This Is How To Move From Anxiety to Confidence

Paul Winkler: Welcome. It is “The Investor Coaching Show.”

I hope all of you are well and out there spending, spending, spending, spending, spending, spending on Small Business Saturday or whatever they call it. I think that’s what they call it, right, guys? Small Business Saturday. You’re supposed to spend at some small businesses?

Nik: Yes.

PW: Yes. Okay. I was just making sure I get this right.

Lovetecus Allen: Maybe?

PW: I think so. I think that’s it. And then yesterday, you were supposed to be spending at the big box stores and hope you had something left over for the next day.

LA: We did, we did, we did.

PW: You go out and spend? Did you get me a present? You got me something for Christmas, didn’t you?

LA: I looked for all of my friends that gave me so much love throughout the year. Because you know, Paul.

PW: Who? What? Who gave you so much love throughout the year?

LA: Oh, like you.

PW: Oh, there you go.

LA: I’m not trying to kiss your woo. But it is what it is.

PW: That’s so funny.

LA: Yeah. Yes, we did. We gave back on Thanksgiving Day.

PW: All right, all right. I trust that you had a lovely Thanksgiving.

LA: And we gave back on my birthday.

PW: And your birthday. That’s true. You had a lot of stuff going on, man.

LA: Mm-hmm.

PW: You had a big week. All right.

LA: Yeah.

PW: All right. And Nik has been out there —

LA: What’d Nik do?

PW: — traveling all over the place. He’s a traveling man.

LA: What’d he do?

PW: He’s been up in Indiana, he’s been to St. Louis.

LA: St. Louis! Hey, that’s where I’m from.

Nik: Nice.

PW: Well, there you go. He’s making it big.

Nik: I’m moving around.

PW: He’s moving on up. Moving on up, as they say in the old song.

LA: Good for you, brother.

PW: Okay, so let’s see. Happy Thanksgiving, everybody. Hope you had a wonderful time. It was fun.

Figuring Out Life

I have a couple things that I’m going to share today that I think are going to be really fun because people have these hang-ups over Thanksgiving. They go and they hang out with family, and you know the strife that sometimes family can bring. It seems like everybody has that kind of story, those people in their family, they’re going, “Oh my goodness, SMH, man, shaking my head.”

And I have a really good time when I go because I enjoy it. I really do.

I had this one nephew I was talking to, and he comes up with some stuff. I’m telling you, this guy sits around and he watches YouTube videos, and has some really good things that he gets his head into. Really interesting things.

So I’m going to share something he shared with me, and I’m going to share some excerpts of something because it was fascinating and it does have something to do with finances. I’ll twist it so it has something to do with finances because it’s interesting and I want to share it with you.

He and I got into conversations about just the stuff going on in the world. It was fascinating, the ebb and flow of the world and what’s happening, what people are worried about. I’m always interested in what people are worried about, what fears they have, the things that are keeping them up at night.

LA: Before you start this, how old is he?

PW: How old is he? Oh gosh, David. He’s in his 40s, I think.

LA: Okay, okay.

PW: Yeah. That’s really embarrassing. I should know. Even better, I should know his exact age, but I just don’t.

But anyway, so I was watching this one video, and it made me think an awful lot about some of the speeches that I’ve given over recent years, in all seriousness. And I’ll get into some investing, financial type of stuff, but this is just a life type of video.

And it reminded me of so many things that I have talked about over the years that I thought I’d start the show just talking a little bit about just the subject matter that they were getting into. And it was basically this on YouTube.

Oh gosh, I can’t even remember the name of the video. I should remember the name of the video. That’s really pathetic.

But it was a video on … it was like “Life in 15 Minutes” or something like that. Something like that to that extent.

It was getting life figured out. I think it’s an oversell to try to say, “I can get life figured out in 15 minutes,” but I think that some of the things in here were really, really good.

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We talk about investing all the time here, financial planning. And what are we trying to do? We’re trying to improve our lives. 

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We’re trying to get to some place where we can do the things that we really want to do instead of spending so much time on things maybe we don’t want to do.

Effortless Investing

Now, work is a part of life. That’s how we earn an income. And hopefully, a part of all you earn, you get to keep.

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The idea with investing is: You put some aside, you live on less than what you make right now.

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And then at some point in the future, you actually have something set aside that you can live with when you may not be able to work. You may not want to work. You may have other things that are priorities that you want to accomplish.

You may want to do some things that have been lifelong dreams. For some people, that’s a big deal.

But they’re making a point that life was easy. And it says if you think about it, if you read books on wellness, you could read a book and it’ll be 300, 400 pages, however many pages, but it’s basically going to say the same thing. It’s going to be eat less, move more, right?

I often use that example, as a matter of fact, when I talk about investing. Investing’s really simple, right? “Buy low, sell high.”

Yeah. Super, super simple, but how do you do that? And so often, what we do is we end up buying high.

We buy after something has done well. We buy based on past performance. We assume that somebody has some kind of a skill, and that’s why their returns were good in the past.

We ask our friends, “Hey, how do you like your advisor?” “Oh, my advisor’s great, I’ve done great.” And you don’t know whether you’ve done well because the portfolio was well-managed or whether the person got lucky, because you don’t even know anything about it, because you’re blindly trusting or they are blindly trusting. And that’s typically what happens.

Mutual fund companies, you couldn’t give away a target date fund back in 2009, 2010, 2011, 2012. You couldn’t give them away. Nobody wanted them. And you found that there was very, very little investing in target date funds.

Not because they hadn’t been around for a long time. They had been around for a long time, but nobody wanted them. Why? Because the returns were awful.

Why were they awful? Because they were mainly focused on big companies, big U.S. companies that had basically gone through a dead decade, negative returns, up to 2012, negative returns. So who wanted that?

Now you look at it, it was something like 80% of the marketplace target date funds. Why the change? Well, because in most recent years, that is the area that has done fairly well. Not even the best, but it’s done pretty well.

And people think, Hey, this is pretty good. This is great. Effortless investing. Don’t have to think about it.

We Make Life Complex

Anyway, it’s easy. Wellness: Eat less, move more. Investing: Buy low, sell high.

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Relationships, oh, that’s not hard either. Just make sure you listen to each other. People want to be heard. They want to be seen. 

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They want you to know what they stand for, what’s important to them. That’s pretty easy.

It’s hard to do because we want to be heard too, so we talk over them, right? Everybody’s guilty of this. You point your finger at somebody, you’ve got three pointing back at you, right?

Care. Just give a rip about people. Care about them. Love on them.

So I always tell my staff, “Just don’t even think about yourself. Just love on people. Everything else will be just fine. Just absolutely love on people.

“Take care of them. Take care of them like they’re your mom and dad, and hopefully you liked your mom and dad, and you do that.”

And then success. Success is working consistently on something that is valuable. Solve a problem. The bigger problem that you solve, the bigger economic problem that you solve, the better.

If we look at how we make life, though, we like to make it complex. We like to make it really, really hard. And why?

Why is it that we do that? We make it hard because people will remain confused if it’s hard, right?

And I remember this guy that I worked with, and he would make financial planning really hard. “You need to set up a limited partnership in this. Oil and gas limited partnerships. And then what you need to do is make sure that when you set up this oil and gas limited partnership, you’re going to get tax credits on this thing.

“You want to get a tax credit, real estate. You want to get that, and you’re going to have money coming out of this investment, and it’s going to be paying a premium. It’s a real estate investment trust.

“And then you’re going to take the premium from that and you’re going to buy a variable universal life policy with that. Ka-ching, ka-ching, ka-ching. And then you’re going to take the tax credits, it’s going to offset it.”

And he would have this unbelievably complex financial plan. And by the time you finished listening to him, your head was spinning.

And he’d go, “Great. That’s what I want your clients to be looking like.” And we’d be like, “What?” And he’d say, “I want your clients so confused that they are putty in your hands.”

I was like, “This guy’s a crook.” And he didn’t last long.

Well, he did. He lasted a lot longer than he should have in the financial industry. I need to take that back. But the reality was that he was just trying to confuse people.

And that’s the same thing we do with life: Make it so stinking complex that you have to read 18 million books to try to figure it out, right?

And why is it that we make it so hard? Because if it’s simple, you don’t feel special.

It’s only when you have overcome a big obstacle that you feel special. You feel good about yourself.

If it’s easy, anybody can do it. That’s the thing. Think about it.

Trying Too Hard

The other thing we try to do in life, we try too hard. I dare you to try hard to sleep. It ain’t going to happen. You’re going to be up all night if you’re trying hard to sleep.

Try hard to make somebody love you. Yeah, good luck with that. And if you’re trying to float in the water, the more effort, the more likely you are to sink.

I remember taking a life-saving class. I was scared of the water. I hated water. When I was a kid, I did not like water.

And a friend of mine said, “Hey Paul, you want to take a lifeguarding course?” And I looked at Matt, my friend Matt, and I said, “Matt, I’m scared to death of water, so yes.”

I was like, “Whatever you’re scared of, just face it.” That was it. I don’t know where I learned that. But I learned that if you spend a lot of energy and effort trying to stay afloat in the water, you’re going to sink.

With effort and love and all that kind of stuff, you think about what happens with needy people: They drive people away. Needy people make people go, “Ugh, I got to get out of here.”

If you’ve ever played a musical instrument, think about what you’re doing when you play next time. You really think hard about the next lick that you’re getting ready to play.

And guess what? You’re probably going to screw it up. It should be effortless, but that’s not how we do life, right?

And we want to have effort without attachment. We want to do that. We want to put forth effort on whatever we’re doing without attachment as far as how things are going to turn out, how the chips are going to fall.

I always say, though, I walk through open doors. Whatever doors open, that’s how I have done things. If a door opens, I walk through it. I don’t really think about it a whole lot.

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You don’t want to get too focused on the outcome. It’s the process.

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When you talk about people who are going through struggle and strife, it’s usually because they’re so worried about the outcome. “What am I going to do? What’s the future going to bring?”

And I tell them, “Just live in day-tight compartments. Just think about what’s happening right in front of you.”

Another thing is control what you can. You can control your actions. You can control your reactions, but you can’t control other people.

Have you ever driven through Nashville traffic and you get really angry and you go, “Well, can I really control the traffic? No. I can control my response, though.” And it’s just like life.

Chasing Happiness

I was thinking about just the brain and how our brains work and how our minds work and the importance of sleep. And this guy was talking a little bit about this a little bit more in detail. I thought it was interesting. He was talking about cerebrospinal fluid and how it cleans the brain and how in the morning, you think a lot more clearly.

When you’re sleeping at night, I did not know this, that your brain actually shrinks during sleep. The cells contract and it allows the fluid to go through the brain and it cleans things. He likened it to a dishwasher. And I thought, Wow, that’s crazy cool.

Just think about that, having that, and why it’s so important that we sleep. And so often what we do is we get so anxious and nervous about life, thinking about, What’s going to happen next? and trying to get anxious over things that we have no control over.

And then what happens? We don’t sleep. And then what happens?

We wake up foggy-minded. And a lot of the things that we can’t control get to us.

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So the idea is that you just can’t chase happiness. If you try to chase it, it’s going to be running away from you. 

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It’s kind of like a cat. Try to get a cat to jump into your lap. If you like cats, that is.

LA: Not a cat.

PW: You like cats. If you like them, you might want them to jump in your lap, but if you try to get them to do that, forget it.

I got a couple of cats, and I could just tell you firsthand, they do not want to jump. My son just sits there, and boom, the cat … it’s almost like the cat knows. He’s not even trying, and the cat jumps into his lap. It’s just the way it works.

I remember “Psycho-Cybernetics,” a book that I read years ago, and it was talking about this guy, he was a plastic surgeon, and he was just talking about people who actually had plastic surgery, and they would look in the mirror afterward, and they didn’t see any difference. And it was the idea that we are like thermostats.

If it gets too hot in the room, you turn on the air conditioning. If it gets too cold, you turn on the heat. And we have this level that we’re comfortable with.

Parents Talking About Finances

That’s exactly what we find with lottery winners, people who do really well. Let’s say if you have a child and they inherit a bunch of money and they aren’t used to handling money, that’s a lot of times why it’s often a good idea for kids to have some kind of a clue what you’ve got going on financially, just to get them at least to the point where they know a little bit.

There was an interesting article in, I think it was in the Wall Street Journal or one of the financial publications, talking about the very, very wealthy having meetings with their kids and giving them some kind of an idea of what was going on and the trusts and things like that they had set up. Because a lot of times they end up inheriting a lot of financial wealth and they don’t know what to do with it, and they’re not used to having money, so they blow it on things. It’s kind of like the lottery winner that ends up back where they started just a few years later.

But there’s a lot more. I’m going to spend some more time on this right after this break because I want to talk a little bit about the things that we want to focus on.

LA: Is it because of no partnership within the relationship of being a parent?

PW: Well, a lot of parents don’t want to spoil their kids, and a lot of times they will have this no-talk rule, as we call it. And the idea being that talking about money, talking about finances, it’s impolite and it feels like bragging.

LA: Okay.

PW: So maybe we’re raised not to boast.

LA: Mm-hmm. Yeah. Yes, sir.

PW: So hence, we don’t talk about it. Maybe we’re worried about stymieing the motivation of our kids. The idea being that if they see that we have all of these finances, maybe they won’t work so hard because they’re just going to rest on their laurels.

But the reality of it is, people living here, you take a person in their 60s, a couple in their 60s, the odds of one of the two of them at least being still alive in their 90s is really high. Incredibly high.

LA: Really?

PW: Yeah. I don’t remember the statistics, Lovetecus, but it is incredibly high that one of the two will still be around.

So you may have kids who are in retirement for 10 years before you pass away. And if they haven’t saved, they haven’t done anything, it could be a long wait for them.

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So teach them about money now. Let them understand it.

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But a lot of times, parents just don’t feel very well-versed to do that.

LA: No, they don’t.

PW: It was an interesting little article I got on that too. I don’t know. There’s going to be a lot of stuff I’m going to cover today.

I’m going to get to more of this right after this. I’m going to take a quick break and be right back.

What Drives Our Behavior?

PW: If your Thanksgiving was anything like mine, it was conversations, interesting conversations. I always get into some fun conversations with family members, just talking about life and things that are going on.

Getting close to the end of the year and you start to think, Okay, what did I do this year? How did the year go? How did I want it to go? How did it go comparatively? 

And just thinking about life because a lot of times I have family members that are just like, “Paul, what do you think about this, that, and the other thing?” And we got into a conversation a little bit about just philosophy, life philosophy type things.

We were talking about how life is easy, and I’d actually run into a video that was very much a lot of the stuff that I typically teach when I’m up speaking in front of groups or universities, colleges. I’ll talk about these types of things.

But they were talking about meaning and growth and contribution as being the things that we want to focus on in life. And that is something that I strongly agree with. Happiness tends to show up when we focus on those things. And biases.

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We often find that our biases tend to drive our behavior a lot more than we think they do. 

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We look for things to confirm what we believe. Confirmation bias. And normally, if I want to take an action on something, there’s something that I want to do, I will look for things that confirm my beliefs so that it will justify my action. It’ll rationalize what I’m thinking about doing.

And halo effect is another thing that drives our behavior an awful lot of the time. How we make decisions quite often is driven not only by what we believe and we want to find things that confirm it, but we also find that we have this idea of the halo effect.

We give people credibility that maybe they don’t deserve. Maybe a pretty person is equated with being smart, for example. That’d be an example of that.

Loss aversion with investing. This is huge. So often, financial firms will push the idea that this thing is safe, this thing is protected, this thing is guaranteed, and the reality is guaranteed against what? Against loss.

And what they are saying is the opposite of that is investing in maybe something that seems to be very, very risky. Stock market-based, for example.

And they’ll say, “Well, that’s really risky. You don’t want to do that. Stock market’s really, really risky, so put all your money over here.”

Well, what do they mean by the stock market is risky? Well, you could lose your money there.

Well, if I’m diversified amongst tens of thousands of companies, for me to lose all my money there would mean that simultaneously, tens of thousands of companies would have to go bankrupt with no residual value. And that would mean that all their earnings went away. And that would mean that the companies, their real estate, their property, their intellectual property, their businesses, became worthless.

Well, if any of those things happen that caused me to lose everything, if that were to happen, how good would any insurance company, bank, or anything else that guarantees your money be? How safe would that be? Are you telling me that they would not be affected by that?

Loss Aversion

But loss aversion can really drive behavior, and investment advisors use this to try to sell products. And the idea behind loss aversion, if you’ve just never really thought about it a whole lot, there’ve been studies where they say, “Well, if you could win $100, what kind of actions would you take to win $100?” Maybe not win, maybe get $100, maybe I’ll put it that way. “Versus, what actions would you take avoid losing $100?”

And they find that people are much more motivated to avoid loss of $100 than they are to gain $100. So that’s the idea behind loss aversion.

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They know that in selling products. Because you’re more likely to sign on the dotted line if you think that you can protect yourself.

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But as I’ve said so many times on the show, with a lot of these products that are supposed to be safe, they’re supposed to protect your downside, people actually lose money. There’s a big lawsuit right now, matter of fact. Right now.

Who was it? My wife was telling me about it. There was a famous, oh, NASCAR driver, now that I think about it.

LA: Yeah.

PW: Yeah, you know what I’m talking about, Lovetecus?

LA: Yes.

PW: And I know I can say this because I remember the company well, because I actually worked with them years ago, Pacific Life. They had an annuity product.

LA: No way.

PW: Oh, yeah, yeah, yeah, absolutely. I used to do their life insurance. And that was my deep dark days when I was in that business, as I call it. Yeah.

And apparently that’s what’s going on right now. Lost a lot of money in this complex product, and these products are sold so often on the idea that you can’t lose money, that they’re protected and all of that. No, it was not. Not the case at all.

Emotion-Driven Decisions

Now, there’s also the 90/10 effect, and the idea is that we are driven by emotion.

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So a lot of times these products are so easy to sell to people because they buy on emotion and they justify with logic. 

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That’s the whole narrative from sales. “You’ve got to sell on emotion. Sell fear, use fear, greed, loyalty, trust.” Those things are emotion-driven decision tools.

And then justify with logic. And what happens is we rationalize things in our mind, and our rational part of our mind just narrates the trip. It’s all they’re really doing. It’s not really driving the bus.

There’s an interesting study about how the emotional part of the brain — and I don’t know how the heck they did this study, you just got to wonder — it processes things 500,000 times faster than the rational mind. And you go, “How on earth do you do a study like that to figure that number out?”

I don’t know. I have no clue, but I just think it’s interesting. I’m always fascinated by how the brain works.

And then memory, how memory works is another thing that’s just fascinating. We think that we remember things accurately, the things that have happened to us as kids. I remember when I was in the master’s program, psychology, and we got into talking about memory and how, when you recall a memory, you actually change it.

It’s kind of like Wikipedia, where anybody can get on Wikipedia and can change the page, right? They can change what’s written on there. It’s the same thing.

When you recall a memory, you’re not remembering the memory. You’re remembering things based on the last time you remembered the memory. It’s just wild how the brain works.

LA: Please don’t tell me that you made up Wikipedia too.

PW: No, this is an analogy. It’s a metaphor that’s used.

LA: No, okay.

PW: It is used to talk about memory and how it works. Then you have the 80/20 principle.

LA: Yes, yes, I know that. When you brought up Wikipedia, I was like, “Please don’t tell me that you were a part of that.”

PW: Well, so Wikipedia is just the analogy, and yes, and I know where you’re going with this, but that’s not where I’m going. That’s not where I’m going.

The 80/20 Principle

A lot of you have heard the 80/20 principle, the Pareto principle, like 20% of what you do gives you 80% of your results. I thought this was fascinating. You know that 20% of your clothes are what you wear 80% of the time? You just think about this stuff.

LA: Yes.

PW: Is that true for you too, man? I know it is for me. I looked in my closet and I have certain things I haven’t worn in I can’t even tell you how long. That’s the whole idea behind minimalism: Ditch the stuff you don’t wear.

LA: Well, you’ve seen my fashions.

PW: Well, you actually dress way better than me, so let’s just forget about that.

LA: No, no way.

PW: I’m wearing a sweatshirt today. Forget it.

LA: You’re an artist. I’m not.

PW: Yeah, not quite. Twenty percent of our effort gives us 80% of our outcome; 20% of people do 80% of the work. We’ve heard that before.

I was looking on Perplexity, and I was just looking at what percentage of people pay 80% of the taxes, and it’s 10 to 20% of people pay 80% of the taxes. The top 5% pay about 61 to 62% of taxes, top 1% pay 40%. So it’s a principle that stands in life. We see that.

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So what do we want to do? Focus on the stuff that really gives you results, things that are really important to you. What is really important to you?

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I was talking to a young guy the other day, and I said to him, I said, “What are your goals? What are the things that are really, really important to you?” And he listed out several different things that were really important to him. And one of the things, literally, he has a month to get it done.

And I said, “Can you put everything else that’s important to you on the back burner and really totally focus on this one thing that’s really important? Because everything you’re telling me, this is what’s floating your boat right now. This is the most important thing going on in your life.” And it was almost like he had never thought about that.

Cultivating Habits

That’s so often the case. We spend our time, waste our time looking at things we probably shouldn’t be looking at, watching things that we probably shouldn’t waste our time on. And most of what we do is waste, and we don’t want to major in the minors.

Relationships, we want to focus on the good ones. Who do we have around us that really lifts us up? Who do we have around us we want to spend more time with? And that’s what we want to do.

Whatever habits we want to cultivate, like exercise. Because habits are easy. You’ve got the cue, the routine, and you’ve got the reward.

And the idea, what the cue might be, is, “I’m bored.” Well, what’s the routine? “Well, maybe check my social media.”

And then what’s the reward? Dopamine, temporary hit.

What’s another cue we get? Stress. So what do we do when we’re stressed? Eat junk food.

And then what’s the reward? Temporary comfort. Maybe if I’m bored, call a friend, work on a project, jump into a hobby, and I can get the same dopamine. I can get a feeling of accomplishment, which might be a little bit better.

This is just the easy stuff. And that’s what I like about this thought process: that life should be easy.

Go in bite-sized pieces. How do you eat an elephant? One bite at a time.

Get 1% better daily. If you do that, if you just get 1% better, just a little bit better each day, after a year, you’re 37 times better than you were at the beginning of the year. Just a little.

Why is it that we have a hard time with this? And I think it really comes down to that we tend to overestimate what we can do in one day, and we tend to underestimate what we can get done in a year.

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We don’t think about the fact that if we just do a little bit each day, in a year, a huge amount will have been done.

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If you just read 10 pages a day, for example, of a book, by the end of the year, you’ve read 12 books on average. You save $5 a day. Let’s put this in financial terms. Save five bucks a day, at the end of the year, you save $1,825.

You go and do a couple of push-ups a day, and before long, you’re up to 40, 50, 60 push-ups. Well, maybe you don’t want to do it every single day. You just take a rest in between days. But the idea is just starting with a little bit.

And life isn’t about finding yourself. So often, people, that’s what they’re doing. “I’m trying to find myself.”

It’s about creating who you’re going to be, and that’s the idea. I think that’s the key.

I’m going to take a quick break. I’m done being philosophical. I got a lot of financial stuff coming, so stay tuned. Hopefully, you got something out of all that.

Advisory services offered through Paul Winkler, Inc an SEC registered investment advisor. The opinions voiced and information provided in this material are for general informational purposes only and not intended to provide specific advice or recommendations for any individual. To determine what investments are appropriate for you, please consult with a financial advisor. PWI does not provide tax or legal advice. Please consult your tax or legal advisor regarding your particular situation.