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The stock market has had a rough go of it lately. Even though only about half of American households invest in the market, the ramifications of the downturn can’t help but affect the psyche of the entire economy. In many ways, the market is a peek into the future since it reflects where investors feel confident putting their money for growth in the near and long term. When the market falters, it’s natural to wonder about the direction of the economy as a whole. But wealth advisor Darren Henke, Managing Partner of 180 Wealth Advisors advises investors to “sit tight, hold on, and try not to worry about it. The best way to approach stock investing is always with a long-term perspective.”
That’s big picture stuff, and in the grind of day-to-day life, there doesn’t seem to be much you can do to change things. Trends come and go, and despite dire warnings and bold predictions, over the long term, stocks tend to go up in value and experts advise against taking any rash action over a short-term hiccup.
Still, seeing your retirement nest egg crack can be a dispiriting experience. Henke reminds his clients that “over long periods of time, as long as you have a well-diversified portfolio, stocks are the only asset class that has consistently and considerably outpaced the rate of inflation.”
In the meantime, there are some steps you can take to stay the course, despite a disruptive time in the market. We’ll look at three solutions today, and three more in the next post.
Do a financial check up. Just as most folks don’t see the doctor until they think something might be wrong, most people don’t pay much attention to their finances until there’s a big enough change to cause some concern. Well, there’s been a change, at least in stock valuations. So use this time as an opportunity to do a financial check-up. Reconsider the aggressiveness of your investment portfolio. Read up on financial gurus like Warren Buffet. Know where your money is going and review your financial plan.
Cut expenses. Households should review expenses like a searchlight reviews the grounds, scanning over and over again and again. But, of course, that’s not the reality for most of us. Instead, we go along day to day, gradually adding to our monthly outflow without really even noticing it. Use this uncertain time to gain some certainty by pulling out the financial scythe and hacking away. Has the cable bill crept too high? Check out cable cord-cutting possibilities. Are you spending too much on take-out food? Check into a dinner delivery service. There are some great apps out there that can assist you in the process. Scrutinize each major expense with fresh eyes. You’ll be amazed at how much “expense creep” has happened over the years.
Craft a budget.
Give yourself a few sessions to make sure you’ve captured a list of all of your major expenses. Then estimate how much you actually spend on each item. Finally, when you’re ready, transfer that information to a simple spreadsheet document. You can find lots of options online. I just create a simple list with my expenses down one column and 12 rows representing each month. Then I fill in the square with the monthly expenses for each item. Some items, like gifts, will be virtually zero some months, but bulky during family birthdays and Christmas. Travel spending may be high during the summer. You get the idea.
Finally, total each month and create a grand total at the bottom. If this is your first real budget, you might be shocked at your total at first, but trust me, you’ll start to get some peace of mind by knowing the parameters of your financial life.
Counter the external uncertainty of the market with the internal certainty of a budget. Information is power. Every financial journey begins with single step. In my next post, we’ll look at ways you can balance your portfolio to make the most of an uncertain time in the market.
December 17, 2018 at 07:35AM
Forbes – Entrepreneurs