As of July 2022, we’re in the midst of a bear market and a likely recession. It’s completely normal to feel anxious about it, but there’s something important to remember: the market is like a boomerang; it always comes back.
To give some clarity to the situation, what we are experiencing right now is a down market, also sometimes called a downtrend or a bear market. What this means is that we’re seeing a significant period of time where the market has prolonged price declines, falling by 20% or more. What this might mean for you is that, if you have investments or bonds, they might be down right now as well.
While it’s easy to feel helpless right now, because we truly don’t have control over market valuations and stock price changes, there are some things that you CAN be doing during this time of financial flux. And it begins with determining what you can control.
Focus on what you can control
We can’t control everything, especially when or how big companies and corporations like Walmart, Amazon, Disney, etc. plan to recover their stock valuations. Yes, our investments ARE important and they might be suffering right now…but there are still things that we can do to plan ahead, control our budgets, and look toward a better financial future.
Keeping a detailed track of your monthly budget can be the most helpful thing to do during times of financial uncertainty. You want to have a good understanding of how much money is coming in and how much is going out. When you understand your budget, you’ll be able to better track things like possible overspending and stop it in its tracks. Knowing your numbers will help you set yourself up for success.
Set future goals
When you can’t control the right now, try to instead focus your mental efforts on the future. Take this time to look at the rest of your financial plan picture, whether big or small! Try to focus on other areas of your financial plan, like do you have a living will in place? Do you have good insurance coverage? Do you have an emergency fund? Sure, these aren’t the lightest topics, but they’re an important part of your picture. Allow yourself to shift your financial perspective when the time calls for it.
Leverage your human capital
At the end of the day, your biggest financial asset is YOU; your skills, your experiences, and your unique interests. This is called human capital, and it’s so important in situations where we know we need to make some extra money (or change the way we make money).
- How much earning potential do I have?
- How can I continue to develop my skills?
- Are there other ways for me to make money?
Human capital can be built by networking, developing a new skill set, exploring other careers, and even asking for a raise based on experience and skills.
If you’re worried about losing your job in a down market, the best way to alleviate that concern is to continue to make yourself marketable and grow yourself professionally.
Take this time to revisit your financial plan
Your financial plan isn’t just when you’ll retire and how much you’ll have. It’s an entire plan for your money and should include all of the following:
- Your current financial situation
- Your long-term financial goals
- Steps to reach your goals
- An evaluation of your spending and saving habits
A down market can shake your confidence in all of the above, so it’s important to know that your financial plan is still reflective of your future goals. Now’s a great time to evaluate your financial plan and address the more “detailed” elements of it, as I mentioned above. This can be your insurance coverage, your healthcare plan, your budget, and even your savings goals.
Also make sure you:
Check on current investments
You most likely aren’t going to be happy with what you see, but if you have money in the stock market right now, I encourage you to check your portfolio/investments and assess whether it’s still the right risk level in the current market. At the end of the day, our investments come down to risk tolerance.
How old you are and where you’re at in life is going to considerably change how this looks for each individual. For instance, A 21-year-old’s investments versus a 65-year-old’s are going to look very different. So will their risk tolerance.
Have a 5-year-plan
I know…it’s a concept that typically gets an eye-roll or two, and I know it won’t always translate well for everyone depending on their circumstances. However, identifying some goals for the next five years can provide tangible steps for what comes next.
Ask yourself: Do you want certain things to change? To stay the same? And if so, how do you get there? Looking at your goals will help you put things into context, for instance, what you’ll need to do to remodel your home, change your career path, etc.
Opportunity is still out there, right now
When there is a down-market, you are not powerless! There are still things you can be doing to improve your financial situation and set you up for future success.
Yes, we’re in a down market right now, but in the history of the stock market, there are usually 3 years of up-market to 1 year of down-market. And remember: market cycles are normal and something to be expected! We know there is going to be an up-market to follow because there is a pattern to this.
Focus on what you can do to thrive right now. That’s how you live wealthy NOW.
Thanks for tuning in!
Thank you so much for checking out this episode of The Everyday Money Show with Hannah Moore. I can’t wait to continue spreading the right information for some oftentimes wrong feeling financial times.
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Resources mentioned in this episode:
- Check out the Everyday Money blog for more ways that you can budget smart during times of financial turning points: Budgeting, Setting Goals, and Choosing Trade-offs Wisely
- Use our BudgetingBlocks™ to plan a financial future that includes the highs and lows of the market. A good budget includes all possible financial scenarios and helps you see where your money is going!