> 0:14:38.400 target date retirement funds because they automatically shift your money 0:14:38.480 --> 0:14:41.800 towards more conservative investments like bonds. Yeah, and even if 0:14:41.840 --> 0:14:44.200 you start seeing headlines like the SMP of our hundred 0:14:44.360 --> 0:14:48.520 or the Dow Jones industrial averages down, you know over 0:14:48.560 --> 0:14:52.080 a year period, because we're in this massive recession, your 0:14:52.120 --> 0:14:55.800 portfolio is not sustaining those losses because you are more 0:14:55.840 --> 0:14:58.840 widely diversified and more of your money is put into 0:14:59.000 --> 0:15:02.200 conservative investment like cash and bonds, and that's just gonna 0:15:02.200 --> 0:15:03.920 make it much easier to sleep at night if you 0:15:03.960 --> 0:15:06.720 need ready access to those funds in the very near future, 0:15:07.000 --> 0:15:09.760 because yeah, I can't imagine a whole lot of worse 0:15:09.840 --> 0:15:13.040 financial scenarios than being super close to retirement and needing 0:15:13.040 --> 0:15:15.240 that money and seeing your balance drop like a rock. 0:15:15.640 --> 0:15:18.320 And basically, if you're not super close to retirement, you're 0:15:18.360 --> 0:15:21.560 not thinking about preserving your money and keeping that nest 0:15:21.640 --> 0:15:24.240 egg intact, and you are in the wealth building phase 0:15:24.280 --> 0:15:27.040 of life. We would say, basically the way you should 0:15:27.040 --> 0:15:29.880 think about a market downturn is that the stock markets 0:15:29.920 --> 0:15:32.120 on sale, and when you find yourself in a bear 0:15:32.200 --> 0:15:35.600 market where values are dropping like crazy and you are 0:15:35.640 --> 0:15:38.400 in that stage of life, it's time to buy. And 0:15:38.400 --> 0:15:40.800 this is easier said than done, especially in the moment. 0:15:40.800 --> 0:15:43.040 We have a hard time thinking like this right as 0:15:43.240 --> 0:15:45.960 as all the headlines predict doom and gloom. But it's 0:15:46.000 --> 0:15:47.880 all the more reason to include this in your plan, 0:15:48.280 --> 0:15:50.920 and you call out specific numbers. If the SMP five 0:15:51.280 --> 0:15:54.560 does dip into bear market territory, let's say, maybe that's 0:15:54.600 --> 0:15:57.640 a trigger for you to pop in extra money into 0:15:57.680 --> 0:15:59.560 your roth Ira or your four ow and k at 0:15:59.600 --> 0:16:02.320 work to bump up the percentage that you're investing, and 0:16:02.360 --> 0:16:05.360 then if things dip even lower, maybe that is caused 0:16:05.360 --> 0:16:07.920 for you to invest even more. Yeah, Joe, what we're 0:16:07.920 --> 0:16:12.000 talking about here is basically being opportunistic, right, Looking for 0:16:12.040 --> 0:16:15.640 a deal isn't a bad thing. In every other area 0:16:15.640 --> 0:16:17.600 of our life, we get excited about finding a great 0:16:17.640 --> 0:16:20.600 deal when things are on sale, like we pounce on it. 0:16:20.640 --> 0:16:23.479 But for some reason, with the stock market, the opposite 0:16:23.560 --> 0:16:25.360 is true. When we see it dropping, we tend to 0:16:25.360 --> 0:16:27.160 like run the other way and we're afraid to put 0:16:27.200 --> 0:16:29.360 money in because I guess we're afraid that we're gonna 0:16:29.360 --> 0:16:31.200 lose all of our money, but we know, based on 0:16:31.280 --> 0:16:34.080 historical data that that is not the case. Yeah, Black Friday, 0:16:34.120 --> 0:16:36.320 we get pumped about the TV sales, and then you 0:16:36.360 --> 0:16:38.120 don't run the other way when you see a good sale, 0:16:38.200 --> 0:16:42.640 like around Thanksgiving, Right, yeah, exactly, You're you're participating, You're um, 0:16:42.680 --> 0:16:44.520 You're thankful for the lower price. But when it comes 0:16:44.560 --> 0:16:47.000 to stock market investing, usually we have the opposite reaction 0:16:47.200 --> 0:16:49.080 freak out. Yeah, and especially for in it for the 0:16:49.080 --> 0:16:51.480 long term, we do have to have that markets are 0:16:51.480 --> 0:16:54.400 on sale mentality, and it's time for me to hopefully 0:16:54.880 --> 0:16:57.680 if we have the fundamentals in place in our personal finances, 0:16:57.960 --> 0:17:00.880 the ability to up our contribution level. And so what 0:17:00.880 --> 0:17:02.880 we're talking about here is making sure that we behave 0:17:03.000 --> 0:17:06.640 according to the plan that we've created. Right, we want 0:17:06.640 --> 0:17:09.240 to make sure that we shure up our natural behavioral 0:17:09.240 --> 0:17:13.240 tendencies in order to stay the course. These dips are temporary, 0:17:13.280 --> 0:17:16.359 and so the idea is to keep ourselves from making 0:17:16.359 --> 0:17:19.040 bad moves during these downturns. And I think a lot 0:17:19.080 --> 0:17:21.919 of times we know this knowledge, like this isn't a 0:17:21.960 --> 0:17:24.200 matter of like do I know the right thing to do? 0:17:24.400 --> 0:17:26.320 Like we know the right thing to do, we just 0:17:26.760 --> 0:17:28.919 don't do the right thing in the moment. Yeah, And 0:17:28.960 --> 0:17:31.720 I think, yeah, just like having the knowledge of the 0:17:31.840 --> 0:17:34.560 history and what a typical bear market looks like going 0:17:34.640 --> 0:17:37.240 into it with that in our brains, it can be 0:17:37.320 --> 0:17:40.600 really helpful and instrumental in helping us stay the course well. 0:17:40.640 --> 0:17:44.880 Knowing ourselves, knowing our behavioral tendencies is key to So 0:17:45.119 --> 0:17:47.320 just being aware of the fact that we might freak 0:17:47.359 --> 0:17:50.000 out if we saw our four oh one k balance 0:17:50.040 --> 0:17:53.480 take a nose dive. That alone can stop us from 0:17:53.480 --> 0:17:56.200 making some sort of a knee jerk reaction. We can't 0:17:56.240 --> 0:18:00.159 create necessarily a realistic simulation, but trying to imagine what 0:18:00.240 --> 0:18:02.480 it would be like and mentally kind of putting ourselves 0:18:02.480 --> 0:18:04.919 in that place can be really helpful for us to 0:18:04.960 --> 0:18:08.240 assess whether we can handle it or not. That ability 0:18:08.280 --> 0:18:11.640 to kind of know ourselves and our tendencies, our personality 0:18:11.640 --> 0:18:13.640 type probably has a lot to do with that can 0:18:13.720 --> 0:18:16.480 really influence how we allocate our funds and then how 0:18:16.520 --> 0:18:20.360 we actually react when the market does experience a downturn. 0:18:20.640 --> 0:18:24.000 And Man, I think another major behavioral influence on us, 0:18:24.119 --> 0:18:27.119 especially during these sort of times that we've hinted at 0:18:27.160 --> 0:18:30.200 it is the media and hype culture. They're so prevalent 0:18:30.240 --> 0:18:32.720 in this day and age, right, they have this insane 0:18:32.760 --> 0:18:37.080 ability to make something bad look like doomsday is here, right, 0:18:37.080 --> 0:18:39.680 and especially when it comes to financial news. So tune 0:18:39.680 --> 0:18:42.360 that stuff out. It's not helpful, and in all likelihood, 0:18:42.359 --> 0:18:44.560 the more you tune into it, the more you're gonna 0:18:44.600 --> 0:18:47.399 be likely to make moves that you shouldn't based on 0:18:47.480 --> 0:18:49.520 everyone else losing your heads. You want to be able 0:18:49.560 --> 0:18:52.040 to stick to your plan, and part of that is 0:18:52.080 --> 0:18:54.639 the ability to tune out the people on TV that 0:18:54.680 --> 0:18:56.960 are freaking out. Yeah, man, we need to take those 0:18:56.960 --> 0:19:00.760 steps to remove ourselves from becoming obsessed with what the 0:19:00.760 --> 0:19:02.879 market is actually doing. You know, we don't need to 0:19:02.880 --> 0:19:05.600