When things get scary, we all look for something to protect us. A new approach, somebody who seems to have the latest and greatest idea, which appeals to the irrational parts of us that are responding from fear.
In the case of coronavirus, this has led to mass purchases of household supplies, protective masks and disinfecting wipes, and hopes for a vaccine.
While all of these are great, they are not likely to be helpful. What’s the most helpful thing, suggested universally as a simple and effective way to protect yourself and your family?
Wash your hands.
It’s simple, effective and cheap, and you’ve got all of the tools you need to do this well, right now.
I’d suggest that financial planning during these times is very much the same. Chances are you don’t need to find a new strategy or way of doing things. What you need is this simple thing: Have a plan.
With a plan, you can make choices. You’ve identified what you want to work towards and have a tool to help you respond when times get a bit scary.
Investments: Rebalance. The old adage is to buy low and sell high. Are there opportunities to do this within your portfolio due to recent shifts? If your bonds are up and stocks are down, do you want to take some profits from bonds to buy more stocks, or do you want to sell some bonds to raise cash for your emergency fund, or for new opportunities?
Investments: Shift your perspective. If returns today look terrible, what happens when you switch to one year or five years? Even if a big goal like retirement is in the very near future, that retirement you’re planning on is for more than just the first year. Your investments were chosen to support the decades ahead not just the next several months, so take the long view.
Investments: Understanding your tolerance for risk. When you hear about the swings in the stock markets over the past week, how do you feel? Are your investments in line with that feeling? If not, you may want to make some changes into a portfolio that you can live with.
Taking more risk than you can stomach is a recipe for spilling those stomach’s contents when things become a roller coaster. If you’re not a roller coaster person, choose a different ride.
Budgeting: Check in on your spending. It’s not surprising that when we’re feeling stressed, we might have expenses that we wouldn’t otherwise have. They don’t call it “retail therapy” for nothing. Are you spending in line with your plan? If you’re not, can you make adjustments to get back on track?
Cash management: Maintain a cash reserve. Having cash isn’t for the amazing return, it’s so you can weather storms like this one. Is your cash amount where you want it to be? If not, how can you grow it so you can weather a reduction in hours or temporary quarantine?
Community: Help each other. We’re all in this together, and the easiest way I know to get out of our own head is to help each other. Talk to your neighbors. Make a plan for how you can check in on each other, and how you can support somebody if they do get sick by helping to deliver groceries, caring for children, picking up mail or cutting the grass.
Exercise, time with family and friends, reading books for entertainment and more can be positive stress managers. How can you build those into your life?
H. Jude Boudreaux
partner/senior financial planner at The Planning Center