For a long time, I couldn’t even think about the stock market without being overwhelmed with fear and anxiety.
Now, as I read stories about bear markets, falling stocks, and the impending recession every day, I shrug my shoulders and move more money into my investment accounts.
I don’t mind that the S&P 500 is down almost 20% from its recent highs. I’m not worried about the price of Bitcoin dropping more than 30% in 2022. And I’m not afraid of negative GDP growth forecasts or chatter about stagflation.
In fact, I invest After. This year, I invested $15,000 more than my usual monthly contributions.
What led to such a drastic change? Instead of seeing market downturns as triggers and anxiety, I am able to see them as Opportunities. I invested five figures on top of my monthly dues in 2020 and plan to do the same again in 2022 while the market is down. On top of all that, financial stress is a rarity in my household.
Here’s how I discovered unshakable financial confidence and how you can use stressful times like this to find yours.
my money story
In 2008, I was a freshman in high school. The stock market crashed, my dad was fired from a technology consulting firm, and the housing bubble burst. I had no idea that these few months would affect the next few years of my life so dramatically.
In the years that followed, my father remained unemployed, we lost my childhood home and we ended up leaving the beautiful neighborhood where I grew up. My parents, who brought our family from Puerto Rico to the United States to pursue an American dream, were forced to face the opposite. Going through this change of fortune, I lost confidence in my financial future. I felt fear. I didn’t know it at the time, but it was this fear that led to a decade of battling financial anxiety.
Imagine this happening in the smallest and greatest moments for me, like:
- Take 30 minutes to decide what to put on the restaurant menu to save money.
- Return 90% of what I bought because of the shame I had to spend on myself.
- Crying on the way to my wedding because of financial inconvenience.
Money only equaled the stress in my world.
Fast forward, and I’m now a 29-year-old mother of two with over six figures invested in my retirement. This means that if I don’t sell and never invest a penny more, I will still retire as a multi-millionaire.
The most important factor that helped me overcome my financial anxiety was realizing that there was more to money than just making a spreadsheet and following “steps”. Gaining confidence would require improving my money habits and beliefs. So I took classes, went to therapy, and hired several mentors. The process allowed me to identify the source of my financial fear and create a new story. Over time, I began to feel more confident with my finances.
Once I found out, I didn’t to have To live my life in fear of the next recession, I made it my mission to eradicate financial anxiety, not only in my own life, but for others as well.
This mission is why I founded Arise Financial Coaching, a company that helps professionals pay off debt, save more, and enjoy financial confidence. Over the past two years, we’ve helped hundreds of people across the country turn some of the most uncertain economic times into the best financial years of their lives through financial coaching.
Are you confident in your finances?
Imagine your finances are like a small ship at sea.
If you’re the captain of this ship, there are a lot of things you can’t control, like the strength of the wind and its direction. However, you can control how you adjust your sail.
Focus on building financial confidence so you feel secure in all market conditions.
Financial confidence is how quickly we can adjust our sail in response to any type of wind or weather to arrive at our destination: financial independence. Not all market declines are as drastic as they were in 2008, but financial confidence can help you regardless of market conditions.
Here are four simple things you can do in times like this to get to shore safely.
Four steps to take when the market is down:
1. Personalize your emergency fund.
Before you even hear a whisper of a tightening economy, take a moment to ask yourself how much YOU should have in an emergency fund. Many people have money in savings but don’t have a strategy for why they have that amount or in what circumstances, they are comfortable using it. Not knowing this and/or not having an emergency fund can greatly contribute to financial anxiety. So take a moment and think about how many months you can cover your living expenses with the amount of cash reserve you have. If it’s below three in lean times, you’re really vulnerable to a market downturn. However, if you have more than 12 months in cash, you are missing out on earning potential with some of those dollars.
2. Remember that you do not having to lose money.
There’s a common misconception that when you log into your investment account and see that your balance has dropped, it means you’ve “lost” money. But the only time you can lose money is when you to sell an investment. This means that if you hold investment and it recovers, you will not have lost anything. Always remember that your balance means nothing until the day you sell. That’s why it’s a good idea to only invest money in the stock market that you won’t need to touch for a while and to make sure that all your eggs aren’t in one basket. This is what will give you the stomach needed to ride out the market dips that normally occur in the economy.
3. Look for opportunities for financial growth and you will start noticing them.
It’s easy to focus on all the stressful aspects of a market downturn, but what about all the opportunities? Market downturns mean that any stocks you were buying while the market was up are on sale. It’s like Black Friday, but instead of buying shitty perfumes, you buy companies! You can own more with the same amount of money. It’s huge! Another opportunity is the tax benefits you always get when you invest in a pre-tax account like a 401(k) or a traditional IRA. Every dollar you put into these accounts up to the annual maximum is deducted from your taxable income. This can reduce what you owe Uncle Sam by the thousands.
4. With a sound investment strategy, time heals all “market” wounds.
If you have a well-researched investment strategy and still feel an insatiable urge to panic, sell, and cash out your 401(k) so you can “wait,” you’re writing your own stress prescription. Without forgetting the lots of dollars you could lose in taxes, fees and unrealized earnings. Studies have repeatedly shown that market speculators (people who try to time the market) lose 98% of the time to people who buy and hold low-cost, long-term diversified funds. The market is still recovering. When in doubt, zoom out and look at the long-term stock picture.
Three ways to increase your financial confidence:
Regardless of the economy, making investment decisions can be difficult. If this market downturn is giving you more seasickness than confidence, you’re not alone. Here are three ways to boost your financial confidence in days or weeks to help your financial plan withstand the recession:
- If you have extra money to invest but don’t know WHERE and HOW to invest it, read some books on investing to improve your insight. These are my favorite books. They can teach you the basics of what you need to start investing on your own.
- If you know how much you want to invest and after reading these books you’re still not sure, hire a professional to help you, such as a trustee or certified financial planner.
- If you have no idea how much you could invest, feel free to years far from ready to build wealth and want to change that, hire a money coach who can help you improve your bottom line with money and build your financial confidence. My average client saves $20,000 for achieving their goals during their program alone. I’d bet my bottom dollar that with the help of a good coach, you’ll be ready to invest much faster than you think.
It’s normal to feel stressed when the markets are down, but if you focus on building financial confidence in YOUR life, you can sail smoothly even when the wind isn’t going in the direction you planned. If my experience has taught me anything, it’s that the situation around you doesn’t have to dictate your financial confidence or your well-being. You can get the security and joy you want in your life much faster and easier than you think.