Maintaining Daily Discipline: Reflections from my CFP® Exam Preparation

Written in November before the Spring CFP® exam

I’m writing this post as I slowly sink further into my comfy armchair at 7:37am on a brisk Sunday morning in the Inner-Richmond district of sunny San Francisco. On the coffee table in front of me is a piping hot cup of Fog Chaser and a water bottle dripping in perspiration. Jazz instrumentals play softly from the small speaker on the floor and my desk lamp emits a cozy glow, setting a coffee shop-esque mood. Pens and highlighters litter the table and my study materials balance precariously on the armrest beside me. Every detail is conducive with productivity, and yet here I sit trying to find inspiration to begin today’s studying for the Spring CFP® exam. After about 15 minutes of alternating between social media on my phone and Reddit on my laptop, it occurred to me how often I go through this charade of “will he, won’t he.” Whether my mind is fresh on a Sunday morning or weary after a day at the office, maintaining the diligence necessary to sacrifice my precious free-time is an exhausting endeavor in itself.

About a month ago, another CFP® candidate emailed me an article written by Shane Parrish which explored US psychologist Mihaly Csikszentmihalyi’s concept of ‘flow’ for finding purpose and happiness. ‘Flow’ is essentially the mindset that allows people to be so absorbed in their work that it no longer feels like work. Csikszentmihalyi discovered certain commonalities people share in attaining ‘flow.’ Can you figure out which one I’m struggling with? (hint: it’s bolded)

• “Intensely focused on activity (busy but not rushed)
• of our own choosing, that is
• neither under-challenging (boreout) nor over-challenging (burnout), that has
• a clear objective and that receives
• immediate feedback”

Inspirational feelings don’t last and long-term success results from solid daily habits. When people say “I’m struggling to find motivation,” they really mean, “I wish having daily discipline were easier.” Feelings of motivation are fickle, only arising when the situation is right (and rarely when it counts). In reality, the discipline required to successfully complete the painfully slow process of obtaining the CFP® designation requires consistently being able to summon a feeling of purpose in the midst of your daily struggle. That discipline is not easily obtained. Studying for the CFP feels like trying to map a mountain, but you can only map a small portion each day and avalanches constantly cover areas you mapped the days and weeks prior.

So what exactly are your reasons for sacrificing what feels like every second of your discretionary time? Is it the prospect of increased compensation? To get another job? To deliver more knowledgeable solutions to your clients? To become more appealing to prospective clients? To prove that jerk neighbor of yours wrong? Maybe you just like studying (then why are you still reading this?), or perhaps you just want letters after your name! Whatever your reasons, the process has a way of blinding you to these benefits.

More often than not it seems as though my mind will remain dormant and focused all day at work, but when it comes time to study, a rapid fire sequence occurs of remembering every other possible task that could fit on my agenda: I know I should go on a run with my dog, but if I don’t go on a run I should at least take her to play fetch at the park, and oh look all of my socks are dirty so I’ll need to throw those in the washer before I leave, and crap, I forgot to call my mom back yesterday, and holy cow there’s a lot of dog hair on the floor, and the garbage is full, and the dishwasher needs to be emptied, and now my phone is vibrating with a text from the roommate, sure I can run to the grocery store, oh crap x2, I forgot to turn on the washing machine, dog you can’t possibly have to go to the bathroom again! Point being, simply finding time to study amidst the chaos of life is a challenge in itself (and many people would not consider my schedule to be an exceptionally busy one). Over the next few weeks when you’re about to dive into your daily session(s), psyche yourself up by remembering that your end goal is only achieved through taking that next step right here and now. Observe how your perception of the task changes when you increase your frequency of recalling WHY you’re making this daily commitment. Your reasons must be burned into your consciousness, or you’ll quickly drown in a mountain of information.

I wrote the following paragraph as a summation of my reasons for this undertaking:

Passing this test is the biggest barrier between now and being able to put those three letters after my name. To someone who doesn’t know me those letters represent a daily commitment to education, they confirm the professionalism I portray through my actions, and they indicate that hard work is a habit of mine. In combination with delivering excellent service, this certification will drastically increase my human capital value to any organization. Not only will the certification act as an outward sign of my competence, my commitment to education will result in providing more knowledgeable and holistic advice to clients. I will receive professional recognition from clients and colleagues alike, and increased compensation will follow.

Passing this exam is never going to come down to implementing a particular tool or trick. For the vast majority of people, the “secret to success” is simply putting in the time. Keeping my reasons front and center is just one of the many steps I’m taking ensure I put in that time. Being creative and dynamic with my studying has been an essential part of getting my butt in that chair every day. When you get knee-deep into studying, you will feel like you’re walking through molasses. Solidifying your reasons for embarking on this journey and periodically changing up your routine are both essential for maintaining the daily discipline necessary to take that next step, and the next one, and the next one…

Don’t Just Do Something, Sit There!

Trying harder in the markets doesn't usually lead to better results. In fact, more often than not, it leads to worse performance. - Ben Carlson, A Wealth of Common Sense

When performance is poor, be it with investments or something in one’s personal life, there is almost always an urge to do something. There is an impulse for action and activity. If something is wrong, we fix it.

Why does this occur? As we have pointed out in the past, one theory relates to our ancestry: on the savannah, action was preferable to inaction. If you heard a rustle in the bush it was one of two possibilities: 1) It was a tiger or 2) It was the wind. If you reacted, you may have been running from the wind 90% of the time, but at least the 10% of the time it was a tiger you could get away. If you did nothing, you may have avoided looking foolish the 90% of the time it was the wind but the 10% of the time it was a tiger you were eaten. Point being, action was preferable, and over time those with the quickest reaction survived as one only had to out-react the slowest. However, what worked on the savannah does not work in the markets. On the contrary, when turmoil is present doing nothing is often the best advice.

Fidelity conducted a study a short while back with the intention of seeing which of their retail accounts performed the best. They found that people who had actually forgotten about their accounts completely were the clear winners. Basically, the study concluded that over time accounts that were inactive beat the accounts that were active. The chart below indicates how the average investor performed over the last twenty years compared to nearly every other asset class. Nearly every asset class over this time period far surpassed the average investor’s returns.  

Why is this the case? Quite simply, our emotions get in our way.

As Richard Thaler points out in “Misbehaving: The Making of Behavioral Economics” this is especially true during periods of significant market volatility.

“The paper reports an experiment in which student subjects at Berkeley were given the job of investing the money of a portfolio manager for a university endowment. Of course, they were only pretending to be portfolio managers, but the amount of money they earned in the experiment did depend on how their investments turned out. Their earnings varied from $5 to $35 in less than an hour, so it was real enough for them.

As in the previous experiment, the subjects had only two investment options, a riskier one with higher returns and a safer one with lower returns. In this case, what we varied was how often the subjects got to look at the results of their decisions.

Some subjects saw their results eight times per simulated calendar year of results, while others only saw their results once a year or once every five years. As predicted by myopic loss aversion, those who saw their results more often were more cautious. Those who saw their results eight times a year only put 41% of their money into stocks, while those who saw the results just once a year invested 70% in stocks.”

At its core, Thaler’s research shows that the more frequently you check your portfolio, the greater the odds you set up psychological barriers that inhibit clear thought. There is and always will be a desire for action. However, the point is that one cannot constantly be switching from strategy to strategy, and this is especially true the longer the time horizon becomes.

Does this mean one should do nothing? No. Rather, it speaks to the importance of sticking with a plan. Reacting is not investing.

Consider the following metaphor: before deciding whether to take a plane, car, train, or one’s own two feet, what must first be decided is the destination. Similarly, before deciding on what investment vehicle to use, one must first determine their financial destination, whether that be retirement, college tuition, charitable giving, a home down-payment, or some other combination. While the plan may and is expected to evolve over time, constantly switching strategies will not help you get to the destination any faster. Getting off at every train stop is only going to slow you down. The more layovers on your flight the longer the overall travel time. The superior (yet more challenging) approach is to sit tight and be diligent about material changes.

Don’t just do something, sit there.

Health and Finances

Ask Steve Jobs, wealth don’t buy health.
- Pusha T, Exodus 23:1
 

I have been listening to Titan: The Life of John D. Rockefeller, Sr by Ron Chernow on audiobook. It is quite long, but I am almost done. Something struck me recently that has stuck with me of late: despite being one the richest men of all time, Rockefeller’s entire family and in-laws battled serious health problems for a significant portion of their lives, with John Sr being the lone exception. On a related note, Rick Ferri (@Rick_Ferri) tweeted on Tuesday of this week, “Today is my 58th birthday. Here is one thing I learned so far in life; if it’s not your health, don’t worry about it. You can get over it.” Between the Rockefeller situation and the Rick Ferri tweet, it is clear that, as Pusha T says in the song Exodus 23:1, certain financial goals do not matter if one is in poor health.
 
Health is everything, both physically and mentally. The relentless pursuit of money or love or whatever it might be won’t matter if one has a heart attack at 40 years old. Frequently, we put the cart before the horse when it comes to our health. That is, we try to fix problems rather than proactively addressing them before they become problems. 
 
This is also true for our financial health. Just like the best medical advice is to eat healthy and exercise, the best financial advice is to spend less than you earn and save/invest the difference. The perfect portfolio can’t fix a spending problem, and the perfect medicine can’t fix a sedentary lifestyle. One must address the tree at the roots, not the branches. 

Unfortunately, this is easier said than done. Unhealthy food is often cheaper, quicker, and more convenient. It is tough to stay disciplined to exercise after a tiring 10 hour day at work. Similarly, lifestyle creep - raising one’s standard of living as discretionary income rises - might be the biggest challenge people face financially. It is crucial to take conscious steps to combat these obstacles head on, and prioritize building a strong foundation in order to live a long healthy life, financial and otherwise.