Clients will often hear me say “organize your financial life so that when a great opportunity presents itself, you are financially ready”. March presented one of those opportunities that if you were ready for, would have resulted in a pretty significant financial gain when measured just few short months later. Recognizing the opportunity is the easy part. The challenge is organizing your financial life so that you are in a position to be opportunistic.
For some, the challenge is a lack of income. I love to share about my single mother client who is raising two children on a modest working class wage who will max out her Roth IRA with $6,000 in 2020. In fact, she has maxed out her Roth IRA since we began working together 8 or 9 years ago. While she does not have the extra discretionary cash flow to buy stock when it gets cheap, or to buy the house across the street that is being fire sold, she is doing great, considering her income.
For some, the challenge is a lack of discipline. I try pretty hard not to be the financial advisor that puts clients on a strict budget and removes the fun from life, but do emphasize that a little financial discipline can pay very big dividends over time, especially if it allows you to capitalize on those rare, but awesome financial opportunities. While I haven’t written any books on budgeting, it comes down to living on less than you make. Dave Ramsey and others have developed amazing tools to help you conquer this hard to achieve victory. In reality, the vast majority of folks spend what they make; if they make more, they spend more. If you can interrupt that cycle with a little sacrifice and discipline and then be intentional with those cash flow surpluses, you too can start to think about how you are going to make the most of that next great opportunity.
As always, we hope you find this week’s Weekly Market Review both informative and interesting.
Trevor N. Coe, CFP®