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Near the jogging path I use there is a three story concrete building where I often see firefighters training fighting real fires. Fires that even from the safe distance of the jogging path put out some intense heat yet I’ve never seen anyone running around panicking and everyone seemed to know what they had to do.
It’s not that firefighters are crazy and don’t recognize the danger, it’s that they’ve been trained and trained on what to do in case of emergencies much like other professionals are required to do whose job function may expose them to extremely stressful situations such as doctors, nurses, police, armed forces, airplane pilots and flight attendants.
I would add “investor” to the list of professions that also must be able to deal with unexpected and sometimes disastrous surprises.
By “investor” I’m not just referring to the Gordon Geckos or Warren Buffets of the world, but also people like you and me who are just saving for our retirement or our kids’ college education.
What would you do in case of a financial emergency?
Would you panic or would already have plan and rehearsed what to do?
What my wife and I do is periodically rank our upcoming spending items (house payment, vacation, kids’ sports, etc.) in terms of importance so if our incomes fall we know what to cut first. This way it is a discussion and not a high-stress-I-can’t-believe-this-happened-to-us-fight-or-flight reaction.
Same goes for our investments. We’ve seen our portfolio go up down and all around but I’ve found it’s much harder to prioritize which investments should be sold AFTER they’ve declined then before.
