Times like these tend to make us reassess everything, including investment risk tolerance. Big market pullbacks are scary. It’s no wonder some are reconsidering mattress cash stashes. Fortunately, there are ways for reducing stress when faced with financial uncertainty.
This pandemic forced us all to reflect on what it’s like to go without pay. Whether gainfully employed, on unemployment, or struggling with reserves, we all felt the effects. It makes you wonder about doing things differently in the future. That’s not a bad thing.
America’s credit card debt is trending up, logging in at $887 billing during the second quarter of 2022, according to the Federal Reserve Bank of New York. That’s up from $841 billion in the first quarter. We’re wracking up debt in housing costs too. Rents have skyrocketed along with the purchase price for homes this year. Add in rising interest rates and many are paying a lot more as a percentage of their income for basic housing needs than they ever have before. We’ve shifted into the first recession since 2009, so expect more challenges ahead.
Changing money habits
The current financial climate is going to force new behavior around money. Debt’s going to be a lot more expensive as interest rates rise. More than any time in recent history, wise investing will be critical. Emotional decisions don’t belong in financial strategies, unless you can afford to lose it all. That makes now the time to get the tempered and knowledgeable input of a financial professional. It’s time to get back to data-driven, logical investment decisions.
It’s a bad time for fad investments or go-it-alone approaches. Eliminating professional fees is a poor reason to invest without guidance. It’s never a good idea to buy high and sell low, but many don’t have a current choice on the latter. What’s important is to be more thoughtful about future money decisions.
This is a good time to seriously reflect on what you’re doing with your money. Sure, today it probably involves some crisis planning, but it doesn’t have to be that way tomorrow.
Consider if past financial decisions are wise moving into the future. Where’s your money going or parked? Are what seemed like good investments at the time no longer sensible?
What you can do today
For those paralyzed by fear and financial uncertainty, start small to reduce stress. Eliminate unnecessary expenses. Craft a plan now to set emergency money aside. Talk to a professional to get some objective and expert advice.
If you came into this global pandemic with cash reserves and retirement savings, they’ve probably been depleted a bit. If you’re currently renting or had to buy a house this year, probably even more. This a good time to reassess your investments and consider potential tax benefits from reallocating poor-performing funds. Don’t be too hasty to bail, though. History shows recovery follows retractions.
Where ever you are, you’ll get through this. Hopefully, it will be with a smarter plan for the future that has you better prepared for the unexpected.
Photo credit: Kostiantyn Li on Unsplash
