Thriving During Turbulent Times
How to Weather Financial Storms with Confidence and Calm
The last sustained downturn was the Great Recession in 2008 and 2009. Just because it’s been a while, don’t believe recessions are a thing of the past. Periodic recessions and bear markets are inevitable.
Now is the time to prepare financially and emotionally—not in the middle of a financial hurricane. As you watch your portfolio plummet and worry about possibly losing your job, you may feel some combination of anger, dread, sadness, fear and even outright panic. I understand.
As a wealth manager for more than 30 years, I have talked to many a client in distress.
It’s normal to get anxious about what the future holds. And I’m not just talking about whether you have enough money saved and invested to cover your family’s basic needs. Life itself is uncertain. If we’re facing up to reality, we are always vulnerable. It feels terrible to consider that a child may become ill, a spouse may die, or Hurricane Helene may destroy our home.
Part of my conversations with clients involved not just investment strategy but a wider perspective. It’s important to recognize that these panicky feelings are going to arise. When they do, identify what you can control and what is beyond your control. And remind yourself, I’m going to be OK, I’ve prepared for this day.
That’s why you seek sensible financial advice and plan ahead. That way, when the inevitable storm blows in, you can stay calm, feel safe, and enjoy life.
My game plan for how to prepare and thrive during turbulent times has three parts.
1. Build a Cash and Bond Reserve
Have an ample reserve of cash and bonds to tide you over till the economy and markets recover. What is an ample reserve? You’re not going to like my answer. There is no rule of thumb.
How would I know how much money you need to cover your basic expenses? But you definitely need to know! That monthly number enables you to structure your investment portfolio to provide enough money in cash and bonds to support you during trying times while simultaneously investing enough money in equities to provide support over the long term.
If you are part of a two-income household with both people in stable jobs, your need for a cash and bond reserve may be small because you are living off your earned income, not your portfolio. The odds are small that both partners will lose your jobs at the same time. If yours is a single-income household with one stay-at-home parent, you might want to have a larger cash and bond reserve. If you are retired with a multimillion-dollar portfolio, you might decide to invest more money in cash and bonds as your investment horizon and life expectancy shrink.
I highly recommend you rely on a competent financial advisor to help you think through and model the complexities of your personal situation.
2. Shift Your Money Mindset
My brother and sister-in-law enjoy life immensely. They travel extensively, always in style. They eat at wonderful restaurants. I once asked my brother how he would handle a once-in-a-generation bear market. His response: “We would spend less.”
Such a simple and profound answer! They can dramatically reduce their expenses and live a satisfying life. They may ease back on travel for a while, eat at home more, and be a little less generous with family and friends. And they are OK with that. This approach enables them to thrive in times of trouble while focusing on their abundance and what they can control.
My blog, I Would Die If I Flew Commercial, offers an in-depth discussion of how to comfortably live on less if the need arises.
3. Help People in Need
When times are tough, look for opportunities to help. Focusing on the needs of others shifts our negative thinking, since depression, anxiety and stress involve a high degree of focus on the self. When you connect with those in need, your fears subside and your gratitude soars.
Start by asking, “How can I help?” Give your place in line to someone at the grocery store. Shovel your neighbor’s sidewalk, or take out the trash for someone. Practice helping others in small ways. Then consider using your time, talents, and treasure to help in bigger ways. Try volunteering at the soup kitchen. Reach out to a nearby school to see if you can tutor students or run a coat drive. Ask your synagogue or church if there are any needs you can fill on a regular basis. Find a charity focused on the working poor and see what hands-on support you can provide.
There’s no question that it’s scary to consider the recessions and bear markets that may lie ahead. We cannot control the forces that influence our economy. What we can do is develop a realistic game plan for the next downturn that will help us thrive during turbulent times.
Until our next conversation,
David
Small Steps & Worthy Questions
What might give you the confidence that you will survive, or even thrive, the next time you have a financial setback?
Calculate your basic monthly expenses. What expenses could you eliminate while still living a fulfilling life? How much money would that save you? How might cutting these expenses improve your life?
Where would you like to make a difference in your local community? Ask yourself, “How can I help?” What’s a small step to take in that direction?
Would this game plan work for you? Let me know your reaction, and consider sending this blog to friends so you can continue this conversation with them.