In last week’s Weekly Market Review I posed the question: Has the market gone up too much too soon since the March lows? Unfortunately last week, the market answered that question with a difficult week of selling. Last Thursday contained the worst of the selling and resembled those dramatic down days we experienced back in March.
If we have talked much at all about investing, you have probably heard me give the following financial advice; Try to organize your financial life so that you are ready to take advantage of terrific and rare opportunities like investing in high quality companies when they are trading at large discounted levels… or buying the house across the street that is being fire-sold before it hits the open market.
Organizing your life in such a way involves several basic elements of financial planning, such as living on less than you make, saving a healthy portion of your earnings, and having a plan on how you are going to invest. In a world where it is so easy to spend money (Venmo, PayPal, Amazon, Credit Cards, Online Shopping, etc.), saving money is a tall order for the majority of Americans. It requires discipline, which almost no one likes.
Make discipline easier on yourself. Through your payroll or your bank, set up a system where a certain amount of money automatically gets pushed to an account that isn’t your main checking/operating account. Designate this account as your “long-term investment opportunities” account. When you have a windfall event like a bonus or an inheritance, promise yourself in advance that you are going to put half of the windfall amount back into the long-term investment opportunities account.
2020 has forced many of us to take a hard look at our finances. While difficult circumstances create uncomfortable situations, you have the opportunity to take control of your finances and when the good times roll again you will be better prepared with a good mindset and a strong plan. This will lead to a significant improvement of your financial situation over the long-term.
As always, we hope you find the WMR both informative and interesting.
Trevor N. Coe, CFP®