Rumors of a market shift have been buzzing for quite some time, but in reality, we can’t actually tell for sure when it will happen. The economy has been going strong and on the rise for over a decade and is well overdue for a shift in the near future. It often acts on a cycle with changes happening every 7-10 years. For reference, we are well over that by about 3 years. Many people forget and are surprised when a downturn in the market comes around, so don’t be caught off guard when it does. From finances to managing your mental health, we’ll discuss what you can realistically do to prepare for that inevitable day.
Preparing for a market shift primarily involves assessing your finances. To begin, you’ll want to audit your personal finances to get a clear picture where you currently stand. Most Americans have debt of some sort ranging from credit card debt, student loans, mortgages, car loans, and more. Do you know if you are paying high interest rates on any of that debt? If you are, figure out how to lower your debt burden. You can refinance your car loan, pay off credit cards, consolidate student loans, etc. If you’re not sure where to start, speak with someone who is invested in your long term success, whether it be a financial coach, advisor, or financially astute family member. We’re going to take a moment to shout out Rick DeOliveira, CFP with olivetree financial coaching. Rick is an awesome and sincere person who created his financial coaching business when inspired by his mom and her financial situation. Check out our interview with Rick in our Client Business Spotlight Series.
After assessing your debt, take a look at your savings. How many months of savings do you have? If the pandemic didn’t put this into perspective, allow us to: you never know when your employer may go out of business or decide to let you go. You’ll want at least 6 months of savings, however, more is always better. Also, what would happen if you were sick and couldn’t work for months at a time? What if one of your family members needed financial help? If one of these situations occurred tomorrow, would you be able to handle it? As much as we don’t want to consider events like these taking place in our lives, we aren’t immune to them. Techniques to saving money can be as unique as you are, meaning, there are plenty of different ways to save that may or may not work for you. We collaborated with our friend Rick a few months ago on 6 Ways to Save (check out our Instagram post). Another suggestion not listed in our post is setting up automatic withdrawals from your paycheck deposited into an account you can’t see; some folks need to not be able to see the amount of money they really have in order to not spend it. Do you have an IRA or other investment vehicle? Our number’s guy, Rodney Ross, suggests reading The Richest Man in Babylon, a very short and practical book on saving a portion of your income.
To increase the amount you can save at a time, are there ways you can create income on the side? For most people, the first methods that come to mind when discussing passive income are investing in stock, real estate, bonds, and less tangible items that may require a larger investment up front and are typically long-term investments. There are plenty of other ways you can use your circumstances to make a few extra dollars faster. For example, cleaning out your parents’ or relatives’ attics, basements, or other storage units. Not only will you be doing them a favor, but you can also sift for vintage items that could make an unexpected pretty penny on Ebay or Amazon. You can also score furniture items at garage sales and refurbish them to make a profit. Thankfully with the internet, there are dozens of instructional videos and articles on how to refurbish all types of items.
After exercising all the avenues to increase the amount of money you can make, start analyzing where you can minimize your spending by getting rid of any unnecessary expenses. What are you paying for right now that you don’t really need? Can you refinance your debt? Refinancing your loans can save you money on the life of your loan. Typically, the reason for refinancing is to lower the interest rate and/or get better terms for the loan, ultimately saving you money over the life of the loan. Finally, a way you can be aware of your unnecessary expenses is changing your debit/credit card numbers every year to ‘clean up’ expenses you forgot about. Once payments start failing due to inaccurate card information, you will start receiving letters or emails from companies asking you to update your payment information. You can also accomplish this by looking at your account statements.
Assessing your finances is only part of the plan to properly prepare for a market shift. Because we are in the wake of a market downshift, paying attention to your mental health is key to clearly navigating this time. Beginning and ending your day with the right attitude can go a long way. To begin, control your morning and the rest of your day will go smoother. Rodney likes to start his day with a glass of water and a workout, Steph goes for a run and takes 10 minutes to read, Lia does a 20 minute yoga flow. No matter how you start your day, start it without technology. You’ll want to end your day the same way, screen-free. Now, don’t lie, how many hours a week are you watching the news or on social media? When was the last time you turned off your phone for more than 5 minutes? Could you turn your devices off for 8 hours? The instant answer is most likely ‘no’, but trust us, you can do it. With the amount of information we have access to, it’s easy to get bogged down in all of the world’s problems and a sense of helplessness as we often feel inadequate enough to change them. Our advice is to focus on what you can change, not what you can’t.
With a better sense of direction on how you can prepare for a market shift and create a successful future, what are you waiting for? Whether it’s practicing one of our ways to save, purchasing The Richest Man in Babylon, or creating a positive mindset, the best way to prepare for a market shift is to start now!
Rodney Ross
January 27, 2022