How to keep deadlines?

M. asks: How to keep deadlines? I missed on my savings plan due to market going down.

Problem Nr.1: Can't plan on markets short term. Market is it's own beast and does what it wants. See my post here. 

Problem Nr.2: The planning might be too tight. 

While planning, many people put themselves into a very tight time frame without leaving any room for unexpected and find themselves missing deadlines. 

Why does it happen? Why do people squeeze themselves into such tight deadlines? It appears to be a certain recipe for a failure... 
The reason may be the misinterpreting of the consequences.

I will explain it on an example. 

My friend had an appointment in a neighbour city which was 30 min away. We were in a car driving on the interstate. Without any bad traffic we still had at least 20 minutes to drive. But we were already late. He called the person he had the appointment with and said that he will be there in 10 minutes. 

I asked him why did he do that? Saying 10 minutes when we have at least 20 more. He said he didn't want the client to know that he will be that late. He planned to call the client again in another 10 minutes and tell him that it will be 10 more minutes.  And then hope that he will not have to call him again if instead of 10 minutes it will be longer. 

I told him that this would irritate me and that such a person would not appear reliable to me. 

He asked me what would I do not to anger the client. I said that I would apologize first. If I know that I will be 20 minutes late, I will tell that I will be 25-30 minutes late. That is to give me some room for the unexpected and not to have call several times. 
Every time you call and add more time to your delay is a separate disappointment. If you call 2 times, the client will be disappointed twice, if you have to all three times, he will be disappointed three times. And when you finally appear late, he will be disappointed that you are late. 
That is not a good start for a meeting. 

You give the waiting person small bits of time each of 10 minutes long and he can't do anything useful in that time. 
I would give him one bigger chunk of time of 25-30 minutes and that is enough to be used for something productive. I would prefer that for myself. 

In addition, if you manage to come a bit earlier, your customer will not feel that you are that late because you re-negotiated the time. After the changed time and changed  expectations, you are still late but that is a much better start for a meeting. Do you feel the difference?

My friend's perceived consequences were that he will disappoint the client less if he will falsely keep his hopes up.
The real consequences are: the client feels like waisting time and you appear as unreliable person.


My strategy

When making a budget for something (expenses or budgeting time required for a task) I over plan. 
If I estimate that I need 3 weeks for finishing up a project, I will say that I will need 4 weeks. I don't try to impress anyone with how fast I could work. The emphasis is on "could". Yes, I could, but that will be high intensity working and there will be no room for anything unexpected that can produce a serious distraction. 
At the end I will be exhausted with work and worries that I might not be on time (which equals to bad time management and unreliability). On the other side, if I have more time for working with good time margin for unexpected interruptions, additional checks or improvements, if I am done before the dead line that will be just a bonus for the receiving site in additional impression of competence, good time management and reliability. 

If I am doing something for myself, I plan the same way. If I want to be done with cooking in 20 minutes, I tell my husband 30 minutes. There can be many distractions at home: a cat asking for ham or ice cream or a child with something unexpected, or a phone call. If there are no interruptions, I can always use some free time for myself. 

My husband lives on a different time scale. He always underestimates the necessary time. I figured out the correction factor and now it works just fine. If he says that he needs 30 minutes, it means in reality 90 minutes. If he says 1 hour, that is usually 3 hours. That way I know, that If he plans us to leave the house in 15 minutes, I have time (about 45 minutes) to cook dinner or bake a pie.

What are the reasons for such behaviour pattern? 
I think that again it is the misunderstanding of the consequences, just like in the first example. 

By giving shorter times the person tries to present the situation better than it is. Then inevitably the truth hits strong and produces disappointment. 
Those people tend to hide the unpleasant facts even from themselves but with the effect of feeling more like a failure at the end. They see others being disappointed by them or they are disappointed by themselves. 

In case they don't feel like a failure and actually just don't care if they are late (like some who are habitually late), those people are just not worried about the consequences. 

Those people will not be late to the airport but they will be late to a restaurant dinner with friends. They estimate the consequences of being late for dinner as not important. 

And that just how their friends may feel: not important. In this case the reason is the same: the misinterpreting of the consequences. 
Is it really your intent to show your friend that they are not important enough for you to at least try to be on time? People like to feel important. Why not to give them that, especially if it is so easy. People always remember how you make them feel. 

Should I be afraid of recessions?

Bear and bull markets are coming and going. 
Everyone feels great during a bull market. Just until it is it's last day. And then the mood changes. 

We save our hard earned money and put most of it into some financial vehicles, dependant on each person risk tolerance and knowledge level. 
As soon as you touch an "investment" the risk level and uncertainty increase substantially compared to cash. 

With cash there is mostly only one uncertainty - with which inflation rate it will devalue over time. 

With investments uncertainties are many of all different kinds. 
The values will fluctuate all the time. 
During the market dips or bear markets your account may show a fat red minus and that will make you nauseated. 
But overall with all the fluctuations the market will move higher thanks to the drift which is probably related to inflation. 
The biggest risk is that a particular stock or fund may lose value and never recover.  And that can happen during a bear marked or a bull market.  

After watching the markets for awhile and seeing the constant fluctuations I realize that there will always be uncertainty. 
Uncertainty brings anxiety and that is not a pleasant feeling. I want to minimize it. 
By this  logic, if I minimize uncertainty, I will minimize anxiety. 

When you minimize uncertainty it can go both ways: you will find out something positive or something negative. But even if you find out something negative, the anxiety should decrease due to decreased uncertainty. 

How to decrease the uncertainty in this case? 
That could work trough information gathering. 

The main question I need to answer is: What will happen to the markets? 

That is actually a substitute question for this one: If I plan to retire and my retirement financing depends on the savings I invest in the market, I am basically asking if there will be enough money for me to finance my retirement. 

Here I already have done some information gathering: I calculated and estimated that with 3% of inflation I will need $3,000,000 at the retirement start point to be fine if I live to 100 or a bit longer. 
I probably will not use all of that money because the chances are high that I will die before I hit 100. If I have unused money left will not matter much. It is more important to have enough until that final point in life because I don't want to be under pressure to die in time to make sure the money doesn't run out. 

I am making some progress getting to this number and I still have 20 years to go till I am 65. If I keep the same savings rate I should definitely reach this number. 

But since I am not there yet, every time the market has a hiccup, it makes me feel uneasy. 
And I don't like this feeling.

Most things in nature have cycles or at lest some king of a wave pattern. For example the blood pressure has a wave pattern. Many hormones have their circadian rhythms. Oceans have their rhythmic ebbs and flows. 
Wind also don't blow with the same speed at all times. 

It feels like markets are a part of nature even they are man-made. They have their natural fluctuations. 

After comparing the markets to the things of nature it just makes no sense to complain about market's fluctuations. It is like complaining about the weather. The complaints will not change it. 

Like with the weather, complaining is useless. All you can do is adjust and use it as well as you can. 

If you don't like the cold, move to a warmer place. If it rains too often, have an umbrella ready. 

The same with the markets: If individual stocks are to much work and too much risk for you, move to indexes. If that is still too much, go into treasury bonds. 
If you know that there will be periods of downturns, have your umbrella ready in form of a strategy.  

You can look at indicators such as unemployment rates, consumer confidence or the yield curve. 
By those indicators we are much closer to a recession than 2-3 years ago. 

At some point the downturn is inevitable. We will have just to live with that. But how much can it go down and how much can it impact me on my way to my target of $3,000,000. 
Would it make sense to look at what happened historically? 

Below is the image of the S&P500 for a very long period. 

The large dip on the left side is the Great Depression of 1928. That is the most significant downturn. It took the market up to 1950ies to get back to the same heights. 
If you are still working and keep adding to the investments it will probably take you only half that time. So instead of 20 years you will get back in 10. The remaining market dips are not a s bad. 

I will assume the worst and look at two scenarios: one is when I am still working and can add to savings and the second where I can't add to savings anymore (due to job loss or retirement). 

Sourse: macrotrends.net


The data in the graph is not inflation adjusted. I chose it because I already did inflation adjustments on my final necessary number to retire. 

1. I still need 20 years to retirement. If that large 1928-like deep happens now, I will need approximately 10 years to get back to the same numbers I have today and then have 10 more years of growth. My estimate show that in this case I will reach my numbers before retirement. 

2. The dip happens just after I retire and my numbers go down to half. I might have to go down on expenses for a while as circumstances dictate to let the funds recover. If the value will go down in half, I will have to cut the expenses in half. If I cut my expenses in half, my live will not be as comfortable and I might will live less long. Or not. I realize that it is "complaining on a high level", because I know a lot of people who already retired on much much less, and they live quite OK. But I like and always liked to have a very high safety margin. 

I realize that even taking in account the the largest known market downturn, I will very likely still come out OK, and I now have to take a step back from all the worries. 

The market can do what it wants with all its fluctuations. Just like the weather, I can't influence it. All I can do, is keep practicing to recognize the upcoming clouds and get my umbrella ready in time. I need to become more efficient with my umbrella.

Working on my umbrella means working my skills in stock selection and timing. There is definitely space for optimization.