Welcome to Pension Attention, the best show for first responders who want to take control of their finances. After advising Los Angeles city firefighters for over 12 years, financial advisor Brad Barrett now shares how you can grow your wealth, build your legacy and enjoy a life of freedom. And now here's your host, Brad Barrett.
(00:21): Welcome to pension attention to show for you. First responders who want more out of their deferred compensation and pension plan friends. My goal with this podcast is to reach you where you are at whatever stage in your career you are in, in order to provide my nearly 20 years of experience, working with both active and retire service members on their investment and retirement planning. My team of fiduciary advisors here at one capital management are dedicated to ensuring you take control of your finances and build the life you deserve today. The challenge is no longer the access to information. I think we all can agree with that, but, but rather it's finding the right information and more importantly, how all of that information applies to you. And that's my commitment to here on the pension attention show and to find out more about myself or any one of our advisors here at one capital management, you can go on our website at pension, attention.com.
(01:21): And as I always say, if you like the show share with someone you like, if you don't like the show, I guess share with someone you don't like. But if you listen to this show over the past couple years, you'll know that I'm somewhat of a nerd when it comes to the psychology of money. And I wanna dedicate this week's show to a recent article. I was reading by a guy, Daniel Crosby. He's a doctor of psychology, and actually he had a lot of points to make around how we perceive important things in our life. And I would argue as many of you listening right now would probably argue that money is a important thing to us. Now, mind you, the first Timothy six, 10 money is the root of all evil. It's the love of, of money. So money itself, as I've stated before, isn't neither good nor bad.
(02:08): It is important because it allows us the freedom to do what we want to do with those. We want to do it with, it does not need to be your end all be all. In fact, it shouldn't be, but it is important. And so Daniel Crosby was talking about and actually wrote an article around this and Kipplinger around a psychologist, fear fighting tips for investors. And I really wanted to focus on that today because I think now more than ever given what we've gone through in this past two years, just, just this last two years, in fact, around the pandemic, and now this last month or two, with what we've seen in the volatility from the Ukraine invasion, all along with supply chain issues stemming from last summer, inflation concerns and issues, all stuff that we've spoken about here on the show. And I've spoken with each of you listening in terms of our review meetings with clients, and if you're not a client and you're listening to this, make sure you are having this discussion with your advisor because to make good financial decisions, you need a clear head.
(03:08): And the one thing that can get in way of a clear head is fear. Fear is a debilitated. We know that it stands for forget everything and run, but when it comes to who are money, we can't do that. In fact, I would comment and suggest that's probably the last thing you wanna do as I've stated before, about trying to time the market or letting fear driven selling drive what you are doing with your investment plan. Because as I stated before, and most of you listen, know that I'm a, a big hockey fan. There are 32 team teams in the national hockey league. And my son Brooks, who is six now, seven who's showing an interest in hockey, wants to get into a league. And we were watching the Kings recently, thank the Lord they're actually doing well this season. Finally, it's been a while, but we were talking about it and I go, Hey, Brooks, what's the difference between a team in the NHL winning the Stanley cup versus the team that ends dead last.
(04:00): Now my enjoy, I'm talking to a six year old, so his answers were somewhat ridiculous. But in that conversation, I wanted to actually bring that up on today's show because the difference between a team winning a championship versus coming in dead last is not necessarily the goal. The goal for every person, everyone listening here is to get your finances in order, have a successful financial life. Do the things you want to do. Maybe it's managing debt, all has to do around the financial discussion, ultimately into retirement. It's about living a happy and healthy retirement and to a sports team. The goal is the same to win the cup or win the championship. So what's the difference. It's the systems you put in place. And if you derail from those systems, I E having fear become involved or anxieties and losing track of your systems, you've put in place or in this world, the financial plan you've put in place.
(04:52): It can derail a lot of the strategies you put out in the first place. Now there's no shame by the way, I should bring this up. Very clearly. There is no shame and being scared, but fears become problematic when it paralyzes us or stands in our way, such as life. Now, even just thinking about something positive, activates our internal reward system, which honestly can lead to increased risk, taking increased impulsivity and greater general physical arousal. If you will fear, understandably has the opposite effect of those things. Making us timid, protective, and risk adverse, both positive and negative emotions. Some can come into play to help you. Some can come into play to hurt you if taken to their extremes, they all can hamper sound, financial decision making, but since fear and why I'm bringing it up today, since fear seems to be the predominant emotion it's worth examining in my opinion, some of our most common fears around money.
(05:53): And let me bring up three fear of missing out or in the vernacular of the young folk, nowadays FOMO, fear of volatility and fear of uncertainty. So let's take the first one fear of missing out the anxiety around not being a part of a market. Upswing can lead to excessive risk. Taking think about that for a second. You don't wanna wanna miss the upswing. Some guy talks to you about a company. A lot of it's been the pocket investments nowadays of Peloton zoom Tesla, right? And you're like, oh man, the fear of missing out on that upswing and have my buddy be right. And I just missed out on it can create anxiety and actually can lead you to maybe have excessive risk taking. Now the second item I brought up fear of vault. This I can describe as the discomfort with the ups and downs that are inherent in capital markets that all can lead to excessive conservatism.
(06:48): So one fear of missing out can lead to excessive Rick taking, and then the fear of volatility, the discomfort of the ups and downs can actually might lead you to excessive conservatism. By the way, am I striking a chord with anyone listening right now? If I'm not, you're probably a robot because every human listening has felt these emotions before. And the third one also fear of uncertainty. And I think more than ever before, especially from the past two years, as I mentioned and what we've seen this year, 2022 so far, not knowing what will happen. Next leads to two common behaviors. And this was actually detailed and researched by again, a guy named Daniel Crosby. And he mentioned these two things, two common behaviors that fear of uncertainty can lead to compensatory overconfidence or assuming the worst. Now in my mind, neither of which leads to great financial choices.
(07:45): So to help us all on this show, listening right now, overcome the fears that can hold us back financially. Let's consider a few tips that I've learned over the past 20 years. First and foremost, look, let's lean in, let from yours, realize that some amount of fear and stress is actually beneficial. Fear in moderate doses can instruct us to better prepare for uncertain futures. I have two kids, Brooks who's six and Kate, my daughter, who is four and anyone listening right now, who's a parent or a grandparent understands this notion we learn at early ages are fears. We understand that we have certain fears of things. And when you're a kid, you have to learn those right. There is really no fear, especially for my daughter. Oh my gosh, everyone listening right now. I have a daughter who has literally no fears. So I have to almost teach her those fears.
(08:37): And I wish I could bubble wrap her as she walks out the, but I can't. I understand that even though I try, oh my gosh, do I try? But I'm bringing this up because we have to actually instill the fears. And I, one of the lessons I bring up to her as young as she is, we wanna learn from that. Okay. We wanna learn, Hey Kate. Remember when you know you were walking across the street and you didn't look for cars. That should be a fear. Why daddy? Well, because if the car hits you, that's no good and believe it or not, we learn from early stages. That fear once we realize what it is, can instruct us to do better and prepare for an uncertain future. Let me give you another example, an appropriate fear of death or dis might lead someone to protect their assets with insurance.
(09:18): I see that a lot in my world. Now, the fear that a single company or country might underperform might rightly lead someone to diversify their assets. Again, I'm using some financial examples. So fear isn't all bad. We must first ask ourselves if there is something, this fear can be teaching us. So number one, we wanna lean in, learn from our fears. And then number two, which is right off the dovetail. Number one is face them. The paradox of fear is that to overcome a fear, you must actually confront it, avoiding fearful conversations for those that like my wife, I love you dear leave Veronica, but she's not a huge fan of awkward or conversations she doesn't want to have, but avoiding them or the feelings that they give can give them more power than they actually have, which is why 90% of those with specific phobias are actually cured by facing their fears crazy.
(10:16): Right? But I think anyone listening who's lived on this earth long enough knows that that just makes sense. The irony of procrastinating or avoiding a specifically a financial reality is that it only gives it greater power. So if you're sitting here listening right now and you're avoiding paying off that debt or looking at it and sitting with an advisor to walk through it with you, now's the time to do it. You have to learn from those fears and then actually face them. So open those bills, pay that credit card statement and even make a phone call asking for leniency, maybe on those kind of things. And I don't, I'm bringing up the debt situation, cuz I've had a few conversations in the past week with clients that are, you know, just facing some debt situations. And so was heavy on my heart and we're going through and we're creating the snowball effect like Dave Ramsey does and we're building all these models for them.
(11:03): But the best thing they did was face them. They brought it up to me as their advisor. And I obviously knew it was happening building the financial plan. These are new clients. And so I had to say, Hey, we gotta, we gotta face these. And that's, by the way, what a good advisor will do help you face those, especially as it relates to your finances, because action has the effect of reducing anxiety incrementally while in action only feeds those fears. I've said this before. One of my favorite quotes from Alexander Graham bell, the godfather of the telephone, he said the only difference between in success and failure is taking action. So again, action has the effect of reducing the anxiety while inaction only feeds those fears.
(11:50): Do you know how much you should be contributing to your deferred compensation plan? Are you getting the most out of your current investment options, looking at entering or about to exit the drop program, go to www dot pension, attention.com to find out how we can help
(12:06): Third fake it. Okay. Hear me out here for a second. There is good signs to the adage fake. It it, until you make it, we typically assume that our behaviors are a result of our thoughts, but research has actually shown actions, drive feelings as much as feelings drive action. And as for your finances, investing in risk assets and setting aside money for a rainy day, maybe the last thing on your mind is you try to navigate the realities of our new every day, but I can promise you the sooner you can begin acting and taking action, as you know, you should, the more natural it will become. Again, psychology has shown us that there is some good science around the fake it until you make it. So even though you may not be emotionally there or it doesn't feel good, start creating some systems in place that are working towards the goals that you know you want to have, and it will start to naturally become more of a system for you in your everyday life.
(13:08): Now four make it meaningful. So a crisis tends to bring out both the best and work in human nature. Now mind you, these couple items I'm bringing up here around the fear or the anxiety around money and why we need to protect ourselves from ourselves is again, crisis. It brings out both the best and worst. It's just human nature. Okay. I see it every day as an advisor. And I see it in my own personal life too, just because I've been in the capital markets for nearly 20 years and been advising clients for about that same time period. Doesn't mean I'm immune to my own human traits. As I've shared many times on the show before Veronica and I, our assets, our 401k R retirement plan are managed by the same portfolio manager that manage it for my clients. For two reasons. One, I'm a believer in what I preach, which is important.
(13:56): But two, I have the same two brains as you do. I have the same logical rational brain up top. And in my belly I have the same emotional brain and there are competing odds. So in a year, like example, 2020 in March, not reacting to that was afforded to me because I, I had a portfolio manager internally in my office helping me make sure that I wanted to stay on track. Now I know inherently, that's what I'm doing. And that's why I advise that for my clients, but I'm still a human just like you. So I do all these steps myself and largely today's podcast is around not only my experience as an advisor, but also what focus on myself, being an investor in this world as well. And just as surely as there is fear, there are more opportunities for service than ever before.
(14:48): So making hardship meaningful is a time tested way to transform suffering into something more palatable. Maybe it's supporting a local restaurant, maybe it's buying groceries for a neighbor or write a letter to the medical professional on the front lines. All of these acts will in fact have an effect on turning fear on its head. So make it meaningful just because you're maybe going through a hardship, whether that's you got some debt or cash flows tight, or maybe you're going through a divorce or something grand good or bad is happening in your life. That's disrupting the plan. Having fear is probably the last thing you want when it comes to manag the assets or maintaining the plan you're putting in place. Again, fear can be a good thing to keep you from doing certain things in certain areas. That's how the brain is wired, but when it comes to your money and planning, the fourth item, I'm bringing up here, making it meaningful is actually lean in on that.
(15:46): Talk to someone who's going through that same situation. Or if you've gone through, maybe it's a divorce or maybe it's some cashflow issues, or maybe it's a debt situation being an advocate for someone else internally, even through your own work or your friendships or your colleagues or your family, making it meaningful will actually have an effect of turning fear on its head. And I've seen that with our clients. And that brings me up to another item here, which is connecting with others, oxytocin, which is a chemical release. When we connect with those, we love, this is studied by this psychologist has been shown to reduce fear. So oxytocin a chemical release. When we connect with those, we love who we care about and think about this. I was thinking about this as I was reading this article and I was kind of going like, you know, when I talk with a, I have almost get a high, I know that sounds weird, but I just really feel, I'm very blessed to say that I felt a calling at 16 years old as I've shared on this podcast.
(16:44): Before that my calling was to be a financial advisor. What I went through financially than our own family, I think was a God given circumstance in my life. And I see it 20 years later, I'll have a conversation with a client who I've had for 10 years. And when I talk with them, maybe it's a three minute catch up call. I actually find that I am happier. My oxytocin was released because I connected with someone who I care about social distancing by the way, two years ago was a killer for me and anyone who knows me and any client listening out here knows that I love being around people. I just was wired that way, right or wrong and social distancing. It may have changed almost the way we connect, but it is still important than ever to maintain strong relational ties find, you know, creative ways to connect with those.
(17:31): You love like a video chat. Even the, the zooming I've been doing with clients allows me to see them, allows me to talk with them. It, it, it does enough there and raising your spirits by staying connected. Why I'm bringing this up, does pay benefits in many ways, by connecting with others and reducing your stress, you will actually in fact, keep yourself in a centered place. Let's call it where you are able to, or better able to make rational choices about your health and your wealth. Being a financial advisor who likes to focus on the human. Just as much as the numbers. As I mentioned at the top of the episode, I'm a geek or a nerd when it comes to the behavioral financial traits. And one thing I've noticed is that we tend to spend our youth sacrificing our health for our wealth. And then what happens is when we turn 50, 60, and 70, the inverse happens, we end up spending our wealth for our health.
(18:25): So I do find that this is an interesting one that I really like the psychology, bringing it up, that we do wanna take care of ourselves now, and money is important. Don't get me wrong. You wanna have your house in order and offloading that to an advisor who you trust, who's a fiduciary for you does make a difference, cuz it allows you some free time to connect with others and actually release that oxytocin that I mentioned that was studied by the psychologist, the, and then finally on the heels of connecting with others, taking care of yourself. And this is what I just mentioned. The connection between body and mind is powerful. And in my opinion, underappreciated, I think across the board, we as humans, excessively use caffeine or alcohol consumption, which can really only amplify fear responses, which is not a good thing when it comes to making financial decisions.
(19:14): That's why I never go out with a client and have a beer to talk about financial decisions. It's probably not the best time to do it. You know, whereas exercise and adequate sleep all tamp down stressful reactions. Your mind will only be as calm as your body allows, right? So in these frightening times or in times that are, you know, volatile, why I'm bringing this up today. I just, it was on my heart this last week, talking with clients and just all the items that we've been releasing within the firm around the Ukraine, Russia situation, even stemming on the heels of the pandemic for a couple years, supply chain from last summer, I mean a lot's going on in this world, mental health, these last couple, I mentioned connecting with others and taking care of yourself actually is very much as important as it is about getting the action items in place for the fear that you have around.
(20:04): Again, the three, I mentioned fear of missing out fear of volatility and fear of uncertainty, making sure that those don't meander their way into your investing decisions or your portfolio structure has a lot to do with actually coming out the other end and being successful. Again, you wanna be the team winning the championship, not showing up dead last. And the goals are the same for all the team. The goals for each of you listening here are most likely the same. I've talked with thousands of clients over my career. Been blessed to talk with many others, prospective clients and through different discussion points. And the commonality is the same for all of us. The fear of money, the fear of the market and human nature is very clear about we don't like what we don't understand and that's why I wanted to do this show. And that's why I like talking with clients and, and meeting with everyone around, educating on an area that I happen to know about.
(20:59): And it helps calm the fear and anxiety that many people have. And we don't wanna let fear and anxiety get into our lining and disrupt us from the goal that we all have in place. So we want to learn from our fears. We wanna face them. We wanna fake it, believe it or not. If we're not feeling great that day or that week, we still want to keep those goals in place that it becomes more natural. And ultimately during those downtime periods in our life that we're gonna have, you know, the one certain thing about life is there'll be uncertain things, right? We wanna make it meaningful and connect with others and ultimately make sure that we're taking care of ourselves even during times of volatility. Hey, I wanna thank you for listening to the pension attention show. And remember before acting upon anything discussed today, speak with a financial advisor near you. And if you're not sure where to turn and you'd like our help, you can visit email@example.com for a complimentary retirement track review meeting. And until next week stay safe.
The information in this podcast is educational and general in nature and does not take into consideration the listeners personal circumstances. Therefore, it is not intended to be a substitute for specific individualized, financial, legal, or tax advice. To determine which strategies or investments may be suitable for you consult the appropriate qualified professional prior to making a final decision.