“The only thing we have to fear is fear itself…..”
President Franklin D. Roosevelt delivered these wise words during his first inaugural address in 1933.
Over three quarters of a century later, these thoughts still resonate in these uneasy times. With news outlets barraging us at every turn about the latest calamities and tragedies -- even on TV screens at our gas pumps -- it’s easy to panic. It’s what our species specializes in when given information that’s fear-based without any offsetting knowledge.
The latest panic button word is Recession. The word itself, combined with fear, can lead to illogical actions, sleepless nights and a general sense of unease. It can also lead to complete inaction based on the fear of doing the wrong thing. However, we can calm our nerves, take a breath, pause a beat and sift through the noise to find the true nuggets that help us move forward. Fear not the recession by following these four tips:
1. Have a plan. If I leave home for a drive, with no idea where I’m going or why, I’m going to waste a lot of time and money wandering around aimlessly, maybe ending up in a less than desirable situation. Better that I don’t leave home without a map (or an address for GPS) and an idea of where I’m going!
Similarly, while you don’t need to know your whole life plan, you should have a sense of who you are and what you’d like to achieve in the short term (and maybe longer) with your life and money. Then get to work with a financial adviser such as a CFP® professional to develop strategies and a road map to help you succeed. Evaluate all the aspects of a comprehensive financial life; from spending habits to insurance to taxes to estate planning to asset management and more, using your plan as a guide to evaluate and then implement any necessary changes that will get you on the right path.
Stress test your plan! There are many tools designed for us to run scenarios, which allow us to toss our “plan” into a mix of all sorts of up and down economics, using past years as examples of what we might expect at any juncture. If your plan holds up, that will be an important “ease of mind” tool, allowing you to separate panic and fear from knowledge and providing the discipline to stay on course. When words such as “recession” seep into your thinking, working within your plan guidelines will help you stay calm and focused.
2. Get (and stay) educated. We need only listen to the never-ending news cycles to understand why we need to arm ourselves with knowledge and educate ourselves about how to navigate churning, uncertain waters. For example, while recessions can certainly cause financial stress and distress, I have noticed that none of the news outlets who are stirring the frenzy of human emotion have bothered to remind us that, historically, recessions are very short in duration, and recoveries and expansions are very long. Did you know that since the end of World War II, recessions have lasted an average of 11 months, while the average length of an expansion has been 60 months? That’s quite a statistic! Arming yourself with this type of helpful information will allow you to continue to move forward thoughtfully with your plans.
3. Consider taking action now. Although there may be no immediate action to take, it’s certainly time to think about what to do now in the context of your own plan. For example, uncertain and more volatile markets might provide you with an opportunity to make changes to your investments. Before taking any specific actions, navigate these possibilities armed with tax and investment gurus and/or knowledge on your side and within the context of your plan. Do not take a specific action because a talking head who knows nothing about you and your plan has suggested it.
4. Update Your Plan. You change, your vision of your future evolves and while you work on your own plans, the world around us changes too. It’s imperative that we update our financial plans and all the components within our plan as our life and times evolve, due to what we can and cannot control.
Remember, even though you cannot control the markets, the news cycles and the economies, you can control your behavior, actions and responses. Don’t let the overwhelming pitter-patter around you derail a successful financial life. Prepare yourself with a CFP® professional who is there to separate the noise from the news and keep you focused and on track. It will make all the difference.