Allison Baines, CFP®
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You may be familiar with the expression, "What goes up must come down". Forbes.com reported on March 16th that the longest bull market in history came to a halt on March 11th, 2020 after 11 years. While your news feeds and favorite stations are all about the markets right now, the current Coronavirus Pandemic can teach us a few important lessons for our overall finances:
- Emergency Fund: The common rule of thumb is to have enough cash in savings for 3 to 6 months of your household expenses. While talks of recessions are looming, it's a reminder to make sure your savings levels are up to par. You may be less nervous about losing your job if you know you are able to still pay your bills and put food on the table while the economy recovers.
- Know Your Risk Tolerance: While you can never predict an economic downturn or how severe it will be, you can always be sure that there will be ups & downs in the markets. If you are nearing retirement or simply haven't been able to stomach the recent volatility in the markets, aggressive stock investing may not be the best place for you when the market does turn back positive.
- Analyze Lifestyle Inflation: Look at your monthly household expenses in relation to your income. How would your bills stack up if you aren't bringing in a paycheck? Now is a good time to analyze your monthly spending to see if there are any subscriptions or monthly expenses you can cut out. Even looking at things like your grocery bill can free up a lot of unnecessary expenses if you really need to cut back.
- Refinance Your Home: While interest rates have been relatively low recently, with the Fed continuing to cut rates you may be able to get a much lower interest rate on your mortgage than you have paid in the past. This move could shave off a few years of payments on your home and save you money in the long term.
- Keep Investing: If you have a long time horizon, keep investing. You could also look at increasing your investment savings over the short term to take advantage of the recent stock market declines to buy in at a lower price.
Finally: Don't Panic!
It's not certain right now if we will enter into a recession, but if you can
get prepared for economic volatility it can ease your fears in the long run.
If you would like to receive more information on making smart money moves for your future, be sure to contact us today!
