29 – Cultivate your Emotions and Behaviors


Episode Overview:

In a change of pace, rather than talk about the technical aspects of handling money, Ken addresses the emotional aspect, particularly fear. Humans are hardwired to be fearful, as it is a survival instinct that allowed our species to survive. Recounting the old adage, “you miss 100% of the pitches you don’t swing at,” Ken dives into fears that often hinder asset cultivation. Balancing fear with well thought out decision making is critical. Ken offers these insights: Don’t make rash decisions. Don’t sit on the sidelines, get into the game. Get an adviser, and work with them, don’t just delegate to them. Do your own homework. Ignore the news, which is built around playing with your fears. Finally, disregard misleading bias. This podcast episode is merely the personal experiences and opinions of Ken Kaufman and not a guarantee. Ken is not liable for any financial decisions you make as a result of this podcast. It is advised that you consult a certified financial adviser and be aware of the risk involved before entering the Stock Market.

Transcriptions are auto-generated, please excuse grammar/spelling!

Happy day to you. This is Ken Kaufman CFO and I am thrilled you’re here for episode number 29, “Cultivate Your Emotions and Behaviors.” This is all part of the series that I am doing on the roadmap to cultivating your assets. And understanding the human emotions and what behaviors those can drive and then how that can positively or negatively impact your ability to cultivate assets is so critical. Up until this point, talked about a lot of technical elements of cultivating assets. Today is, like I said, is this human emotional side and I wanna start by giving you what the key takeaway is I want you to have from this podcast. And then I have a life example to share and some very applicable suggestions as to how to help through the process of managing human emotions and making sure they don’t hurt your efforts to cultivate your assets.

So, here’s the key principle. As human beings, as the species of human beings, we are hardwired to be fearful, to be protectionary, to even be a little bit cowardice. Now, this isn’t a bad thing. In fact, it’s a really good thing because it has allowed our species to not become extinct and we’re here today and this fear is imprinted in our DNA and even in our brains and how they process and work through things. Again, not a bad thing, but if we allow fear to rule within us exclusively, well, that’s gonna hurt us dramatically. It’s gonna keep us from saying, doing, experiencing, and ultimately becoming as much as we can become and what we’re designed to become. So, with that is the underlying principle, this concept that fear is in us and it’s a natural emotion, it’s a natural reaction to things in the world.

I wanna share an experience with you and then we’ll take this and apply it into what this has to do with cultivating assets. When I was eight years old, baseball was my favorite thing to do. I went to the batting cages regularly to practice my swing, I went to the park and played with friends often, I would even play catch very regularly with my dad in either the front or the backyard or even sometimes at the park. I enjoyed it. I enjoyed every aspect of the game. When I was eight, it was time for me to finally join my first organized team and this was so exciting. I couldn’t wait for this to happen and it meant I could get some new equipment and try some new things out and be on a true organized team.

So, within this context, the buildup to opening day into our very first game, we had some practices beforehand, got to know our coaches and the other players and I think it was a couple weeks before we started practicing and then it was game time, at least on opening day. And I showed up at that game and something completely unexpected happened to me. Fear completely took over. In the moment I stepped into the batter’s box, I froze up. I could not swing the bat. It did not matter how good or how bad the pitch was that was coming in, how fast or how slow, how straight or how curved, I could not swing the bat. I was crippled by fear. Now, every other part of the game was working great. I loved being out and running the bases which only happened if I got walked and I loved playing out in the field. I played third base. I love diving for balls and getting dirty and I was very active in the game, but I just froze up in my first at bat and then every bat thereafter through the rest of the game. And then the same thing happened the next game and the next game. And I just could not bring myself around to swing because I was so overwhelmed by this fear.

Now, for those of you that don’t know baseball that much or for even those of you that do, there’s basically two outcomes if you don’t swing, either strike out or you walk and it has nothing to do with the batter if they’re not swinging, it has everything to do with what kind of day the pitcher had or was having. So, if the pitcher was doing well, I went up to bat and maybe saw three, four or five pitches and then went back and sat down. If they were struggling that day, I might get walked and find myself on first base. And I loved running the bases. I looked forward to that, but I just had this fear and I wasn’t able to overcome it. And through a conversation with my father several weeks later, he uncovered and I just said, “Look, I’m afraid of messing up, I’m afraid of swinging at a bad pitch and missing it, I’m afraid of disappointing my coach and my parents and my teammates.” And of course, none of them were putting undue pressure on me, these were things that just I had built up in my mind. And over these weeks become really emotional around it because I really wanted to do good. And like my dad would say regularly, “I can take you to the batting cages and you can hit the ball really well. And when you play with your friends out in the front with a tennis ball and an aluminum bat, you hit the ball really far.” And we just couldn’t understand why I wasn’t swinging the bat and giving myself that chance. And he through questioning started to uncover that it was around this fear of failure and this fear of disappointment.

And so he decided to try something and he said, “Hey, if I called your coach, do you think you’d be willing to consider if your coach is okay with it, would you consider just completely changing your strategy from not swinging to just swinging at everything?” And I said, “I don’t know. What if I strike out?” And my dad said, “Well, that’s happening already.” “Okay. That’s a good point. Well, what if my coach is disappointed and what if?” And he said, “Great. So, let’s call the coach.” And so we called the coach, I spoke with him and he said, “I love that idea. I just want you to swing at every single pitch and we’ll see what happens.” And I appreciated the belief that both of them had in me and it ultimately helped me overcome that fear. Again, it came out of nowhere. And in the very next game and my very first at bat, I said, “Okay. I’m just gonna swing.” And I swung at every pitch that came across. And I started to hit the ball and sometimes hit it really well. And this started a string of at bat after at bat me swinging and making contact with the ball and getting on base and even hitting a couple of home runs during the season which was just thrilling and so exciting after, especially considering where I’d come from. And the thing that my dad said that I’ll always remember, and that is one of the key lessons to apply to the concepts we’re gonna talk about today is, “You will always miss 100% of the pitches you do not swing at.” Now, it’s true, some pitches aren’t worth swinging at and those need to be studied and understood and then you let them go by. But there are a lot of really great pitches to swing at, a lot of great opportunities in life, a lot of great opportunities to cultivate your assets. And yet if you sit on the sideline, or even worse, if you get in the batter’s box but you’re not willing to engage and swing and invest, this is gonna be very problematic and it’s going to create very negative outcomes when it comes to cultivating assets. So, with that as the experience and now some application, I just want to reset from the beginning. Our natural state is to be fearful and to protect ourselves. We let this fear creep in our lives and it takes over in very unhealthy ways and it can really mess with our emotional state and lots of other things as well.
We typically tend to be afraid of things that are new or unknown and we also tend to be afraid, or I should say we tend to associate safety with being the best choice or the right choice. And let me give you a couple of examples here. First, a young child who touches that hot stove for the first time and burns their hand, they now are going to always remember and their brain is gonna have this fear built into it, that anytime they go near a stove, they shouldn’t touch it. Well, if the stove is not on and they need to say clean it or cook on it or use it in some other way, huge negative impact if they never go near a stove again and touch it again. We have brains that besides these emotions that can happen and occur, there’s also logic and we need to apply some of that to help offset some of the fear.

Another one would be again, an example of a young child who has a new kind of food put in front of them that they’ve never seen and never tasted. Well, a lot of times kids will refuse and the reason why is because if it’s not something that they know, they automatically will start to associate with it that it might be bad or they should be afraid of it or that it could hurt them in some way or it’s not, in this case, that it wouldn’t taste good. And so this fear of things that we don’t know or better yet associating safety with things that we do know like food and this imprint of fear within us when something bad happens, these can create very real stigmas that we need to overcome when it comes to cultivating our assets or just overcoming fear in general. And so I wanna mention a couple when it comes to cultivating assets that would probably be really helpful for you to consider. Couple suggestions for you to consider as you go through this process.

So, cultivating your emotions into balancing fear with well-thought-out and planned decision-making can look like this generally. First, you don’t wanna rush into anything. Generally speaking, the less time you have and the more pressure you have, the more fear-based your decision-making is. So, don’t…if you’re about to invest your assets, don’t just jump into the first thing, take time, sleep on it. Don’t make these big decisions in a rush. And what will happen is the more time you give yourself, the more fear will start to dissipate and you can balance having a logical conversation and overcome that protectionary thing that’s so hereditary that comes with all of us but can hurt us if we don’t balance it out properly.

The next one is get yourself off the sidelines and into the game. You have to swing the bat. You have to. Sitting on the sidelines is never going to create the acceptable outcome and so you have to keep telling yourself that, “I’m gonna miss 100% of the pitches I don’t swing at, I will miss 100% of the pitches I do not swing at.” Sitting on the sideline means we miss the opportunities. Now, our brain is telling us, “Well but what if something bad happens?” And it tells us that we need to be fearful around that or I should say the potential of that. But again, with the right information, we can start to dissipate that fear and get comfortable.

The next thing is it wouldn’t hurt to get an advisor who can help you understand risks around investing and help you mitigate that and set strategies up. You don’t want to assign them the decision maker. I’m not a fan of saying, “Hey, just do it and I don’t wanna understand what I’m investing in.” I don’t think that’s right. I think you should understand where you’re putting your assets and what you should expect from them. And you should be asking your advisor, “Hey, how much could this investment go down?” It actually is a really good exercise to walk through, “Hey, what’s the worst case scenario or the worst outcome,” that helps us to see it, understand it, know it, and then not overreact when and if that really bad outcome should happen. So, don’t just trust what the advisor says. Do your own due diligence, sleep on it, think about it, process it, and do your own homework to whatever degree you need to and understand what it is that you’re getting yourself into.

And then once you make that decision, then please do not listen to the news. The next suggestion is don’t listen to the news because everything on the news is built around playing with your fear. And it’s like they’re in there tweaking it and poking at it and doing anything to inflame it and have it come up. If you don’t believe me, just watch the news tonight or tomorrow and look at what the first things are they lead with and the first things that they talk about are. Generally, they’re selling fear and being afraid of things. And in fact, I can remember shortly after we had our first child, some article in a newspaper came out about how a certain brand of car seat had a one in 1 million chance of failing in an accident and potentially causing the death of a child that would be in that car seat at the time of the accident. And wow, there was this huge uproar and everybody in my family and on my wife’s side of the family and there’s this big uproar, “Hey, did you see this and you got this, this, this, and this is horrible and can you believe this? And what kind of car seat did you guys get? And make sure it’s not this brand or this model.” And I just sat back scratching my head saying, “Wow, everybody is just running around afraid.” And it’s just some piece of information. It’s a one in a million chance that there’s a lot of other ways that a baby could die that are far more likely. But logic tends to go away when we let fear come in and dominate. Don’t listen to the news, don’t listen to the financial pundents and the talking heads. All they’re going to do is make you feel fearful toward being invested in the market.

I’m going to give you one data point to hopefully calm and rest some of the fears you might have about the market. They are…or it is this. If you take the US stock market from the time it began until today, and if you were to take a 15-year window of time, anywhere along that timeline spectrum, so you could say from…I wanna look at from 1980 to 1994 or 1829 until 15 years after that, just so you could pick any window of time, how many of those periods end with a negative return? Meaning if you started with $1 at the beginning of it, 15 years later, you’d have less than $1 value in having invested in the stock market? Guess what? It’s zero. Zero. Long-term investing is ridiculously safe. Ridiculously safe. Yet we allow fear to come in and influence us to think it’s not safe. I have news for you. If you’re 25 years old and you’re not planning to retire until you’re 65 and you are starting to save and invest for retirement, so in 40 years, guess what? Let it ride, let it rip. There is nothing to be afraid of. Now, I’m not promising or guaranteeing returns. I would never do that. You know me and you know I’m not gonna do that, but your best chance is to get in and swing at that pitch. It’s your best chance. You could lose everything. Yes. The whole US stock market could fall apart and all the companies in your index fund, you have exposure to 2,000 or 3,000 companies and they could all fail, but my guess is there’s gonna be a lot worse going on that we’ve got to deal with if that was the case anyway. Your best chance to create that best outcome is to get in and swing.

The last piece of advice is this. You’ve got to throw out yours and other people’s biases. Somebody might have had a bad experience investing and now you’re gonna allow that fear to come in and dominate. You or you yourself don’t understand it and that makes you afraid of it. Well, that’s a bias that may or may not be true. We have to take the time to understand and drive into these things. So, be willing to call out biases that might be stopping you from cultivating your assets. Challenge them, look at the data, look at the information. Nobody can promise you that you’re gonna get a certain return if you’re investing in the stock market, nobody can promise you what the timing is you gonna be on all these different things. Nobody actually really knows what’s going to happen. All we have is historical data that tells us that over time, the longer you’re invest in the market, and if you’re not flipping in and out and getting in and out of security and selling low and buying high as the emotional roller coaster goes, you’re gonna be fine. And in fact, you’re gonna do well. That’s what history says. Nobody knows what’s gonna happen exactly in the future. But this much, I can say, if you want to truly cultivate your assets and build your net worth, you have to overcome the fear. It’s okay for some of it to be there, but you’ve got to offset it. Don’t rush into things, take time, get off the sidelines and get into the game, get help where you need it. Don’t just trust what people say, definitely engage and learn and then certainly trust an expert to help you understand risks and how everything works, but don’t ignore it. Get in there and learn and do your own homework. Do not listen to the news, it plays to stoke up those fears and have you make really bad decisions. Like if the market’s gone down, you’re saying, “I just can’t handle this anymore, I’ve got to get out.” And that’s the lowest point in the market or when it gets really, really high, you’re thinking, “Oh, I got to get in now.” Because there’s a lot of exuberance and excitement and momentum in the stock market. Well, guess what? All the studies and research show that the quarters before the stock market comes down, generally there’s a huge influx of money going into the market. And then the same on the downside when the market is hitting its lowest points, those are the moments that people are pulling money out the most rapidly or at the highest volumes because people haven’t learned how emotions impact their behaviors when they’re trying to cultivate their assets.

So, if you remember nothing else from this podcast, I just want you to remember this. Me as an eight-year-old baseball player scared to death to swing the bat. I had let fear completely take over me and ruled the day. Luckily, since then and through the rest of my life, I’ve learned this important lesson. I will miss 100% of the pitches I do not swing at. I have to face my fear and overcome it and I have to apply that even to cultivating assets. You need to understand your emotions, but don’t let them stop you from making the right choices and engaging in the best behaviors that are going to help you cultivate your assets and build your net worth. So, all of this key principle centers on that key point, overcome the fear and engage and do the things that the experts and all the academic research and even your advisor are telling you are the best things that you should be doing when it comes to cultivating your assets.

Now, we’re gonna finish up this “Cultivate Your Assets” podcast series in just a few more episodes. And then most likely I’ll probably be moving on to “T” in the impact your net worth model, which is terminate your debt. And we’ll go through several series of podcasts on that topic as well. Many, many thanks to you for joining today. This is a wrap for episode 29. Happy day.

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About the Podcast

Join Chief Financial Officer Ken Kaufman as he helps you track and hack your net worth. For those seeking financial independence, your net worth is one of the most significant measurements of success. Using his two decades of financial experience, Ken Kaufman helps you overcome your financial obstacles and look onward towards a better, brighter financial future.


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