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Financial Planning Insights

What the Great Resignation Can Teach Us About Emotions and Decision-Making

By Joe Maier | Johnson Financial Group

5 minute read time

COVID-19 hit us in waves, and not just outbreaks of infection. It also brought waves of uncertainty – over everything from vaccine safety and effectiveness, inflation, and stock market volatility. That uncertainty led to fear, which prompted anti-social behaviors like fighting over the last package of toilet paper. But the pandemic also prompted many people to think about what’s most important to them in work and in life, and what makes them truly happy. As a result, a giant wave of workers quit their jobs in what’s become known as The Great Resignation. While some people will caution that we should not make decisions based on emotion, the simple fact is that emotion drives all decision-making. But we have to pay heed to the right emotions to make wise decisions.

The Problem with Fear

Wisely, in his 1933 inaugural address, with a country in the middle of its deepest economic depression, Franklin D. Roosevelt diagnosing the financial cure the country needed, warned that the only thing we have to fear is fear itself. In 1933, the study of behavioral economics did not yet exist; if it had, our president would have known the neurological and psychological underpinnings of his famous quote. Our brains are wired to overstate and overemphasize fear compared to other emotions.

In behavioral economics parlance, fear’s impact on financial decision making is found in loss aversion, regret aversion and herd mentality. Taken together, in times of financial, economic and market uncertainty and volatility, our brains tell us we will be happiest if we follow the crowd; sell as others are selling and buy when others are buying. Taking a step back, this means buying high and selling low. Something no rational wealth maximizer would ever do. Stated another way, the fear centers in our brains scream to us to make dumb financial decisions. Fear, above all other emotions, will lead to behaviors that, while temporarily soothing, will lead to misery.

So Logically, the Answer is to Lean into Logic and Away from Emotion: right?

So the solution to this potential behavioral economics induced tragedy would seem to be to not let emotions get in the way of financial decision-making. That is the common wisdom found in the financial press; espousing all of the right statistical evidence on why staying the course and acting contrarian to the market is what a rational wealth maximizer would do. These good intentioned authors advise us to simply shut out the fear and turn on the logic.

That sounds good in theory. But in practice, it does not work very well. First, it is neurological folly to think that we can avoid emotions in decision-making. The portion of our brain that is responsible for decision making is the limbic brain. The “problem” with the limbic brain is it is solely, completely, exclusively and indelibly emotional. The limbic brain does not understand words. It does not understand logic. It does not understand numbers. It does not think long term. So our brains simply do not allow us to follow the experts’ advice; we cannot shut down emotion and turn on logic when we make decisions.

But even if our brains worked differently, I would advocate that the experts’ advice should still be ignored. Why do we accumulate wealth? Is it a mathematical exercise? Is it as simple as the more the better? That is not my experience in working with clients. They build wealth to use it. They use it to maintain a standard of living. They use it to purchase goods, services and experiences that they enjoy. They use it to take care of people and causes they believe in. They use it for needs, wants and wishes. They use it for independence, legacy and impact. They use it to make them happy.

Lean into Happiness

In times of economic uncertainty, it is critically important to recognize when emotions are driving our decisions and focus on the right emotions. Like the people who quit their jobs to focus on what makes them happy, we need to remember how our wealth is designed to maximize happiness. When we do that, and we rerun our financial plan, we mathematically understand that we can purchase the fewest needs, wants and wishes when we give into fear and sell low and buy high. Those actions, if followed, will minimize our happiness and maximize our misery. On the other hand, we can protect our needs, wants and wishes if we take control of what we can control in these times of economic uncertainty, taking actions such as delaying wants and wishes and exploring whether lines of credit make sense for your situation and help meet your immediate needs, rather than selling investments.

By understanding that emotions are, neurologically, at the core of all decisions, you can take control of how you react. By focusing on the right emotions, you can make the right decisions. Avoiding fear and remembering your why, and how that why maximizes your happiness, will lead to decisions that have the best chance of successfully maintaining that happiness.


Joe Maier

Joe Maier

SVP Director Wealth Strategy JD, CPA | Johnson Financial Group

Joe has extensive experience helping high‐net worth individuals, family offices, business owners and corporate executives meet their wealth and legacy goals. His areas of specific interest and skill include business succession planning, financial and estate planning, and wealth transfer strategies.

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