Money is the #1 cause of stress among Americans[1] and that is during normal circumstances. When we are under threat from factors that are out of our control our financial stress can be multiplied. Here are several items to consider when it comes to managing your money during times of turmoil.
Take Inventory
Before you make any decisions, it is important to evaluate where you stand. Take a moment to look at the following items:
Inflows: How will your income flows look over the next 3 months? Will they change? What should you expect?
Expenses: How much will you actually spend in the next 3 months. Have a number in your head and compare to what you are bringing in. Will you have added or reduced expenses?
Savings: How much do you have in short-term savings? Do you have enough money to fall back on in an emergency?
Cut Out Unnecessary Spending
Your life has changed. Your outflows should as well. What expenses can be cut out? Think about memberships that you will not be using. Can they be put on hold or cancelled? Will you be eating less or more? Dining out less? Traveling less? Consider your loans. Does your financial institution offer deferment? Make sure to ask questions and don’t worry about being frugal.
Keep Surplus Income in an Emergency Fund
Set up an automatic deposit into savings. Try to only access this savings if there is an emergency need.
Tune Out the Noise
During times of turmoil, there is no shortage of bad news. Often headlines are more intense than the reality. As much as possible, try to tune out the noise and focus on the big picture. Remember that you can’t do anything about factors that are out of your control, so only make decisions based on what you can control.
Below is a graphic of market fluctuations over a recent week. As you can see, the markets swing quickly and if you are focused on daily headlines, it can be gut-wrenching. Take a step back and you will realize that over time the short-term problems work themselves out.
Have an Outlet for Your Emotions
Staying active and getting exercise
Meditating
Venting to a friend or confidante that will listen
You have to have ways to release your stress so that you don’t bottle it up inside.
Look for Opportunities
Periods of financial turmoil are often followed by periods of financial prosperity. Educate yourself on finances and investing and look for opportunities to set yourself up for future financial gains.
Keep Investing for Long-Term Goals through Dollar-Cost Averaging
You may need to make adjustments to your savings, but as much as possible try to maintain saving for your long-term goals. By making consistent contributions to your financial goals, you can really take advantage of good prices during financial downturns. Think of investing during these times as finding a really good sale that you shouldn’t walk away from.
The images below show the effect of dollar-cost averaging to obtain a good price on your investments:
Talk to Your Financial Planner
These are times to check-in, evaluate your plan, and adjust your expectations as needed.
[1] https://www.blackrock.com/corporate/insights/investor-pulse