Money moves I am making amid a crumbling economy

I am lucky. Three words that are incredibly difficult to say amidst the turmoil the world has been thrown into in 2020.

In the month of March 2020 I have lost over 35% of my life savings. Not an easy pill to swallow. Yet, the truth remains, I am lucky.

I still have an income. My job in retail is considered essential, thus I continue to go to work. It kinda sucks but when I consider the alternative, I must admit, I am lucky.

I have an emergency fund.

I have a wonderful family

And as bleak as the future may look today, I have hope.

Most importantly, I have a plan.

1. Be Unshakeable

The first part of my plan is to remain calm. As difficult as this seems in times like this, it is required. If I sell off my positions in the market now, I lose 35% of my life savings. If I hold, there is a very good chance the market rebounds and I don’t lose anything. Not only is there a chance, the odds are with me.

Take a look at the great recession for example.

On 9/1/2007 the Dow Jones Industrial Average was at 13,924. It bottomed out at 7,062 in February of 2009. It then took until February of 2013 to climb back to the highs it was experiencing in 2007.

What happens in the 6 years between the bottom on 09 and the climb back to the highs in 2013 are buying opportunities. Rather than focus on the crushing feeling of loss, we focus on the opportunity to buy.

I know this coronavirus thing is scary and I can already feel you screaming as you read this that this isn’t the same. However if you stop and think for a minute back to 2008 or even the dotcom crash of 2000 or 911 we all thought then that the markets would never come back or that our savings would be decimated forever. The markets rebounded then, and they will rebound again after this. You just need patience and unwavering confidence in the resilience of the market.

2. Wait and see

Have we experienced the bottom of the current decline? I’m not so sure. As of this writing, the Dow is down over 33 percent from the high it experienced just a few months ago. And it appears we are about to enter the worst phase of the coronavirus quarantine. The phase where EVERYTHING shuts down and we are all trapped in our homes for a month.

I know that is a very pessimistic outlook but it appears to be where we are headed and I fear the worst is yet to come both socially and economically. I am however, optimistic that we will rebound just like we have in the past.

In the meantime, my approach financially is to wait and see. Over the next few weeks/months I will begin to dip my toes back in to the investing waters. In order to do so, I will need to have some capital to put into the market.

3. Cut spending, increase saving

I will need to raise some more capital in order to maximize my input into the markets once I am ready. What better time to take a good long look at your spending then now. Afterall, everything is closing down so we are kinda forced to lower spending. Unless of coarse you are getting takeout everyday which is just silly right now.

If you are interested in joining me, there is a section of my book that teaches you how to take an introspective look at your spending and how to cut in order to have more freed up capital to become debt free or invest. Just send me your email address and I will send you the book for FREE. Check it out here.

You can also read an early article of mine where I outline 10 insanely easy ways to cut spending.

A more recent article of mine gives 50 ways to get out of debt. What better time than now?

3. Dollar Cost Averaging

Dollar-cost averaging is strategy for building investment positions over time. When you dollar-cost average, you invest equal dollar amounts in the market at regular intervals of time. The goal is to get the best deal on a desired investment by limiting the impact of market fluctuations. Rather than trying to time the market, you buy in at a range of different price points over an extended period of time thus averaging out the total cost of the investment.

For example, suppose I want to build a position of $12,000 on a certain stock which I feel has good long term growth potential over the next 5 years. Rather than trying to predict the bottom price and purchase $12,000 of shares all at once, I would purchase $1000 each month for 12 months regardless of what the price was. Some months may be up, some may be down but at the end of the year, the average is what I am concerned with.

This will be my strategy over the coming years. If history is any predictor, it will be 3 -5 years before the markets make a full comeback. That is plenty of time to a. Accumulate enough investment income to put into the markets, b. Dollar cost average and achieve the desired amounts in the desired stocks I choose, c. regain faith and confidence that these tried and true systems work.

4. Do not Panic and trust the markets

Right now there is almost no optimism in the markets. It is total panic selling at its worst. I think what is required right now is to keep a level head and understand that, while we probably haven’t seen the worst, there are opportunities ahead and you can turn this lemon into lemonade.

If you have lost a great deal of your wealth due to this market, as have I, know that you will get it back. Know also that the NEW money you invest will grow very rapidly over the next few years. So while the money already invested is gone for the time being, you have a chance to benefit as the market comes back.

I refuse to be scared off by this and will continue my investment strategies. In one of my accounts I had about $120,000 before the coronavirus hit. It now has just under $80,000. I am fully prepared to accept that that money will not return for the next 3-5 years.

In the meantime I plan to invest approximately $2000 a month into the markets which should grow considerably. I should be able to achieve 10% per year on average which would mean, the new money grows to over $100,000 in about 4 years while my old money comes back to the $100,000 range.

Again, these numbers are guesses but they are guesses based on historical data. I would not be at all surprised if over the next 5 years, once we defeat the coronavirus, we see one of the biggest bull markets of our lifetime.

I remain positive and optimistic because history tells me to and because, in a sea of negativity and pessimism, I have to

Godspeed

Earl