Right now, so much of our lives seems out of our own control. Most of us can't help develop a vaccine or take care of those who are sick. We can't know the risks we face in any given day, or when life will return to "normal".
Yet there are concrete steps each of us can take to protect ourselves and others. You know what they are, and hopefully you are doing what you can.
This reminds me of our financial lives. Admittedly, the stakes are not as high. But financial setbacks are frequent, and the serious ones can challenge your financial well-being.
I learned long ago that I can't predict the next stock market crisis. I can't predict when or why it will start, or when or how it will end. Almost no one can.
But you and I are not powerless. Far from it. We can take actions that allow us to survive the next financial crisis, and the one after.
Here's what I do -- and what we help our clients do:
1. I create a financial plan that fits my family's particular circumstances. We determine our needs and ability to take risk, and we only take actions that align with our long-term plan. That includes how we invest, what insurance we own, tax strategies and estate planning.
2. Within our investments, we diversify. No one can predict what kind of stock or bond will do better over the next year or 10 years. So we own the world, to eliminate the risk of any one investment hurting our plan.
3. We keep our costs low. That means buying low-fee mutual funds and minimizing trading, to minimize tax.
4. We ignore the ups and downs when they come. It's not easy. When I was younger, I thought I could time the market. I couldn't. But I also learned I didn't need to. It's incredibly liberating when you discover that, as long as you have an appropriate ratio of stocks to bonds, you don't have to worry about the market. It will eventually rebound, putting you in position to achieve your goals.
When there's plenty you cannot control, it's easy to lose focus on what you can control. That's your opportunity: identify what you can control and apply your energy there.