April 27, 2020

Edited 11/17/20

Feeling Financially Secure in Uncertain Times

How to stop panicking and be proactive about money when hard times hit.

In early 2020, we saw the stock market crash to new lows — stomach-churning lows — due to the sudden onset of a global pandemic. Among those of us who are closer to retirement age, the idea of not having enough money is suddenly very real and scary. We may be considering a number of moves, from hoarding our paychecks — and pausing contributions to IRAs and 401(K) accounts, or even cashing out our retirement savings, in spite of the penalty for doing so. 

How we’re reacting — and how much fear we’re feeling — may be tied to our line of work. If we’re freelance contractors, perhaps we’re already seeing fewer work opportunities. Or if we’re employees, and our company instituted a 25 percent salary cut across the board, we may be wondering whether we can keep up with our current lifestyle with less money. 

But regardless of our life path and career choices, most of us are trying to figure out what we should do with our finances. Where should we cut back? Where should we continue savings? And most important, how can we ease our fears and financial insecurities?

Facing Our Fears

This isn’t the only time in history that fear and financial insecurity has led many of us to doubt our best instincts. 

During the Great Depression, the months following September 11, 2001, or even the recent recession of 2008-09, many people lost jobs, paychecks and income. Many went into debt. Multiple businesses closed. And many wondered if they’d ever recover. 

The current COVID-19 pandemic is undoubtedly scary and will impact most of us financially. But if history has taught anything, it’s that humanity is resilient. We will recover.

“History has shown us that those that stay invested during market corrections are rewarded,” says investment professional, Mychal Campos. “After the carnage of 2008, we have seen the longest bull market in history. We saw the markets recover from 9/11 as well and this time will likely be no different. Things may get worse before they get better but markets have always come back and rewarded patient, long-term investors. “ 

So even though we’re seeing the stock market hit lows we haven’t seen in a while, Campos advises consumers who are in their 50s or 60s to keep contributing to their retirement — and even increase their retirement contributions if that’s possible. 

“There is no better time to be contributing to your retirement accounts then right now,” he said. “Stocks are on sale. Your contributions are buying more shares which can help your account to recover its losses quickly when normal market conditions prevail. Dollar-cost averaging is an approach here for new contributions, which you already likely practice through your 401(K) as new contributions are made with each paycheck.” 

Additionally, says Campos, individuals who are retired or not contributing should avoid selling shares to cover expenses: Reducing your withdrawals from your portfolio is critical while markets are down.

Getting Proactive

Whether your financial situation is highly stressful and uncertain — say, if you’ve experienced a slowdown, layoff or a pay cut — or totally unchanged, it’s a good time to assess your financial goals and priorities. 

Here are a few things to do and consider as you deal with turbulent financial markets: 

  1. Stay calm. Now, more than ever, it’s important to keep your immune system healthy and your focus on your health. Do whatever you can to remain calm, whether that’s meditation, yoga, running or playing hand drums. Perhaps looking at your savings account and seeing that you have two months of expenses socked away will help you to relax. Whatever it is, do it. The calmer you are, the less likely you’ll feel bad, sad, or do something impulsive with money. 
  2. Scale back on nonessential spending. “It is a great time to review expenses both essential and non-essential,” says Campos. “If there are cuts or pullbacks you can make to either save more or reduce your withdrawals then that is advisable.” If it’s too hard to decide what expenses to trim (e.g., boutique gym memberships we’re not able to use, high-end beauty products, dog-walking services), talk to a financial planner who can help with making the hard choices. 
  3. Keep saving for emergencies. “We always recommend that you have a healthy emergency fund with 3 to 6 months worth of expenses easily available in cash, CDs, Money Markets and savings accounts,” says Campos. “If you don’t have that now is the time to build it up. If you have more you may consider using that cash to fund your lifestyle and reduce withdrawals from investment accounts.”
  4. Avoid the temptation to react to every headline. “Follow your long-term plan,” says Campos. “Cut expenses where you can. Remember there are opportunities in every market correction. Take care of each other and keep on keeping on.”