Your Financial Crisis Checklist

By Amy Hollibaugh

Eat healthy, well-balanced meals? Check. Get eight hours of sleep? Check. Meditate? Check. Exercise? Check. Get outside for at least an hour in nature? Check. Practice gratitude? Check.

If the global pandemic has given us anything, it’s a renewed focus on physical and mental health and the reminder that self-care is not a luxury, it’s mandatory. But for some of us, no amount of meditation can help calm our fears when reading headlines about the crisis and the worldwide effects it is having – especially across the financial markets.

During this time, don’t forget to practice some financial self-care as well. It’s often said that hope is not a strategy, so here are a few tangible steps to creating your own strategy for managing the financial crisis spurred by the pandemic.

Breathe – We can’t help but feel some level of stress and anxiety when reading headlines about the markets or thinking about our 401(k) balances during a crisis. What we can do is control what we do next. So before you make any moves – stop and take a breath. Still stressed? Repeat this step until you feel better. Feel better? Great, let’s talk about what you can do next.

Do Nothing – That’s right. Do nothing. Believe it or not, now is not the time to sell all of your investments and move to cash. That voice in your head that’s telling you to sell everything? That’s fear talking. Give that fear some facts to quiet down. Tell that fear that history has shown that after every major market downturn, recession and depression, the markets have not only recovered, but they’ve continued to reach all-time highs.

Selling now just means you’ll have to figure out the best time to get back into the market, which is something some pretend to know but really can never truly predict. By staying invested throughout the turmoil, you’re poised to capture the upside when it eventually comes.

Invest Excess Cash – But you’re thinking, “Wait. You just said do nothing?!”  Yes, a down market is not the time to sell. But if you have excess cash available, this is a great time to buy while the markets are down.

Be careful, though, that you don’t invest too much cash now just to take advantage of the “discount” happening in the markets. Do you need any of this money to meet your goals or expenses in the next 2 to 5 years? You don’t want to have to sell later at an inappropriate time to get the cashback, if you need it. Keep that money in an FDIC-insured money market account alongside your 6-month emergency fund.  Your future self will thank you.

Revisit Your Financial Plan – If you have a comprehensive financial plan, you most likely have already projected what a bear market means for your portfolio; and your recommended action items to achieve a successful plan likely already have taken into account times of down markets. Take another look at your plan to see if you’re still on course. Don’t feel like you’re on track? Time for a plan update. Don’t have a plan in place? Talk to your advisor, reach out to a fee-only, fiduciary planner or reach out to me Amy Hollibaugh at Nora Wealth or email me at ahollibaugh@norawealth.com

Consider Advanced Planning Opportunities – While now is not the time to sell everything and move to cash, it might be a good time to take advantage of a technique called tax-loss harvesting, where you sell mutual funds with losses and immediately purchase similar funds. This allows you to create a tax loss to reduce future tax liability while staying invested to take advantage of any potential market growth.

Other advanced planning opportunities could also include a Roth IRA conversion, exercising and holding stock options, and reducing concentrated stock positions, where appropriate. If you think any of these opportunities might benefit you, reach out to your advisor or message me. I’ll be happy to talk through them with you.

During a crisis, it’s easy to feel like we’ve lost control. And while there are many things that are out of our control right now, facing our fears and controlling the things within our reach can often bring the feeling of empowerment we need to persevere. Make a plan and stick with it. We’ll be here to cheer you on along the way!

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