Plan

Your new habit initiative is missing something

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Humans are bad at starting new habits and jettisoning old ones. It doesn’t seem to help if we know better (like, smoking will eventually cause you to suffocate to death). Our level of desire or commitment isn’t a useful indicator. We typically come up with a great idea, what could probably be classified as a goal, some change we’d like to initiate in our lives, and then we hope for some motivation to strike so we can implement the new behavior. Unfortunately, motivation is undependable and scarce, and your new habit, as well-intentioned as it may have been, never comes alive.

But there’s a solution to this. James Clear, in his book Atomic Habits, explains that while our usual understanding of how to cause behavioral change (knowledge, motivation, earnest desire, strict discipline) is mostly worthless, an implementation intention plan can make all the difference.

So what’s an implementation intention plan? Well, stated as simply as possible, it’s your plan for the time and place you’re going to execute your new behavior. Clear says, “Most people think they lack motivation when what they really lack is clarity (P71).” When we fail to make the changes we intend we start to think we lack discipline or maybe we don’t want it enough. That’s purely false. What’s lacking is most likely not discipline, but a plan of action. When we leave our behavior change initiative to the erratic realm of inspiration and motivation we’re begging to fail. But if we’re clear about a time and a place, about when and where we’re going to execute our new habit, the likelihood that we’ll execute skyrockets. This can be as simple as choosing which chair you’ll sit in at what time in the morning to start your reading habit. I have two seats in my living room (there are more seats, just two that I claim), one couch corner for TV and video games, and one couch corner for reading and writing. It makes a weird, incredible difference which one I’m sitting in. When I’m in my reading spot, I read, when I’m in my TV spot, I watch TV. That’s about as complicated as it has to be. I execute my reading habit because I chose my seat and I decided on a regular time (quick aside, reading in the morning is the best).

I think this implementation intention plan, while super simple, is one of the most important concepts in the study of habit formation. We select times and places for all sorts of important things in life, meetings, family time, workouts, church, etc. Why do we try to sidestep this necessary piece when we’re dealing with ourselves?

An implementation intention plan is not the be-all-end-all magic dust that will guarantee the success of your new habit, but it is a critical piece and one that few of us consider. So stop worrying about whether or not you’re disciplined or motivated, pick your time and your place, and execute.

Don’t worry about long-term plans

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Long term plans are tough, mostly because we don’t know the future. If you’ve got a 20-year long term goal that’s great, but it’s probably not going to happen, at least not the way you planned; who knows what will happen in the next 20 years? It’s not bad to set long goals if only to set you in a direction, but don’t marry those goals, don’t die on their hills, don’t forsake all other paths or options. People achieve success more often by focusing on what’s right in front of them. It’s called short term planning. When an opportunity arises you make a decision, you work hard at the work in front of you, you make plans for things that are actionable and semi-immediate. Success tends to favor those who, instead of working backward from a goal in the future, make a decision based on the currently available options which will give them the best range of options in the future. They actually keep their options open. It’s a different perspective, instead of an early determination to go all out in one direction or after one thing, you can take things as they come. You’ll obviously still work hard and make good decisions when options present themselves, but you don’t have to sell out for a long term goal. Don’t worry about the next 20 years, worry about the week, the day, the hour in front of you, and make the most of it.

Stop Aspiring

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Aspirational material is everywhere. We see headlines like ‘7 steps to shredded abs’ or ‘how I made this much $$$ working from home’ or any other exciting material promising to help you be or have something different. Aspirational material is addictive, probably because we pretty much all aspire to things. Who doesn’t want more money or a better body or a more fulfilling job? Seems pretty natural that we’d be interested in engaging with the manuals.

Simon Sinek is his Start with Why: How Great Leaders Inspire Everyone to Take Action makes the point that all of this aspirational jargon is a type of manipulation. Here’s a helpful quote:

Though positive in nature, aspirational messages are most effective with those who lack discipline or have a nagging fear or insecurity that they don’t have the ability to achieve their dreams on their own.

By ‘effective,’ Sinek means for the company or person who creates the content, it’s not effective for the individual. Companies use aspirational messaging to sell us things, and it works. You buy a gym membership because you aspire to be healthier, and if it’s a nice gym for a great deal it’s easy to justify. An entire gym membership business model is built on these aspirations. They sell innumerable memberships, far more than the gym could actually accommodate, because they know people won’t show up. They know people aspire to be healthier making a membership an easy sell, but they also know people only aspire, they don’t want to put in the work to execute on a goal.

When we feel stuck in some part of our lives, when there’s something we would love to change about ourselves or our circumstances, we often think the problem is a lack of knowledge or motivation. If it’s knowledge, we think that either we need more knowledge or someone else needs more knowledge (probably both) in order to make progress or affect change. If it’s motivation, we think we need some sort of special inspiration in order to get us moving. Neither of those beliefs is helpful. How many aspirational blog posts do you think you’ll need to read before you’re sufficiently knowledgable and motivated to make those pounds fall off or start that passion project? If you’re anything like me, you’ve definitely put your time in with this aspirational stuff, but those hours probably haven’t paid really well. It’s fun, but it never does what we hope it will. Aspirational material is not all bad, you can find some really helpful tips and tricks buried in there, and maybe even a little motivation now and again, but it’s important to understand what that stuff can and cannot do for you. Aspirations and aspirational material can’t change you.

So here’s a little trick I picked up: stop aspiring. That doesn’t mean we shouldn’t set goals and make plans, in fact, goals and plans are the opposite of aspiration. An aspiration is foggy, vague, mostly unhelpful. It’s more like a wish than anything else. And it’s really easy to spend hours and hours thinking about our wishes. A goal is objective, something you can act on, something you can make a plan to achieve. If you want to do or be something different an aspiration won’t take you very far, but a plan of action could.

How does your retirement plan look?

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Many of us, especially those who are younger, probably haven’t thought much about our retirement plans. I wouldn’t have put any thought into it either if I wasn’t an investment advisor. But I’ve run into some troubling stats about the relationship between Americans and retirement, so I think it’s worth talking about.

First, by retirement, I mostly mean age, like somewhere in your 60s. I don’t mean quitting all obligations and sitting around by a lake somewhere. Retirement definitely could include that (I’m counting on it!), but most of us probably won’t be content to only sit around. We’ll probably be doing some kind of work when we’re retired. What you definitely don’t want when you’re in your 60s is to be working full time out of necessity at a job you’d rather not be working at (which is unfortunately normal among retirement age Americans). I think about retirement as a time when people have options. I’ll personally want to keep working or doing something productive, but it could be work that doesn’t pay, or pays very little; I’ll be doing it because I want to, not because I have to. And let’s be honest, at some point we just won’t have the strength to keep working full time, so we need a plan to pay the bills.

Here’s a problem, 1 in 3 Americans has nothing saved for retirement. 4 out of 5 Americans have less than one year’s worth of income saved in retirement accounts. That obviously isn’t great. Consumer debt is on the rise. Student loans put young people in a large hole right out of college, the most fruitful investing years. Credit card debt is up. Car loans are accepted as the normal way to buy a car. The average American starts behind finically and borrows their way further down. Partly because of this debt crisis and partly because of our consumer culture, Americans only save about 3% of their income today, barely enough to keep up with inflation let alone fund their futures.

Compounding all of this is our increasing dependence on savings for retirement. Generation Y (Millennials) and Generation Z will to need to lean on investment accounts more than any generation before for a few reasons:

1) Pensions are all but gone. They’re a conduit for too much risk to employers who have shifted to 401(k) offerings. This trend isn’t actually bad, the market will do a better job growing money, and many employees offer generous 401k matching programs. But in order for it to work employees need to be intentional about utilizing 401(k)s, and to understand how the money is invested within the 401(k)s. That’s where we tend to fall short. Employees miss out on $1,336 in employer matches each year. We also let the money we do have in 401(k)s languish in actively trading mutual funds, surrendering large sums to fees and sub-market performance.

2) We don’t know exactly what Social Security will look like in the future, on its current trajectory it will have to be cut by about 23% by 2033. There will likely still be some sort of social security benefits down the road but it’s not something reliable enough to stake retirement on.

So right now, regardless of your age, do you have any idea what your retirement is going to look like? One meeting with an advisor to take a quick look at your situation could save you worlds of financial hurt down the road. Maybe you’re actually in great shape, or maybe there are just a few small things you can change which would have a dramatic impact on your financial future, or maybe you need someone to tell you your lifestyle needs trimming. It’s something you can, and probably should know.

When’s the Next Market Crash?

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Full disclosure, I don’t know, but don’t stop reading! The thing is, that’s a bad question, or at least the wrong question. No one knows when the next market crash will be. We’re pretty sure there will be another one at some point because that’s how the market works, but instead of trying to figure out when, let’s work from what we know:

1) We know that the market moves based on new news and people’s emotions. Neither of those things are predictable in the future. We don’t know what’s going to happen tomorrow, what news will come out. And we especially don’t know how people will feel or how they’ll respond to unknown things in the future. So, we know that we don’t know what the market will do tomorrow or anytime in the future. Make sense?

2) We know that the general stint of the market is up, way up. We know that for people who don’t freak out about the next crash, who instead stay invested through the bumps, the average returns are really amazing (to the tune of 10+% per year!). 

3) We know that when the market does crash it takes an average of about 4 months for it to bounce all the way back. The average crash takes about 4 months to hit the bottom, and 4 months to come back. For those keeping track, that’s a total of 8 months for the average crash. 

4) We know that over the last 93 years (that’s as far back as the super-reliable data goes), 68 of them were positive by an average of 21%. That leaves 25 negative years, which were down by an average of 13%. Who doesn’t want to sign up for those odds!

5) We know that people get real nervous about the market. On average, people jump advisors and funds every 3.5 years. And we know that’s not a winning strategy. 

6) We know that bonds are much less volatile than stocks, but that they also return significantly less than stocks. So, when you’re young, you want to own mostly stocks. You want your money to grow, and crashes don’t matter too much because you’ve got plenty of time to let the market bounce back. If you’re older, you might need more of your money in bonds because the bonds won’t dip like the stocks will in a crash. Bonds can reduce the volatility in your portfolio when you need the funds to be there.

7) We know that good advisors have a profound impact on people’s returns. Instead of encouraging clients to try to figure out when or what is going to happen next, they help clients stick to the plan, even when the market seems scary. 

So we don’t know when the next crash will be. But it actually doesn’t matter, not if you have a good advisor, a good understanding of the market, and a good plan. The timing of next market crash should actually be the least of your worries; but if you must worry, at least worry about something a little more worrisome.