Back To Insights

Steering Clear of Financial Catastrophe

Nov 15, 2019

For most people, money equals stress. Debt, retirement, savings, emergency funds and living expenses are all things that most Americans worry about and feel unprepared for. The threat of financial crisis can come from many directions, but what most people don’t know is that a financial advisor can be your biggest ally for more than just your investment in the stock market. Saving for retirement? Call a financial advisor. Is the stock market making you uneasy? Call a financial advisor. Is your debt becoming impossible to deal with or are you considering bankruptcy? Believe it or not, you should still call a financial advisor.

As financial planners, sometimes the first question we get asked is how to avoid these financial crises. “How can I keep from getting myself into a financial emergency?” is something we’re often asked. We’ve found that no matter your level of financial expertise, the two mistakes you want to avoid are very common:

  1. The “Panic Mentality”

Money can be a high-stress, emotional, even scary topic to explore, especially if you’re not where you’d like to be financially. That fear can be detrimental to the health of your investments and can lead to money-wasting actions. According to a 2019 Gallup study, 25% of Americans worry about money constantly, their biggest concerns being saving for retirement and unplanned expenses. If you’ve put your retirement income in the stock market, this fear can be daunting—and when the market is falling, people tend to panic. They have an overwhelming feeling of “I need to get out.” So, they do. They sell their stocks quickly in order to avoid the impending doom of the market fall and financial loss. But once the market goes back up, they feel confident again, their worries ease and they buy back in. But in actuality, you should buy when the market is low and sell when it’s high. If you hold on through a market dip, your investment value would likely return. The action of selling and buying back investments is often a waste of your money. It’s typically better to ride out the fear.

  1. Living Beyond Your Means

Living within your means requires making sure your expenditures don’t exceed your income. It also entails managing your debt and knowing what to do with the money you have. As financial advisors, our biggest piece of advice is to save, save, save. Having a Plan B, or “rainy-day fund,” will help contribute to thinking rationally about your investments and give you confidence when the market falls. Saving will also contribute to feeling confident during life changes such as job loss, retirement, divorce, death, or marriage. As a country, Americans owe a shocking $1.04 trillion in credit card debt. This means that the average American owes just over $6,000 in credit card debt alone. This may seem insurmountable to many households, but again, the key here is not to panic. If you find yourself in a situation where debt seems overwhelming, money market funds can sometimes be used as relief or we can advise on other options.

At the core of both these issues is the fact that many people don’t seek to educate themselves further about investing and managing money. Financial planners can help put your mind at ease through knowledge and guidance. Our ultimate goal is to help you feel comfortable with how your money is working for you, and to give counsel that can relieve worries surrounding market inconsistency. Financial planners help their clients prepare for the future, no matter what stage of the game, and explain what will work for their personal situations. Even though the market continues to be a little unsteady, investing can be a tool to get the most out of your money. Before filing for bankruptcy or calling a debt relief company, try calling a financial planner. We’re a great resource to help you manage your debt in a way that is truly in your best interest. We can help you come up with the best and most efficient way to pay off what’s accumulated.

The key to financial stability is switching your mindset to long-term goals. A financial planner can help you ride out stock market fluctuations, come up with a plan to live within your means, and survive debt. It’s a partnership that can turn your money concerns into money confidence.