Financial Uncertainty Preparedness Checklist

Warren Buffett once said, “Only when the tide goes out do you discover who has been swimming naked.”


While his remark may have originally been a comment on how economic downturns inevitably reveal which companies have been taking excessive financial risks, it’s equally applicable to individuals with regard to their personal financial planning and investment management.


The first six months of 2020 saw the advent of the worst global public health crisis in over a century—since the 1918 influenza pandemic.  In response, the world locked down, putting the economy into a kind of medically induced coma.


In this country, the immediate effects were a savage and nearly instantaneous economic recession, accompanied by record unemployment and the fastest, deepest collapse in stock prices in living memory.  Confoundingly, the market then posted its best 50 days in history.  On Aug. 31, 2020, the S&P 500 closed at 3,500—representing an 8.3% year-to-date gain (excluding dividends).  From its March 23, 2020 low closing value, the S&P 500 has gained about 58% (total return, including dividends) and set seven all-time closing highs.


If challenges effectively shine light on the cracks in any system, this pandemic has been peerless as a real-life stress test for every aspect of personal finance, including behavioral responses to very real and understandable panic.  How did you fare?


The changes you did or did not make to your portfolio in the weeks before and after April Fool’s Day likely render a reliable assessment of your behavioral temperament as it relates to investments.


Consider this sharp difference.  Investors who sold all their stocks on or before April Fool’s Day most likely have not gotten back into the market, so they are now about 40-50% permanently worse off—because they sold—compared to investors who did nothing and only experienced a temporary decline in value.  The former group should heed Marcus Aurelius’ advice:  “If you seek tranquility, do less.”


The real risk for equity investors is not volatility; it’s their own emotional response to volatility.  We all have an innate tendency to interpret large temporary declines in the market as the beginning of the end.  And when we panic, we tend to flee.  This is the perfect example of how investor behavior—not investment performance—actually drives the financial outcomes that most investors experience.


Your Portfolio Is Only the Tip of the Iceberg


The principle of simplification requires that any big idea one wishes to impart must be communicated very simply, such that it has an unmistakably clear essence.  In the realm of real-world lifetime investment success, defined properly as the achievement of one’s financial goals, there are three—and only three—determinants that truly matter:  financial planning, asset allocation, and behavior.  Everything else is commentary.


Additionally, you must understand and embrace the mindset that your portfolio is the medium to fund your plan so you can achieve your financial goals.


Just as an airplane requires a flight plan to safely reach its destination, affluent families need comprehensive date- and dollar-specific financial plans to successfully complete their multidecade or transgenerational financial journeys.  Although financial planning is relatively simple in concept, the execution can often be confusing and complex.


The Checklist Manifesto


When staff at Johns Hopkins instituted a simple five-item checklist for inserting IV lines, they dramatically reduced the number of infections associated with the procedure.  Since then, consistent implementation of similar checklists for various procedures in hospitals around the country has saved countless lives.  As surgeon Atul Gawande explains in The Checklist Manifesto, using checklists for safety is not a new concept; the aviation industry has done it for many years.  Establishing standard procedures backed by research and formulated as checklists helps people remember to do all the right things.


In that spirit, we have created a compact checklist to help prevent you from forgetting anything important in your financial planning.


Financial Uncertainty Preparedness Checklist


Knowing you are well-prepared for any eventuality can relieve a great deal of stress during times of crisis.  Our Financial Uncertainty Preparedness Checklist outlines more than 40 actions you and your financial adviser should take to ensure that there are no dangerous gaps in your financial plan.  Please feel free to share this checklist with any friends or family members who may be feeling uneasy about their financial plans right now.



Throughout the checklist, you’ll see icons identifying relevant Keating 101 Series briefings (sample:  Social Security 101).  Each 4-page briefing is highly visual and answers a common financial planning question clearly and succinctly.  If you’d like to receive any of these briefings or arrange a consultation with us, just ask.


Once you’ve completed the checklist and taken remedial actions as necessary, you’ll rest easy knowing that you are on track to achieve your financial goals.