Why are people more afraid of flying than driving, even though car wrecks are far more frequent? As one academic suggests, “in a car, at least I know when to brake. In a plane, I have no control.”
This might also explain why many investors want to hit the brakes if they fear a recession is on the way. We’ve got no control over when the next one may occur, or how markets will react when it does. Still, even though your best bet is to buckle in and ride out this sort of market turbulence, it’s hard to do absolutely nothing in response.
Rather than trying to react to market mood swings by switching up your investments, here are 10 actions you can take instead. Each is within your control, and any of them can add real value to your financial well-being. In fact, these actions are worth taking regardless of a potential recession. And focusing on what you can control, rather than worrying about things beyond your control, is the key to mastering financial peace of mind.
1. Reduce debt. Pay off credit card balances and other high-interest loans.
2. Cut unnecessary costs and negotiate on the rest. Cancel subscriptions or services you haven’t used in months (magazines, streaming services, club memberships, credit cards, etc.) Manage insurance and other ongoing costs by seeking periodic competitive bids. Negotiate with vendors to reduce “fee creep.” Be a squeaky wheel!
3. Keep an eye on things. Order and review your free annual credit and Social Security reports. (And freeze your credit to shut out identity thieves. It’s free to freeze, and temporarily unfreeze your credit reports when needed.)
4. Freeze your kids’ credit. Unfortunately, kids are prime targets for identity thieves. Create and lock down their Social Security Number and credit reports, before anyone else does.
5. Establish a Trusted Contact Person (TCP). Name a TCP as an extra line of defense for your investment accounts. If your account custodian feels you are being financially exploited, they then have a back-up person they can talk to about some of their concerns. Read more.
6. Establish or increase your retirement plan contributions. The more you invest toward retirement (or similar goals), the better you can employ compound interest and market returns to accelerate your efforts – especially if your employer matches your contributions.
7. Set up or beef up your emergency/rainy-day fund. It’s great to be investing toward tomorrow. But in an emergency, you may need cash today. Be sure to set enough aside, so you won’t need to take costly loans or sell holdings at inopportune times.
8. Declutter your portfolio management. Over time, most families end up with a confusing array of investment accounts across multiple custodians. Where possible, organize your accounts across fewer platforms, so you can better manage your moving parts.
9. Advance your financial literacy. Books, podcasts, classrooms … financial literacy pays for itself, and then some. (Do beware of mass-mailed sales pitches, posing as “educational” forums.) Want some recommendations? Let us know. We’ll share some of our favorites!
10. Hire a fiduciary advisor. There are so many effective actions you can take to contribute to your total wealth, we’ve barely scratched the surface. None of them are terribly time-consuming in isolation, but it can feel overwhelming to consider them as a whole. Plus, a coordinated effort usually yields the best results.
That last point is exactly why we founded Brightview Financial. Managing your investment portfolio through thick and thin is part of it. But our greater goal is to help you oversee all the variables we can control in your financial journey. In so doing, we’re also preparing you to move more smoothly past the market’s inevitable – and uncontrollable – rough spots.
What else can you do to “recession-proof” your wealth? Contact us today to learn more.