Over the past few days, there's been no shortage of bad news in the financial headlines, and I know it can be scary, and I'm here to help you get through it. When bad news comes, you have a choice about what you do with it:
- You can believe it, then act on it in hopes that what you do will be a good move, or
- You can accept it, and stick to your plan.
What does your plan say?
It probably says something like, "Save $X each month so you can send your kids to college and still be able to pay your bills some deay when you can't practice medicine any more. Invest using a balanced blend of high risk and low risk investments."
Let's look at your plan together (and if you don't have one, by all means, stop right here and call me to get one together):
- "Save $X each month": If you stop saving (or don't start), you'll never reach your goal. So keep saving. And do it every month, so it becomes a habit. Creating a "culture of savings" in your life means you'll have money in the future when you need it. Creating a culture of savings in your household means your kids will have money in the future, too.
- "so you can send your kids to college": If you have kids, they're going to go to college, and kids in physician families have just about zero chance of getting anything other than a scholarship because mom and dad earn too much for need-based financial aid. With the cost of college topping $20K for public and $40K for private school, it's virtually impossible for them to "work their way through school" (remember, that $40K is after-tax money). You have to keep saving.
- "and still be able to pay your bills some deay when you can't practice medicine any more": You love working, and you never want to quit your practice. But some day in the far distant future, you will be forced to stop, either because you've stopped breathing, or standing, or just because you can't stand the bureaucracy and the paperwork any more. While your "retirement" may be a long way away, "some day" you'll need a big retirement fund, so keep saving.
- "some day": That could be a long, long time from now. Maybe five years, maybe a decade, maybe several decades. And even when "some day" comes, you will still need your savings to keep pace with inflation, and it's unlikely that safe harbors like bank deposits and money market funds will allow for that, at least not in the foreseeable future, so you'll need to be fully invested in something with at least some risk until you leave this planet.
And now, for the last part: "Invest using a balanced blend of high risk and low risk investments."
Today's news tells us that high risk investments (a.k.a. "stocks" or "the market") have crashed. But what about the other half, fourth or three-quarters of your savings? In many cases, low risk investments have either held their value or increased in value.
Stick with the plan.
When it's time to rebalance your accounts (I look at this quarterly, and do it as needed), there's a good chance you'll be able to buy some of these now-distressed investments at lower prices, and be able to reap the dividends from them for years and years to come... but only if you continue to own them through thick and thin.
Saving regularly, remaining fully invested , and rebalancing as necessary are all part of the plan. Bearing risk and stomaching volatile markets are part of the plan, too. So choose to do what's necessary to keep saving and remain fully invested: look past the minute-by-minute minutia of the news about the markets and stay focused on the future where you will still need money.
Call me if you need to update your plan or contact me to revisit your investments. And by all means, if your investments seem "broken" or if you feel the need to "do something different" let me know.