How to Deal With Uncertainty, Now, this is a serious time and it requires serious action, and it’s gotten me to think about how people respond when they’re faced with that tasteless, odorless, scentless thing called uncertainty.
How to Deal With Uncertainty?
So, you can see it in the stock market on a pretty much daily basis as things continue to seesaw from record highs to record lows. The only thing that you can guarantee right now is that things will continue to remain uncertain.
But if you prepare accordingly, this should not be a time to panic. Allow me to illustrate. This is what I like to call the axes of uncertainty.
When faced with uncertainty, we have minimal options with what we can do and how we can react. You’ve got those who are underprepared, those who are over-prepared, and everywhere in-between, and people who react emotionally with a range from panic to calm.
Up here we’ve got those who are panicked and underprepared. It’s your classic deer in headlights. You recognize that there’s a problem. That you should probably do something, but you’re just so damn scared that you fail to take any kind of action. They’re usually the first people to be eaten by zombies.
I mostly feel bad for these people. And down here, we’ve got those who are underprepared and calm. At a time like this, your parents are probably down here. You might find yourself down here for a few reasons.
Maybe you’ve become desensitized by the media always fear to monger that when a real crisis happens, you don’t believe them. Maybe you trust the wrong sources entirely.
Anyway, not a good place to be. It’s not a great place to be because you’re not thinking critically and when it’s really important to take action, it’s either too late or you failed to do so.
Zombies are gonna eat these people as well. A lethal combination of panic and over preparedness. These are the people who go out and buy a year-long supply of toilet paper.
I don’t blame them because panic is known to cause massive bouts of diarrhea. But when you clear out all the hand sanitizer and canned soup, you’re being a dick. It’s both selfish and shortsighted.
They’re so panicked that they aren’t rational enough to prepare mindfully and as a result, they too get eaten by zombies. Don’t be that person.
Finally, down in this lower right quadrant is really where you want to be. Say, right around here. You’re cautious, you’ve taken the necessary steps to prepare, you’ve got enough non-perishable food and essential medical supplies to last you a few weeks, and you remain calm knowing that you’ve done everything you possibly can.
And as a result, you’ll probably be able to fight off the zombies. But even if you are calm, admittedly, you can still be over-prepared. And what to note here is the law of diminishing returns when it comes to preparedness.
The more you prepare, the better you’ll be able to tackle whatever problem it is that you’re facing. Up until a certain point, when those benefits begin to diminish and then flat line.
Continuing to prepare beyond that has diminishing returns. At this point, you’re simply wasting your time.
And it could crash even further when people’s opinion of you and your community change because you hoarded all the toilet paper because of your diarrhea panic.
And now, here’s the real beauty of finding your sweet spot on the axes of uncertainty, and a lesson that can be applied to any major project in your life. You follow a simple checklist.
- Do enough research to make an informed decision,
- take effective action without overdoing it,
- stay calm knowing you did all you could,
- adjust your plan as new information comes out.
So, this is personally how I approach my retirement investments. And it’s precisely why I’m not freaking out, and I’m not panicked right now that there are such highs and lows, and that it is so volatile at the moment.
Because you have to look at it long-term, the big picture. So, I invest in a 401k and I update the balance of them every year depending upon what my returns are.
This is just the maintenance that I need to do to make sure that it doesn’t sway too far into stocks or too far into bonds, and it’s perfectly balanced to match the risk that I’m willing to tolerate.
But other than that, we don’t touch that money. We put it in and we ignore it. Through good times, through bad times. I’m not celebrating when times are going well.
And times like now when things aren’t going very well at all, I don’t panic as well because I know that I’m in it for the long run.
We put our money in knowing that we’re not gonna touch it for 30 plus years until we need it at retirement. And, of course, once we get closer to retirement, we’re gonna then adjust slowly over that period of time to make sure that it’s even more secure
and even more safe, and take much fewer risks the closer that we get to age 65. In this specific case, I’ve done all the research I need to do when it comes to my investments.
I understand that, since 1923, there’s been an average return of over 10%. So, I know that, again, in the long-term, my money is gonna be safe. You’ve gotta think big picture.
You see, when it comes to everything in life, you’re only guaranteed a certain amount of certainty.
Let’s say this bucket represents my wedding. You can fill this bucket with research, planning, and action.
You weigh the risks, the pros, and cons, and prepare for as many contingencies you feel comfortable preparing for. But there’s only so much you can do, you can’t plan for everything.
And this is where you need to embrace uncertainty.
This is the area that’s unplannable. It’s your rain delay, your car accident, who knows. Maybe even a pandemic.
You simply do the best you can and know that everything else is out of your control. And there are thousands of different areas in your life where you need to accept uncertainty.
There will always, always, always be things outside of your control. And the only guarantee in life is that shit gonna hit the fan and disrupt your plans eventually.
So, the sooner that you get used to the fact that there are so many things in life that you can’t control, the sooner that you can adjust, adapt, and change your plan accordingly.
No matter what happens to you in life, you always have a choice for how you can react and how you respond in those moments.
At times like this, I understand that it’s difficult not to get anxious, or nervous, or emotional. Even myself, I find when I’m watching the news too much.
When I’m getting into this habit of checking every 15 minutes and seeing what’s happening. What’s the latest? What’s going on?
I start to find myself creeping up towards panic. Never to the point of hoarding toilet paper, to be clear, but I do find that I push myself further and further into panic just based upon how I’m reacting, and the media that I’m consuming at the moment.
One important thing to leave you with as we head into even more uncertain times, let’s do our best to help lift each other. Give each other a hand, help those who maybe are facing even more difficult circumstances than yourself right now.