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A financial crisis, divorce, and irrational decision-making

A financial crisis, divorce, and irrational decision-making

May 06, 2020

A financial crisis causes stress like any other crisis – divorce, a health crisis, or anything else that disrupts your life. We feel this financial crisis and what is happening in the economy is not a structural or cyclical event.  It is an event driven incident, like what happens with a hurricane, earthquake, or tornado.  But when you have a financial crisis in the middle of a divorce, you probably don’t care much about the cause.  For someone in the midst of divorce when the S&P fell 34% from its high on February 19, 2020 it just added more stress on top of the uncertainty that already existed.

When stress hits, the part of our brain that controls rational thought process stops working.  You might have a fight, flight, or freeze moment.  In a program I listened to recently they reported that reactions breakdown roughly like this: 10% fight, 10% run away, and 80% shutdown.  A pending divorce may have already caused a shutdown, and when the financial crisis hit, it only made things worse. 

When Stress goes up↗, Emotional Competency declines↘,

Irrational Decision Making goes up↗, and Physical, Financial and Emotional Health generally decline↘.

Most of us have probably had at least one time in our lives when we asked ourselves, “Why in heaven’s name did I make that decision?”  Well, it was probably a decision made when you were highly stressed, your emotional competency was severely impaired, and, as a result, you made an irrational decision.  Stress may be the cause of a lot of irrational decision-making during a divorce.

In the divorce process, when the brain stops functioning – when a person is shutdown, it is vital to find a way to de-stress because that is how irrational decision-making is minimized.  For folks going through a divorce, whatever process is used – Collaborative, Mediation, Litigation, DIY – as an adjunct to your process and the other professionals in your case, it may be advisable for you to continue to work with a therapist and financial advisor to keep stress levels down, but mostly, to help you achieve clarity about your vision for the future and to put a comprehensive financial plan in place that will enable you to move forward confidently.

When Stress declines↘, Emotional Competency goes up↗,

Irrational Decision-Making declines↘, and Physical, Financial and Emotional Health generally improve↗.

Irrational Decision-Making does not just happen in the context of divorce.  A financial crisis can shake anyone’s foundation.  Adding divorce into the mix only complicates things.  Couples intending to divorce have been quarantined together.  Quarantined couples not previously contemplating divorce are realizing that staying married is no longer an option.  Unemployment is high.  Telecommuting has become the norm.  Families are negotiating for computer time to do Zoom classes for school and work for the office.  Grey hair is showing, and haircuts are needed.  Days are long and tempers are short.  The news is filled with some States slowly re-opening and some not.  It is not fast enough and comes with many unanswered questions – like where is all the toilet paper!?!   As stay at home orders are gradually lifted and we continue to social distance and wear face coverings, please keep in mind the following about the COVID-19 world we are living in:

What we do NOT know:

  1.  How long this will last or when the markets will recover 
  2.  When the next 30% gain or 30% decline will commence 

What we do know: 

  1. The economy had been showing tremendous strength before this current panic.
  2.  No person, investment adviser or government can consistently predict the future
  3.  Most of mankind has a massive internal motivation to innovate, grow, work, and succeed.
  4.  Good times in this world come and go, but the spirit of the human soul continues.
  5.  The past never guarantees the future.

What should you do? 

  1.  If you have been implementing comprehensive financial planning principles that we have historically, currently, and continually advocate, our advice is to do exactly what you were doing BEFORE this current panic showed up.
  2. If you have not been implementing comprehensive financial planning principles, talk to your financial advisor about putting a plan in place,
  3. If you need cash, talk to your financial advisor about the best place to get what you need.
  4. If your long-term financial goals have not changed, we do not recommend changing your portfolio (from our perspective, the word “portfolio” includes the entirety of your financial resources: all accounts and products you own).
  5. If you have some additional cash, talk to your financial advisor about the best way to deploy it.
  6. Don’t make an “irrational decision” (a decision based on fear, not process) to sell low and buy high.
  7. If you find yourself home more than usual because of “social distancing”, shut off your electronic devices, spend time in real conversation with your family.  Cook as a family.  Make up some silly games and have family “Olympics”.  Do devotions as a family.  Make some memories. You will never be this young again.
  8. If you live alone, “partner” with someone else who lives alone with a commitment to check on each other frequently with a phone call or a text.  A phone call is better, because it does a heart good to hear another human besides the voice that comes from the TV. 
  9. Don’t hoard.
  10. Don’t spend hours fixated on the news.  Limit your time on the TV.   If you miss the evening news – trust me – they will be covering the same thing first thing the next morning. 
  11. Live with hope and faith and gratitude.  Living with an attitude of gratitude will go a long way in keeping you healthy.
  12. Laugh.  A good belly laugh is great for reducing stress.
  13. Remember, this too shall pass.  As I read on a poster recently, it may pass like a kidney stone, but it will pass.  You will survive this.
  14. Exercise – it is good for your lungs and your mental health.  Coronavirus attacks your lungs.  Help protect yourself physically and emotionally with exercise that is appropriate for you.
  15. Eat well – I know it is easy to order in pizza and other comfort food, but, especially if you are NOT exercising, not eating well will most likely be a decision you will regret.
  16. Sleep well – sleep supports your immune system
  17. Keep a schedule – Structure is particularly important when you have kids – but it is important for you, too.  It is easy when you are working from home to not set boundaries.  Have work time, play time, and rest time in the appropriate proportions.
  18. If there are people you can’t reach digitally, go old-school - send a card.  Let them know they are in your thoughts and prayers.
  19. Don’t worry.  Worry is to your body like putting sugar in a gas tank is to your automobile.  It will make you not work! 
  20. If you are suffering from depression, be sure to reach out to your doctor or therapist for help.
  21. If you are contemplating divorce, go to and register for the “What Everyone Needs to Know About Divorce” workshop

Whether you are getting a divorce, happily married, or happily single, please remember, you only have 168 hours to live your life this and every week.  Spend your 168 hours doing the things that only you can do – the things that are truly important to you.  Spend more time with the people you love.  (And tell them you love them, too.)  If you can’t do it in person, do it via skype or zoom.  Do activities to help improve your health and fitness and spiritual life.  Engage in activities that give joy to others (and see how much you benefit, too).  Laugh out loud.  Express your creativity.  Play a game.  Take a friend to lunch (or for the time being send them lunch via one of the food delivery services and do a skype or zoom meeting and eat lunch together).  Donate your time (if possible) or resources to a worthy charity.  Change your routine.  Live a high-performance life!  You only have one.

 Please stay safe and be well.