Some things you CAN do while markets are volatile
I’ve already given you guys some thoughts on the current market environment. That was about two weeks ago, and I think it’s pretty clear that the volatility and downturn are not over, and likely won’t be for a while. So let’s talk about the things that you can do right now to set yourself up for success if you are feeling understandably anxious.
Reframe your thinking.
A 30+% market downturn and a global pandemic will challenge even the most optimistic of minds. I try my hardest to manage my mind and stay away from negative thinking, but it can be a challenge even for the likes of me. I do see a lot of positives in the US state & local government response to this crisis, including discussions of paid emergency leave, delaying the tax filing deadline to July 15th, halting of foreclosures and evistions just to name a few.
Some corporations are also proving that they have a heart and are operating with kindness. For example, Ally Bank is offering relief to its customers from debt payments, Capital One is allowing customers to skip payments interest-free while Citibank is offering credit line increases. These are small measures, but they give me hope that Americans are rallying together in this uncertain time.
Focus on the positives for you.
So instead of focusing on how your 401(k) is down a whole lot, let’s look at how this can actually benefit you. The stock market has done great over the last few years, and it’s possible that you haven’t been investing outside of your 401(k). Now is a great time to open up a brokerage account because the last few years of gains have been wiped out! Basically, you get a do-over of the last three years. When does that ever happen?
Secondly, all of this social distancing means you actually have time to reexamine your finances closely and see what improvements could be made. Make yourself a quarantini and get to work sis!
Give yourself a gift
You guys already know that I love Brooke Catsillo’s idea of “gifts to your future self.” The basic idea is doing things now that set yourself up for future success. I know it sounds counter-intuitive, but these volatile markets are a really great opportunity to take steps in the right direction regarding your finances. Here are a few steps you can take now:
Take some time to revisit your goals. What is it that you want to accomplish in your finances? Have you been allocating your money appropriately? Do your goals line up with how you’ve been spending/saving your money?
Set up automated debt payments and savings transfers. This allows you to put your finances on auto-pilot, get out of your own way and achieve your financial goals.
Review your portfolio’s asset allocation (the mix of investments- stocks, bonds, cash) and diversification ( how many holdings of each different type do you own?). Does it match your risk tolerance and goals? This is a helpful guide to evaluate your investments.
Check the investments you’re currently buying in your 401(k) with every paycheck. Do they match up with the risk tolerance and goals?
Revisit your monthly expenses. Are you using them all? Where could that money be allocated if you decide to reduce your spending in that area?
Update your 401(k) and IRA account beneficiaries.
While you’re at it, increase your 401(k) contributions.
These are obviously just a few ideas on steps you can take towards setting yourself up for financial success during this volatile economic period. Just remember to leave your 401(k) and your face alone!