Steps To Take With Your Money When Chaos Abounds

There were a number of reasons I felt compelled to start this blog nearly 2 years ago, and one of them was to help increase financial literacy for DVM’s before there was any sort of market downturn. Taking action on your money is easier to accomplish when the economy is doing well and individuals have more available resources (time, money, energy).

I knew, based on history, that the bull market was going to come to an end at some point, but I couldn’t even begin to guess that a pandemic would be the trigger. 

The markets are extremely volatile at the time this post is being written (mid-March 2020) in response to COVID-19. Daily life has been disrupted on a global scale, and everyone is trying their best to adapt to these extraordinary circumstances. 

Foremost, there is the issue of ensuring the health and safety of everyone. #Flattenthecurve and #socialdistancing are now widely used hashtags. This is a rare time in human history where we’re all called to do our part to help one another. 

Not far behind is the concern about the economic toll of essentially shutting down the economy in response to COVID-19. And of course, there is so much fear and uncertainty around what this will mean, not just globally, but at an individual level as well.

So what do you do about your money during times like these? You can choose to take the ostrich in the sand approach, or you can choose to take action. I vote for action.

If you don’t know where to start, here are some steps you can take:

STOP BINGE WATCHING THE NEWS

It is SO hard to turn away when the news is changing so quickly. Especially when the 24-hour news cycle is so accessible and social media acts as an amplifier. 

Focusing on the negatives, especially when the negatives seem to overwhelm the positives, only creates additional stress and worry that isn’t doing anyone any good. 

So by all means, feel the anger, frustration, overwhelm, fear, etc that come your way. We’re only human, after all. 

But don’t dwell there. Sitting in that place of negativity just perpetuates a relentless negative feedback loop. Limit your exposure to the news and social media; you want to stay informed, but not overwhelmed. Quit logging into your investment accounts when you already know that your investments are down.

Break the cycle by working on that gratitude muscle. Get some exercise. Chat with your favorite person. Turn on your favorite music. Play with your kids and your pets. Sit in prayer. Watch a show or movie that makes you laugh until you cry. Meditate. Create something. Continue practicing self-care.

Our time is so precious. Make sure you’re using it in a way that is helpful, not harmful.

REVIEW YOUR DEBT PAYOFF PLAN

Are you aggressively trying to pay off debt? 

I am a BIG fan of getting rid of debt, and I love supporting those that are on their debt-free journey.

But, as I said before, this cannot be done at the expense of the rest of your finances. This is not the time to put blinders on when it comes to your debt and paying it off ASAP.

Focusing on debt, and nothing but debt, is opening yourself up to vulnerabilities if you’re ignoring other financial obligations and goals. Each dollar has a job, and if its job is to pay off debt, then it can’t perform any other potential jobs, such as building your emergency fund or investing for your future. 

Specifically regarding student loan debt, remember that paying more than the minimum payment on your income driven repayment plan (IBR, PAYE, REPAYE) does not typically work out in your favor mathematically. You can read more about that here.

And if you’ve already refinanced your student loans, or you have private loans, this is a good time to see if you can lock in even lower rates. If you have federal loans, you need to first ensure that refinancing is even the right choice. 

So by all means, continue paying off your debt. But this would be a good time to revisit your plan and make sure that it still makes sense in light of what’s going on currently.

REVIEW YOUR SAVINGS GOALS

Your savings are meant for upcoming known expenses happening within the next 5 years. It needs to be held in a liquid account, such as a regular account or a money market account. Planning for something that’s further than 5 years away? Think about investing for it, instead.  

Examples of what people save for:

• Wedding/honeymoon
• Down payment on a home or a practice
• Car
• Vacation

When there’s an economic downturn, you’ll figure out pretty quickly what you want to prioritize. Maybe what seemed really important just a few short months ago isn’t so urgent anymore. There is a LOT of variability in terms of how much these big-ticket items will cost you. The beauty of savings accounts is that ultimately, you get to decide how you want to use this money that you’ve stashed away for yourself. 

REVIEW YOUR INVESTMENTS

With wild stock market volatility, you can’t help but wonder how this is affecting your investments. It’s especially important that you remember the “why” behind your investment accounts.

Here are examples of mid to long-term goals (anything greater than 5 years) that people invest for:

• Retirement
• College 
• Health Saving Account
• Tax Bomb if you’re on an income driven repayment plan

When the markets start tumbling, or during times of economic stress, such as a recession, many well-thought out plans are immediately pushed aside as fear and stress take over….especially as our investments are directly impacted by the stock market.

Remember, investing is all about long term success, not short term wins and losses.

With each of your investment accounts, can you answer these questions?

• What is my goal with this investment?
• Where am I holding my investments?
• What am I invested in?
• What is my asset allocation?
• What is my risk tolerance?
• What is my time horizon?
• What is my investment strategy?

If you cannot confidently answer these questions about your investments, then please don’t make rash decisions with your investments in the heat of stock market volatility! Which brings me to my next point….

DON’T BUY STOCKS JUST BECAUSE THEY’RE ON SALE

There is a common mantra when stocks are plummeting:

“Stocks are on sale! Buy, buy buy!”

Or, “Buy the dip!”

By all means, please invest. This is how you grow wealth. There’s a reason that people choose to invest rather than save for long term goals. If you’re a beginner investor, do not use this as an excuse to shy away from investing.

But if you’ve already been investing, buying something when it’s on sale ONLY makes sense if you were going to buy that thing anyway AND you can afford it. 

Think about the hordes of people that go shopping during the holiday season. Sales abound, and even the most disciplined person can buy something because the deal is just too good pass up. Think of how often you have gone through this process, only to regret that choice later on down the line because you never used or enjoyed what you had bought on sale. It just sits there, in a shopping bag or with the price tag still attached, and now you have the fun job of figuring out what the heck to do with it.

When it comes to buying stocks or equities on sale, the main issue is opportunity cost. Again, every dollar in your possession has a job. Pumping more money into your investments means that those dollars are spoken for and cannot be used for any other purpose. 

So make sure you were going to buy anyway because you regularly invest as it is, or you’re in the process of rebalancing your portfolio according to your desired asset allocation. 

Do not buy individual stocks because, on a gut level, you think that they’re going to do great. Even financial professionals cannot reliably pick those winning stocks on a consistent basis. You have a greater chance of success when you build a portfolio that is low cost and well diversified. 

CONCLUSION

It’s so important during times like these to take a pause and evaluate your financial situation from a place of rationality, not from a place that is driven by fear and stress. 

I clearly remember being incredibly worried during the Great Recession. The news cycle was terrible, and my heart ached for those who were going through troubled times. I had gone from working as an associate veterinarian to staying home full-time after becoming a mother. We still had six-figure student loan debt, and my husband was finishing his nearly decade-long training post medical school.

We simply had to block out the noise and focus on what we could control. So we did what we had been doing all along since getting married: we continued automating our savings and chipped away at our debt. We finally decided to get more serious about saving for retirement by aiming to max out retirement accounts. We bought a home that was well below what the bank said we could “afford.” 

There were no fancy spreadsheets or apps. No “must buy” stocks that significantly increased our net worth. 

We just stuck with the boring stuff. Being boring in personal finance works. You don’t want a lot of drama with your money. 

This is all about the long game, making more good choices than bad, and practicing those positive financial habits over and over again, laying brick by brick in order to shore up your foundation. You are doing Future You a huge favor by doing this.

This storm is fierce, and we don’t know how long it will stay, but this too, shall pass. Continue taking care of yourself, review your goals, and remember to refocus on your energy on what you can control. 

Has this recent turn of events made you re-evaluate your finances? Comment below!