financial actions

TWS 46 | Financial Actions

Top 5 Financial Actions You Need To Take During These Times Of Crisis (Part 2)

June 4, 2020 Patrick Donohoe Podcast 00:28:03 Comments Off on Top 5 Financial Actions You Need To Take During These Times Of Crisis (Part 2)

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TWS 46 | Financial Actions

 

While nothing in this world is ever permanent, the current situation we are living in is definitely more than the change we have been expecting to see. The COVID-19 situation is becoming more felt by the day, challenging our financial capacities. Continuing from the previous episode, Patrick Donohoe reveals the rest of the top five financial actions we need to take during these times of crisis. These times may be shocking, but why not use that shock to snap you out of the situation and be in a position to adopt some new habits and new behaviors that will undeniably come in handy in another unexpected crisis? It is prime time to do that, and Patrick helps you kickstart with this series.

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Watch the episode here:

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Top 5 Financial Actions You Need To Take During These Times Of Crisis (Part 2)

Thank you for tuning into this part two episode of the Top Five Financial Actions to Take During Times of Crisis. I hope you enjoyed the previous episode. If you haven’t read it, definitely go back. It sets the stage for these more practical things to do. Go to TheWealthStandard.com, there’s a bunch of links as well as our Resources section of the website. I’m here doing part two, and this is where the rubber hits the road. For those of you who have been reading for a long time, I’m big being in the right mindset because I believe that is a precursor to the best decisions and the best actions to take, which ultimately leads to the best results. We live in very different times. We live in times that can throw us off-kilter and times that we’ll look back on and either celebrate for how much we benefited from them or on the contrary, we look back on times that destroyed us.

I go back to 2008, 2009 and I know families, people, and friends who have still not recovered, and this is years ago. Because they are telling themselves a story about what happened and why it happened. Typically, it relates to them. Not necessarily what they control, but it relates to the blame that they’re placing on others and also not using those circumstances to learn valuable lessons and do something about it. I believe these times are going to create those same exact two camps. The camps, the smaller one that capitalized on the environment, and then the one that tuck tailed, ran, blamed others, and played the victim.

I understand where people are at. I understand that there are so many that look at life happening to them, and that they should get this treatment, benefit, and people essentially serving them as opposed to them, figuring out how to properly serve others in order to serve themselves. That’s where I’m at. This episode is going to be interesting because we’re going to get into some very practical things. They’re things that very few people have done. I have had the opportunity to advise thousands and thousands of people and collectively with my team, more than that. We see the same things. It’s seldom we find these outliers and anomalies when it comes to how they manage their finances.

There are definitely signs of what has worked for people, will work for you. Now is the time to essentially use the shock that you’re getting based on what’s going on in the environment and use that shock to snap out of it and be in the position to adopt some new habits and new behaviors. It’s a prime time to do that. First was a state of mindset. Those two equations, state, stories, strategy, and principles, processes, products, in those sequence. Not executing a strategy until state and story is in line, and then not buying a product, creating a product if you’re an entrepreneur or business owner, or even like yourself as a product of service. It’s the principles first. What are the principles? Where’s their value? Where’s their exchange?

A salesperson is never going to tell you not to buy what he's selling. Click To Tweet

What’s the process that you use to deliver that? Finding those two out first, before you start to look at ways in which you can tweak the product, whether that’s yourself or something you buy as a product, investment product, financial product, or any other product. This comes down to the investment decisions that you make as well. It may be into a company that produces a certain product, but knowing the principle and knowing the process of that business is way more important than the product. Most people are infatuated by the product. That’s most important. State and mindset. The second is structure. It’s the routine that you established for yourself. Your morning, meditation, visualization, and spiritual routine. How you reach structuring your day using Craig Ballantyne’s Perfect Day Formula.

Another thing that I failed to mention in Part one is Tony Robbins’ Priming Exercise. These are ways in which you can establish your day. You don’t even have to think about it. It’s preprogrammed. You don’t have to spend energy on it. You commit and you do it. What that does is it positions you to make the right decisions and take the right action. The first action is cash and cashflow. The first thing is, you need to know where your expenses are. Know your money in, money out. There’s so much to buy these days that people are just that crazy about buying and subscribing to this little thing. Now is the time to slim down and trim the fat. There’s an awesome app that I use called You Need A Budget. It’s so simple and easy, so you know where your expenses are. Here’s what’s cool. You can start to use this app to figure out ways to reduce your expenses and to be frugal, which is going to be necessary.

The way in which we’ve consumed in the past is going to change. Supply chains are completely disrupted. You’re going to find that the goods that were expensive are cheaper than the goods that used to be cheap. Looking at how supply chains work, because of how clunky it is now, things are going to get stupidly expensive. I would do two things. Number one, you’re going to want to get a handle on where the money is coming from and where the money is going. Establishing that budget and then starting to trim down. The first thing I would do in trimming down is to prioritize because there may be some situations where you don’t have income for a couple of months. You need to know where to cut and what to cut. Instead of making a decision then, in the emotional frenzy, it’s determining what are the priority of your bills right now?

Going back to my 2008, 2009 experience, I prioritized my finances. I knew what I could get away with not paying and I knew what I had to pay. The biggest priority for me was my contributions. Contributing, whether it’s tithing or charity for you. The second thing became my family. It was the home we lived in and our transportation. I had a car repossessed during that time because we didn’t need two cars and there came a month where it came down to my priorities of bills and I chose those priorities, but I determined that in advance. I defaulted on quite a few business loans that I had because they weren’t a priority. Obviously, since then I paid everything back and got everything cleaned up from a credit standpoint, as well as the relationship I have with creditors, my credit score, and so forth. I’m fine now, but during those times of crisis, I had everything prioritized. Do that. Prioritize your bills. Know that if it came down to it, and you only could pay a few, which ones would they be? Knowing that in advance is huge.

TWS 46 | Financial Actions

Financial Actions: Sell stuff, get some capital, and donate.

 

It’s also a nice time to negotiate. This could be negotiation with your landlord. I’m doing that. The office space market is going to get hammered and cleaned out. I would be willing to bet that the way in which we office and work is going to completely change because of the experience of remote work. As well as having stringent finances and realizing that, “There’s a lot of expense that goes into my rent.” I have several months left of a seven-year lease on this building, which is a big building and way more space than I could ever use even when there are people here. We’re renegotiating because the lease is up and I know that then is going to be a different environment than now. I’m figuring out ways to cut there.

You also look at your cable bill and negotiating with that, finding new deals. I guarantee most service providers are figuring out ways to cut because so many people are canceling. They’re trying to figure out ways to discount this and discount that. If you don’t call, you’re not going to get it. They’re not just going to call you up and say, “We’d like to discount your internet bill, or we’d like to discount your phone.” These are times which you can start to negotiate, find deals, and cut your expenses, but still get the same services and goods.

Also, managing your credit. Most credit cards now give you a credit score for free so monitor that if you start to get credit dinged. This is going to be an environment where it’s going to happen potentially. You need to have the resources to be able to improve it. Lexington Law is a company that I’ve used personally for years and it’s an easy service. Most of it is automated and all online. This is also a time where I’ve seen some reports where you have a lot of people paying down credit. From a low credit standpoint, this is a time to not pay off your low-interest debt. I remember back in 2008, 2009, this is when banks were cutting credit lines like business credit lines and home equity credit lines. I had a big home equity line against my house and I drew 100% of it. I didn’t spend it but it’s in cash and it has a low interest.

I look at the banks closing that down, versus me having the cash and paying interest on it. I’m going to take the low interest on it every single day of the week. It’s going to position me for making better decisions and taking some action that I can take now that I may not have been able to take if I didn’t have access to cash. Evaluate your debts. If it’s a low interest, do not pay them down. Keep cash. Cash is way more valuable than paying off something that you can’t sell or getting the credit line completely cut and not being able to use it.

The time between depression and despondency is the ideal place to make a decision. Click To Tweet

Also, check out TheOrganicPrepper.com. They have a whole section on their blog about being frugal. Where you can cut how to grow your own vegetables. A lot of ways in which you can learn to cook. There are some things that you can teach kids, start to study, and also find opportunities to have fun that don’t require going to Disneyland, Disney World, or a vacation. Also, start to understand bartering. This is going to be an environment where I would say trade is going to be way more prevalent than it had been in the past. If somebody needs this, you can provide that. I believe this is the time to look for those opportunities.

Those are three for cash and cashflow. You want to have cash. This is where the dry powder idea comes from, which is number four, financial actions. Keeping liquidity in areas that provide interest but are susceptible to being taken. With my other company Paradigm Life, we specialize in insurance products and how they play a role in personal finance. I have pretty much all my cash in these vehicles and in well over a dozen different insurance policies. Insurance companies are contractually obligated to lend you that money. It’s one of those circumstances where I know that I have a tremendous amount of dry powder so that when opportunities do present themselves, I can capitalize on those quickly.

I earn good interest on what the insurance company pays me as opposed to what a bank pays me. Diversify your liquidity. There are a lot of emotional decisions that go into buying metal like gold and silver. These are the crisis investments, the crisis assets, and I have a lot of gold and silver. If you don’t have any, I would definitely encourage you to look into that physically. Tom Dyson, who was a guest a few months ago is writing postcards from the fringe. He talks extensively about gold and its role in history as far as how it has been used as the benchmark for money and is continuing to do that during this crisis.

It’s an already established rule. Despite how digital things have gone, it is already an established habit that people have as far as what is safe during times of crisis. If there’s ever an end to the long-term debt cycle, which we talked about with the Richard Duncan episode. Gold is typically the place to be because most likely the new long-term debt cycle is going to start with potentially a new reserve currency. Who knows? It is one of those assets that you know is safe during times of crisis. Remember, you need to be smart about this. Consult with a wealth strategist and a financial advisor in order to make the right decision there.

TWS 46 | Financial Actions

Financial Actions; Right now, people are heightening their game when it comes to selling, so put yourself in that emotional state where you can operate the three sides of the coin: heads, tails, and the edge.

 

I would also separate your dry powder from your general expense account. Create a savings account. Create something that you have rules attached to. I have rules attached to three accounts that I have where no money is spent out of those accounts and they don’t pay bills. They don’t pay off a credit card. They are not used for any expenses. They are used for opportunity. Create some side account or repurpose an account you already have as your side account, your dry powder account. Sell things during this time. Donate them to charity and get the charitable deduction, or sell them. Facebook Marketplace. You have local classifieds that are still widely being used. I have a friend I used to work out with, and he works for a classified section of one of the local news organizations and they’re blowing up.

Number five is investments and assets. It’s going to be a really interesting time because I remember back 2008, 2009 so many people got into investments, this deal, that deal because they were so emotionally vulnerable. It was crisis, fear, “I’ll buy it.” “I’ll subscribe.” “I’ll do this.” I’m starting to see a lot of it especially when it comes to gold and silver. It comes down to the dollar as the reserve currency is going to end. The story there is so emotionally driven that it leads people to make poor decisions. I’ve made them in the past. I bought a ton of gold and silver, because of these things, and I realized that it probably wasn’t the best decision I could have made relative to the other decisions that I had. You’ve got to be smart here because the sales acumen of businesses is going to go up a lot.

I’m not saying that sales is bad, part of my business is sales. What I’m saying is that, people are heightening their game when it comes to selling. Be aware of that and put yourself in that emotional state where you can operate the three sides of the coin. Heads, tails, and the edge. A salesperson is never going to tell you not to buy what he’s selling. He’s always going to tell you to buy it. That’s one perspective. What’s the other perspective? Most people don’t go to the other perspective. Go to the other perspective. What would the opposite of what he is saying be? Who would say it? Find a person that is somewhat credible that is saying not to do whatever you’re being sold.

Now you have the two opinions, you can sit on the edge and make the best decision. That comes down to seeing both sides, getting more information, educating yourself and now you’ve positioned yourself to make the best decision. That’s one thing to be aware of. Also, I would revert back to this emotional cycle. During the times of euphoria, it’s the biggest financial risk that exists. The time between depression and despondency is the ideal place to make a decision. It’s right at the very bottom where everybody’s saying not to do something. Blood in the streets is often the quote that’s used. When there’s blood in the streets, even if it’s your own, that is when you should buy. That’s not right now. That’s why dry powder or liquidity is vital.

Deals happen in disruption. Click To Tweet

We’re going to be going down through these emotional stages. Anxiety, denial, fear, desperation, and capitulation. “This investment is not for me, I’m getting out and never getting back in.” You’re going to see this. There’s so much money tied in the capital markets. There’s so much money in pension funds, 401(k)s and IRAs, it’s insane. There’s going to be a lot of selling because of what type of tsunami is going to hit. Whether it’s GDP, second-quarter earnings, or third-quarter earnings. It’s going to be crazy. At the same time, that’s one perspective. You’ve got to know the other perspective and when you sit on the edge, you can now analyze the additional information which is emotional states. That will help you start to buy in the right environments.

That’s where I would say a lot of the investments are going to come from. It’s during that stage, but at the same time, you know that I’m always big on business, that’s my biggest investment. I’m my biggest investment because I’m not meant to be a trader. I have a lot invested in real estate. I sold more than half of my real estate in 2019 because I knew we were in this bubble place. For me, I look at the biggest opportunity and it’s in business. That’s what I often communicate through this even though I do make investments. If you love investments and that’s a passion of yours, make it a side business of yours. That passion is going to give you information, expertise, and hopefully a lot of these ancillary things as far as your emotional state and the structure of things is concerned, the philosophical things and psychological things. That will help you be a better business person.

How I look at businesses is, leadership is number one. What leaders do is they serve. Whether you’re a leader or not, it doesn’t mean a leader in the formal terms, whether it’s a manager, an executive, or a director. I’m not saying that. Leader is an archetype, it’s a persona. That persona exists in you, it is inside of you. That king and warrior inside of you, male or female, it’s there. You just have to know what that is, identify it, and figure out how to bring it to the service you provide others. People gravitate toward leaders. They’re attracted by leaders. They follow leaders. Honing in those leadership skills allow you to leverage that, and then help and help a lot more people because doing it by yourself, is single-dimensional, and you’re only going to get a certain amount of output from that.

Make some investment in yourself even if it’s just time. Finding opportunities to serve and do it without the expectation of pay. If you think there’s something that would be valuable for a person, or valuable as a business, try to do it for free to see if it is valuable. Do more than what’s expected. Go out of your way to help people. Build and enhance relationships. These are things that don’t require any money but they do require the right state and mindset and also an identification of that leader inside of you. I would say this is a time that you’d want to double down. Do the things you’re most afraid of. Do the things that give you the most anxiety. Do the things that you were afraid to do in the past. Make the commitment and do it. The fear that exists is all mental. It’s all mental fear, but that experience will teach you some tremendous lessons and help you to identify opportunities, both in the short-term and in the long-term.

TWS 46 | Financial Actions

Financial Actions: If you can keep your head straight, keep yourself liquid, keep yourself lean, mean, and efficient, then you’re going to crush it.

 

Two more things when it comes to investments and assets. First, it’s the idea of asymmetric risk and reward. That’s where making small bets but getting huge upsides, or multiples of those bets. These are not the times that getting the standard long-term interest rate is relevant. Now is the environment to find deals. Deals happen in disruption. Don’t settle for small interest rates as far as your investments are concerned. Try to find the highest interest rates as it pertains to your tier one security guaranteed bucket. Your cash liquidity. When it comes from an investment standpoint, these are the times in which you can get multiples. You can get deals on them.

2010 was the best time after the financial crisis of 2008, 2009. Everyone said housing had crashed and nobody should get into the housing market. I got a few deals during that period of time. I know people that cleaned up because of buying during that time. Now’s the time that there’s going to be tremendous disruption and opportunities to make some good investments that give you this asymmetric risk-reward type of return. These multiple returns. Finally, it’s the identification of assets when it comes to cashflow. In the end, capital gains is going to become income. If you buy low and then sell high, that money is either going to be income or it’s going to have to go into another investment. Who knows what the investment environment is going to be then?

That’s where focusing on your tier two and tier three assets. As I talk about my book Heads I Win, Tails You Lose, these are assets that produce monthly or quarterly income. This is income that’s going to be consistent for a really long time. A perfectly leveraged income. Here is when more education and information is required on your part so you can make those right decisions. I’m not saying the capital gains isn’t necessary, but in the end, what gives true lasting wealth is income. Property values are going to tank, in my opinion. At the same time, those that bought for cashflow are going to be just fine. There’s maybe some slight disruption to rents but people need a place to stay. There could be some months between stimulus in responses by the government to help tenants and also help landlords where you may not get a month or two of rent.

At the same time, it’s going to be there especially if you bought in the right areas. Cashflow investments, there’s going to be a ton of those. There are always going to be people that have gotten in the game in the last couple of years, and it may not have been the right time. The reason why I sold my properties is I would never pay those prices for them. It was at such a high level and the cashflow wasn’t justifiable. The values were too high. I decided to sell. I don’t know if selling is appropriate, probably not. At the same time when it comes to the decisions you’re going to make in the years to come, that is where you want to get into investments that obviously produce a high amount of long-term cashflow as well.

That’s what I wanted to cover in this two-part series. These are some of the core financial decisions to make during times of crisis. I’m going to speak a lot to this as the months start to transpire, and the topics from guests as well. I believe that if you can keep your head straight, yourself liquid, lean, mean and efficient, you’re going to crush it. There’s a tremendous opportunity coming. I believe that if you guys continue to read, continue to implement what I’ve talked about, this is going to be a prime environment to establish personal wealth beyond your expectations and beliefs before. At the same time, you’re going to be able to help a lot of people. They’re going to need it. I mentioned tons of books, lists, graphics and terms. Make sure you also subscribe to the newsletter. Give me your feedback. I’d love to hear from you, Hello@TheWealthStandard.com. Thanks for reading. Thanks for your support. You guys are amazing and we’ll talk to you next time.

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TWS 45 | Financial Actions

Top 5 Financial Actions You Can Do During Times Of Crisis (Part 1)

May 28, 2020 Patrick Donohoe Podcast 00:31:57 Comments Off on Top 5 Financial Actions You Can Do During Times Of Crisis (Part 1)

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TWS 45 | Financial Actions

 

We are right smack in the middle of a crisis, and we are yet to see some ripple effects that will profoundly impact almost every aspect of our lives. Now is the time to be prepared and take some essential financial actions that will allow you to seize the opportunities that come once the worst is over. In the first episode of this two-part series, Patrick Donohoe elaborates two of the five things you can do to make the best, financially speaking, of the opportunity the current crisis presents. He talks about having the right state and mindset and creating a structure from which you can anchor your goals on. Join in and be prepared to make the best out of the situation and thrive in the post-crisis world.

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Watch the episode here:

Listen to the podcast here:

Top 5 Financial Actions You Can Do During Times Of Crisis (Part 1)

I’m doing this one solo. There are going to be two parts. The first part is going to be probably number 1 and 2 of what I consider the Top Financial Actions to Take During Times of Crisis. Part two will consist of the Final Three Actions During Times of Crisis. I felt it was important to speak about this. The guests that I’ve had on before, we’ve all spoken to what’s going on with regards to COVID-19. The disruption to the economy. As I’ve had some time to digest, to think about, what is going on? What are the ripple effects based on this rock in the water? How long is it going to last? What are they going to be? What to pay attention to? I’m finally ready to start speaking to that. Things that you as an audience can do to prepare yourself to capitalize on the situation. That’s what I’m going to start into. There are a lot of updates that we’ve been making through the show. We’re creating our resources page for you. You can find it at TheWealthStandard.com. It consists of some of the businesses of guests that we’ve had. It also consists of courses that I’ve done. Let’s go ahead and get into it.

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As I look back the world has changed dramatically and it’s happened quickly. I remember 2008, 2009 where I was in some pretty rough shape. I was starting a business and having the financial crisis in sue, it felt quick. It was one week after another week, and it continued to get worse then it gets better. It was one step forward, three steps back. I look at where we’re at as a society and it’s been interesting. It’s easy to talk about the things that you can’t control. It’s easy to put blame on media. It’s easy to say this or that regarding where the virus came from and what China did or didn’t do? What the president should or shouldn’t have done? There are many things that we focus our attention on that we have no control over.

I got caught up in that and I get it. These are some dire times and often when we start to hear statistics and soundbites, it engages this unconscious part of who we are and we start to react to things. I’ve caught myself to that a number of times. At the same time, the guests that we’ve had on and what we’ve talked about, as well as some of the material that I’m reading, videos that I’m watching with a lot of time to study and reflect that I didn’t necessarily have before. I’ve come to at least conclusions to the point of, “What can you do to influence your life?” Some things that you can do, you can control things to be aware of so you can make the best of this and you can capitalize on this opportunity.

Firstly I’m going to dive into is, we’re going to be experiencing some ripple effects. What’s a ripple effect? Ripple effect is, a drop us a stone in the water or rock in the water. You can even have an earthquake under the ocean and you have a tsunami. There’s obviously a spectrum of how big a ripple could be, the magnitude of a ripple. We don’t realize that it wasn’t an earthquake of sorts. It wasn’t a pebble or a rock in the water. It was an earthquake. The earthquake waves are still coming. Some of the statistics that represent this is, if you look at quarter one January, February, and March, we only had disruption to the first quarter in the latter part of March. If you look at productivity, there are different measurements of productivity of people.

The Bureau of Labor Statistics has a couple of them. It was down in quarter one by negative 2.5% which is huge. You have the velocity of money not to get into the complexities of it. When I spend $1 at a coffee shop, the coffee shop then pays their employees and the employers spend money, and then the businesses that the employees spend money. There’s this money multiplier. M2, which is one of the common ways to measure the velocity of money has also gone down significantly, and the stimulus that is done. Whether it’s quantitative easing since 2008, whether it’s what they’re doing now, it’s not working at all. It’s keeping things at bay.

Humanity rises in times of massive disruptions. Click To Tweet

We had some employment figures out, which were shy of 15%, but it didn’t take into consideration some critical weeks. There are estimates that unemployment’s 20%, 25%, maybe even more when you count underemployed in there. GDP is going to take a massive hit because nobody’s out. Nobody’s spending. That right there is going to be a big indicator as to how severe, what the magnitude of this earthquake is. The psychological impact that we’ve experienced. I was talking to my parents, they live in Massachusetts and it’s different here in Utah. I’m from Connecticut, partly from Massachusetts. There’s a term called “maskhole” and it’s coming out when it comes to the masks.

My dad got shootout by these old ladies when he was standing in line and he goes down the wrong aisle or doesn’t go the right way in the aisle. The psychological damage where people are afraid. Whether there’s a reason for that or not, it’s the fact that there is psychological damage associated with people washing their hands, wearing a mask. There are some psychological things that are going to inhibit business, whether it’s theaters, transportation, going to stores in general, people interacting, which is going to have long-term effects. You also have travel. We’ve become this connected world.

This idea of globalization where different countries are doing different tasks. We’ve created a global supply chain because of it. Demand comes from this country, but yet a piece is manufactured in China, in Europe, in South America, Africa and everything comes together. That’s all been disrupted. The earthquake is hit but we haven’t seen the waves. We’ve seen some ripples or maybe some signals as to what’s coming. There are many different reasons why we could be concerned for all of this. These are things that are outside of our control. On this show, I’m going to keep repeating this, it’s based on things that are within our control, having the information that we have.

It’s powerful to look at this from how I view things because I’ve gone through some difficult times, but these are difficult times and nobody’s ever gone through. It will be interesting to see how humanity rises to the occasion. We’ve talked about the idea of creative destruction. Joseph Schumpeter, the idea that, “When there are massive disruptions, humanity rises.” Humanity is going to rise. I know that they’re going to rise. They’ve done it for millennia, they’re going to do it again and figure out ways to be more efficient, ways to create a product, and ways to create the new ways of being entertained and the list goes on and on.

The biggest thing I would say is as this disruption occurs, it’s in a person’s mind as far as what they think something means. The meaning of things is being created by the populous and collective. That’s why it’s important to have your own individual perspective information, trying to prove and disprove not just your opinion, but other opinions so that you can come to the truth. If you could do this, it is known that these are the times where the greatest opportunities are. There’s a field of study called Behavioral Economics, which talks about how people behave around money. It relates to everything.

TWS 45 | Financial Actions

Financial Actions: The psychological impact associated with this crisis is going to have long-term effects on business and human interaction.

 

It’s behavior in general as far as stimulus and then the response, what a person does given a set of circumstances that they are exposed to. There is a curve. The curve that I’m going to post is the investor mentality, but I’d also say it’s the business mentality because, during these times, there’s a story going on in people’s minds. We’re going to go back to the way it was. We’ll be able to hang on for a month and then we’ll do a lot of business and be able to pick up there. Businesses are going into the hole. It’s hanging on, hoping that things come back. This curve states that the point of maximum financial risk is where there is maximum euphoria. The whole idea of nobody buys low and sells high, everybody buys high and sells low.

I often post at my other company Paradigm Life our eLearning in our courses called the Dalbar Report. Dalbar is an independent research group. It studies the average returns people receive. It’s mainly alluding to the impact of human behavior when it comes to rates of return, not necessarily market indexes. These emotional stages that you euphoria where everyone thinks everything’s amazing this is leading up to 2020. 2019 was an amazing year for people, investors, markets, businesses, capital, and liquidity. This is the next stage of the curve, which is anxiety and denial. There’s some anxiety now. You started to see sell-off, but there’s like, “I need to get back to work.”

You see people protesting. Denial that this is going to have a long-term impact. Fear is the next stage and then it’s desperation. These three are the ones to pay attention to, denial, fear, and desperation because they can oscillate back and forth. After desperation is panic. I don’t think we’ve seen desperation yet. There’s the next stage, which is the capitulation. Maybe the investment and this business isn’t right for me. You start to see people file bankruptcy and retire early. You have despondency and between despondency and the next phase, which is depression, this is the point of maximum financial opportunity.

State And Mindset

There are other perspectives as far as this is concerned but this curve is consistent with how humans behave. Most of our behavior is unconscious. It’s pre-programmed and we operate in a similar way. That’s why this field of study has been created. That is number one, as far as what you can do to prepare yourself to capitalize on this opportunity, which is state and mindset. I consider this being the watchman at the gate of your mind. What does that mean? I’ve tried to structure the way in which I lead, do podcasts, speak, show up for my family, and show up for myself, is in a sequence. The sequence is state, story and strategy.

State is something I’ve discussed in the show. State is a function of our physical well-being, where we’re focused, and the language that we use. It’s how we describe things. There’s a difference between like, “Crap,” and “Wow, this is interesting.” Even though it can be applied to the same situation. I also look at focus. It’s what I have, not what’s missing. What I’ve gained, not what I’ve lost. You can look at anything, any situation, any circumstance, and find that there is something you will gain from it. This is all unconscious, at the same time most people gravitate toward what they’ve lost. For me, what I’ve focused my attention on and improving is my leadership capabilities, my leadership state.

With the right mindset, you can look at any situation and find something that you can gain from at the moment. Click To Tweet

Being in a zone so that I show up for my team, the audience, and my family because I know that most people are not going to respond in a strategic way. They’re going to respond in a carnal instinct way. How do you do this? First off, you’re going to recognize that there’s going to be way more bad news than there has been already and a lot of it is going to be economic. The economic is going to cause even more ripple effects. It’s a main ripple effect and then multiple ripple effects. As some of you know who’d been reading, when we started to shut down, I sent my office home when we had an almost 6.0 magnitude earthquake. I was here in the office. I was the only one. The building was shaking and swaying back and forth. It was crazy.

The reason why I brought that up is that there have been aftershocks and there’s still going on. It freaks my wife and dog out. For me, I look at, “We’re going to get a lot of aftershocks.” When the earthquake hit, we’re going to have a tsunami, ripple effects, and aftershocks. Those are going to carry ripple effects as well. The worst has not been seen yet in my opinion, from an economic standpoint. I look at being prepared, being in the right state of mind, is going to position you to create a tremendous amount of value for people and capitalize on some amazing opportunities. People will identify leaders more in this environment than in any other environment. In the euphoria environment, it’s difficult to stand out as a good leader.

In times of crisis when difficult decisions need to be made, that is when true leadership steps up and is identified. It’s the yin and the yang. The more severe the state of things in the environment, the more it creates like, “That person is an amazing leader.” The other end of the spectrum is also extended. We’re seeing murders, suicides, home invasions, and tons of crime. People are going stir crazy. The emotional intelligence that exists in people is low. What that does is present a huge opportunity for you to step up as a leader and help a lot of people with who you are in the state that you’re in.

The idea of state leads the story. When you’re in the right state when you’re looking at the glass half full as opposed to half empty. What you have versus what’s missing, what you’re grateful for as opposed to what you haven’t been given or what you deserve or you feel entitled to, it’s also one of those ideas of words because words describe what our story is. What words are we using? Are you using unbelievable or are you using, “This is horrible?” Unbelievable is a word that can connote whether good or bad. At the same time, it doesn’t have the tone or the psychology piece to it to be bad. It’s carefully choosing your words.

Being the watchman at the gate, not letting those thoughts come in, knowing how to position yourself so you can do something about it. The final thing that I would say in regards to a state in mindset is another sequence. The state that you’re in, your physical well-being, what you’re focused on, the language that you’re using, the story that you’re telling. What is going on? It’s disruption. This is a great opportunity. I have a lot of opportunities to serve. Finally it’s strategy. It comes down to the how. First define what the how is, what is the outcome that you’re looking for?

TWS 45 | Financial Actions

Financial Actions: Being in the right state of mind is going to position you to create a tremendous amount of value for people and capitalize on amazing opportunities.

 

You start to create your game plan based on that, but you don’t create the game plan before you’re in state and then have the right story associated with it. The final thing is, another sequence that I’ve been using a tremendous amount, especially when it comes to financial advising, are principles, processes and products. Principles are laws of sorts. Gravity is a principle of nature. Honesty is a principle of morality. You also look at other principles when it comes to finance, interest rates, and evaluations. There are principles out there that can be identified. There are also principles of commerce exchange, exchanging with one another, exchanging your services and getting something in return. You also look at principles in people.

Structure

People are the true assets. I look at relationships as some of the most valuable assets. Its processes, which is the structure of things. This is going to be number two. Number one is state in mindset. The reason why I want to use structure is because there’s only so much energy we have during the day. It’s an allotment of energy and keeping yourself healthy, keeping your head and I’m going to get into some structure and some strategy as far as how to do that. Being able to have energy focused on the dynamic. Not the approach reoccurring or recurring, but the dynamic, it’s powerful. That’s why structure is powerful because you can set yourself up so that you don’t have to think about things.

Things are done in a certain way. You have a routine, you have habits that allow for all the energy to be focused on dynamic things the day-to-day decisions that you maybe didn’t have to make the day before. The decisions for an opportunity, new content, and ways in which you can be a better leader and do those things. It’s establishing essentially a structure so that all of the routine things you do on a daily basis are pre-programmed. You don’t have to waste your energy on that. An example I heard maybe to illustrate this point is, when we get up in the morning with an alarm clock, the buzz when that goes off, it ignites in every human being an adrenaline rush.

Our DNA associates that sound the same way you would associate being attacked by a Saber-toothed tiger 10,000 years ago. When that happens, it jars us out of bed and expands the majority of our adrenaline, testosterone, those chemicals that have our body respond that way are expended for the day and they’re gone. There’s a strategy there as far as waking up with peaceful music, which doesn’t necessarily waste those valuable chemicals that you expend and allows you to apply those at different points during the day. What I would challenge you to do is, start to establish a structure for this summer. The next few months are critical. Some of the hardest times are going to come after the reportings from Q2 or quarter two ends in June. The reports usually come out mid to end of July. Creating all of this now is going to prepare you. When a lot of these things go sideways, you have structure, you’re not trying to figure it out then. It’s optimizing your energy.

Craig Ballantyne who wrote The Perfect Day Formula is applicable. Some of you maybe had your routine and it wasn’t necessarily as valuable as it should be. Revisiting daily routine, structuring your day, and your priorities. Perfect Day Formula from Craig Ballantyne is ideal for that because Craig is a genius at that. He’s done that with many entrepreneurs and business owners. It’s a short book and it’s simple. Perfect Day Formula as a resource there where you can start to structure your day and you systematize the predictable. There’s a saying that we started using with my other company Paradigm as how we’re operating and what we’re looking for as far as opportunities are concerned. It’s a saying by the Four Seasons Hotel, which is called “Systematize the predictable so that you can humanize the exceptional.” What that means is, it’s all those routine things that you do on a daily basis. It’s the setup structure for those things. One way in which I have re-evaluated my goals to finalize the redo of some of my annual goals. The way in which I’ve done that is using what’s called the Wheel of Life, which is a self-assessment.

Identify the areas where you can make the biggest difference and create your goals and routine around them. Click To Tweet

The Wheel of Life is essentially a wheel in which you rate the different aspects of your life, your physical well-being, financial well-being, mental well-being, spiritual, relationships and physical situation. You rate yourself there and it starts to help you evaluate where the areas are that you can make the biggest difference in. You start to create your goals and your routine around that. This is important because the goals that you may have set, they’re probably not realistic anymore given that the environment has changed, at least not all of them. That’s why I’ve reevaluated all of my goals. Looking at establishing where those goals are, that’s going to help propel the daily routine.

Craig talks about it in The Perfect Day Formula, you can start to chip away at some of those goals and have something simple to do on a daily basis and make those micro improvements toward the end results. The morning routine as far as structure is concerned is huge. I’ve redone my morning routine. I come to an office and there’s nobody here. It’s completely quiet and dark. Everybody’s working from home. We have a daily standup with my team, but it’s given me the opportunity to not have any distraction or disruption. I always get the knock on the door when I’m in the middle of something. I don’t turn people away. It’s one of those things where it’s allowed me a lot of time too to be consistent with some of the things that I find valuable.

What I started using is a neurofeedback device called Muse. Muse is a feedback part of meditation. What it does is it allows you to see where you’re at when it comes to your mindset. It’s not expensive at all. I do it on a daily basis. What it does is it shows you where your brain activity is with sounds. When you’re active, all over the place and thinking about this and this, you’re in an active mindset and it measures that by the severity of weather in the environment. You have to wear earphones associated with it, but you’ve got the desert, the rainforest, and the ocean. There’s one that’s general sounds, but when you are active, not calm and not focused, the weather is all over the place. What it does is, the weather and it gets less severe and calm the calmer you get. Eventually, you have birds that start chirping when you are calm and in the zone.

There are days where I don’t get any birds or 1 or 2. There are days where I get 50, and this is in a ten-minute timeframe. What it does, it gives you feedback so that you’re not telling yourself stories. It gives you actual feedback so that you know where you’re at and you know how much time and attention you have to focus on your meditation, your gratitude getting in the zone. That’s one thing that I’ve started doing. Now that I have my goal is getting restructured, I’m sitting back and once I’m in the zone, I start to ask myself strategic questions.

These questions, you don’t have to ask them all in one day. I usually ask 1 or 2 per day. I learned this from Keith Cunningham, Keys to the Vault and there are a few other books that he’s written. The questions are insightful and asking yourself these questions in the wrong state can be catastrophic. That’s why being in the right state, doing meditation, getting in that zone is powerful. The questions are like, “What do I want? What in my control is preventing me from achieving that? What don’t I see? What if I’m wrong? What is the result that I would be ecstatic about? How can I make the biggest difference? How can I be the best conversation on somebody’s day? Who do I need to call? Who do I need to write? Who would benefit from a conversation with me?” This is a big one. Maybe a whole thinking session dedicated to this. “Why am I paid? What must I believe about myself to be paid more? What are the ways I can go above and beyond what is expected that I am not paid for?”

TWS 45 | Financial Actions

Financial Actions: Structure is powerful because you can set yourself up so that you don’t have to think about certain things.

 

Here are a few others. “What is the least amount I can earn and live an unbelievable life? What am I spending money on that is not producing the result I want? If I could devote time to one thing, what would it be? What about if my life gave me tremendous enjoyment many years ago but doesn’t now? Is there an opportunity there?” These are a few. These are profound, insightful questions that you can find online. It may not feel like it’s that significant, but asking yourself these questions creates tremendous breakthrough and insight as to where opportunities are. The reason why I wanted to start here these first 2 of 5 things to do in a financial crisis, is because being in the right state, having the right mindset and then structuring your day so that all the different routine, things that you do, don’t expend any unnecessary energy. It will position you for making the best decisions given what’s going on.

The next three are going to be cash and cashflow, dry powder and investments, and assets. I wanted to cover this again because it sets the stage for where the opportunities are, as well as a dry powder, which is more opportunity fund. If you are familiar with the language I use in the book, Heads I Win, Tails You Lose. Finally, investments and assets and we’re going to revisit the financial, the behavioral economics curve when it comes to most the collective state of mind. Where in that state of mind are the best opportunities and the worst opportunities to make a decision or take action on something? Thank you for reading this episode. I will talk to you next time. Take care.

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About the host

Patrick Donohoe

Patrick Donohoe

CEO Paradigm Life

Patrick is the President and CEO and started Paradigm Life in 2007 after learning from his mentor Kim Butler about financial strategies outside of Wall Street.

With a background in economics and marketing, Patrick immediately realized the opportunity to teach investors, business owners, professionals and families on a large scale using modern digital media and communication technology. Since 2007 Paradigm Life has worked with thousands of individuals in all 50 states.