For a long time, I couldn’t even think about the stock market without being encompassed with fear and anxiety.
Now, as I read stories every day about bear markets, tanking shares, and impending recession, I just shrug my shoulders and transfer more money into my investment accounts.
It doesn’t bother me that the S&P 500 is down almost 20% from its recent record highs. I’m not anxious that the price of Bitcoin is down more than 30% in 2022. And I’m not scared by predictions of negative GDP growth or chatter about stagflation.
In fact, I’m investing more. This year, I’ve invested $15,000 above my usual monthly contributions.
What led to such a drastic change? Instead of experiencing market downturns as triggering and anxiety-inducing, I am able to see them as opportunities. I invested five figures on top of my monthly contributions in 2020 and plan to do the same thing again in 2022 while the market is down. On top of all that, money stress is a rarity in my home.
Here’s how I discovered unshakeable financial confidence, and how you can use stressful moments like this to find yours.
My Money Story
In 2008, I was a freshman in high school. The stock market crashed, my dad was laid off from a tech consulting company, and the housing bubble burst. I had no idea that those few months would affect the next few years of my life so tremendously.
In the years that followed, my dad remained unemployed, we lost my childhood home, and we ended up moving away from the nice area I grew up in. My parents, who brought our family from Puerto Rico to the States to chase an American dream, were forced to confront the opposite. Living 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 struggling with financial anxiety.
Imagine this happening in the smallest and greatest moments for me, like:
- Taking 30 minutes to decide what to get on the restaurant menu to save money.
- Returning 90% of what I bought because of the shame I felt about spending on myself.
- Crying on the way to my wedding because of a financial inconvenience.
Money used to only equal stress in my world.
Fast forward, and I’m now a 29-year-old mom of two with over six figures invested in my retirement. This means that If I don’t sell and never invest another cent, I will still retire as a multi-millionaire.
The biggest factor that helped me move past my financial anxiety was realizing that there was more to money than just making a spreadsheet and following “steps.” Building confidence would require improving my money habits and beliefs. So, I took courses, went to therapy, and hired multiple mentors. The process allowed me to identify the source of my financial fear and create a new story. In time, I began to feel more confident with my finances.
Once I discovered, I didn’t have to live my life in fear of the next recession, I went on a mission to eradicate financial anxiety, not just in my own life, but for others as well.
This mission is why I founded Arise Financial Coaching, a company dedicated to helping professionals pay off debt, save more, and enjoy financial confidence. In the past two years, we’ve helped hundreds nationwide make some of the most uncertain economic times the best financial years of their life through financial coaching.
Do You Have Financial Confidence?
Let’s pretend your finances are like a small ship out at sea.
If you are the captain of that ship, there are many things you cannot 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 can feel secure during any market conditions.
Financial confidence is how quickly we can adjust our sail in response to any kind of wind or weather conditions to get to our destination: financial independence. Not every market downturn is as drastic as 2008, but financial confidence can serve you no matter the market conditions.
Here are four simple things you can do during times like this to arrive safely ashore.
Four Moves to Make When the Market Is Down:
1. Make your emergency fund personal.
Even before you hear a whisper of the economy tightening, 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 as to 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 contribute heavily to financial anxiety. So take a moment and consider how many months you can cover your living expenses with the amount of cash reserve you have. If it’s less than three during lean times, you open yourself to being really vulnerable during 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. Remind yourself that you do not have to lose money.
There is a common misconception that when you log into your investment account and see that your balance dropped, it means that you “lost” money. But the only time you can lose money is when you sell an investment. This means if you hold the investment and it recovers, you will have lost nothing. Always remember that your balance doesn’t mean anything until the day you sell. This is why it’s a good idea to only invest money in the stock market that you will not need to touch for a while and to make sure all of your eggs are not in one basket. That is what will give you the stomach to ride out market dips that are a normal occurrence in the economy.
3. Look for opportunities for financial growth and you will start to notice them.
It’s easy to focus on all the stressful parts of a market downturn, but what about all the opportunities? Market downturns mean that all the stocks you were buying while the market is up are on sale. It’s like Black Friday but instead of buying crappy perfume, you get to buy businesses! You can own more with the same amount of money. This is huge! Another opportunity is the tax benefits that you always get when you invest in a pre-tax account like a 401(k) or Traditional IRA. Every dollar you put into these accounts up to the yearly max gets deducted off your taxable income. This can lower what you owe to Uncle Sam by thousands.
4. With a solid investing strategy, time heals all “market” wounds.
If you have a researched investing strategy and still feel an insatiable urge to panic, sell, and cash out your 401(k) so you can “wait it out,” you’re writing your own hefty prescription for stress. Not to mention the beaucoup de bucks you could lose to taxes, fees, and unrealized gains. Studies have shown over and over that market speculators (people who try to time the market) lose 98% of the time to people who buy and hold diversified low cost funds for the long term. The market always recovers. When in doubt, zoom out and look at the long term stock market picture.
Three Ways to Increase Your Financial Confidence:
Regardless of the economy, making investing decisions can be tough. If this market downturn has you feeling more seasick than confident, you are not alone. Here are three ways you can increase your financial confidence within days or weeks to help recession-proof your financial plan:
- If you have extra money to invest but don’t feel confident in WHERE and HOW you should invest it, read some investing books to improve your acumen. These are my favorite books. They can teach the basics of what you need to start investing on your own.
- If you know how much you want to invest and after reading those books you still aren’t confident, hire a professional to help you, like a fiduciary advisor or Certified Financial Planner.
- If you have no idea how much you could invest, feel like you are years away from being ready to build wealth, and want to change that, hire a financial coach who can help you improve your results with money and build financial confidence. My average client saves $20,000 towards 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 stress when the markets are down but if you focus on building financial confidence in YOUR life, you can be smooth sailing even when the wind doesn’t go in the direction you planned. If my experience has taught me anything, it is that the situation around you does not have to dictate your financial confidence or well-being. You can gain the security and joy you want from your life much quicker and more simply than you think.