If I am being honest, I am scared.
I am angry, I am confused, and I am not completely sure how to feel. But I do have hope and I know that eventually things will go back to normal. When will that time be? I do not think any of us actually know. I have wanted to write a blog post on this and felt reluctant with the gravity of what is going on in the world, but a Facetime with some friends (Haley & Annie) brought out the encouragement to be a voice to our generation in this time of uncertainty. I do think it is important to say that your fear is valid, your pain is valid, and it is okay to worry. I just want this blog to show you how we can take this time of pain and use it as a learning experience that can impact our financial life for the good.
To my fellow Gen X and Millennial readers, take a second and think about 2008. What comes to mind? For me all I can think of is Lil Wayne’s a milli freestyle, Valentine’s dances, and my brother telling me to wipe the crust off my lips at lunch in front of our friends. Now if we were to ask our parents what they remember, they would respond saying they remember uncertainty, financial discomfort, lack of job security, etc. It was a scary time for our country, and the housing market crashed. The one asset that many people thought could “never fail,” failed. Over two and a half million people lost their job that year, and the highest yearly job loss total since 1945. This was not an easy time. And then, Drake spent over 400 weeks on the billboards and the stock market skyrocketed up like Mo Bamba did the in summer of 2018.
“Also, Mo Bamba, the basketball player, never lived up to his hype, and the song didn’t help. Yes, for those who did not know, Mo Bamba is an actual person who plays in the NBA”.
I say all of this because we spent majority of our adolescent/young adult years in a pretty stable economic time. I would even step out and say it was one of the best decades in regard to market growth. With that in mind, whenever our schools started to extend our spring breaks and started to prepare for classes online, we had no clue this would be the first time most of us would feel some real financial pain in regard to the economy as a whole. Rather than letting this time pass by, actually let some of that worry and uncertainty be a lesson that impacts the way we make financial decisions in a healthier way.
First, I do not want to sound like a parent and say “I told you so.” But look, I told you so. One of the first things a financial planner will tell you (a competent one) is to have an emergency fund worth three to six months of living expenses. As you can see now, no one knows what the future holds, and that is why we should always give ourselves an element of financial security- not only mentally and emotionally, but practically. If I were a betting man, I would wager that more college graduates will actually start saving for an emergency fund once they start a job, post-graduation. And for my entrepreneurial readers out there, understand the risk that starting your own company brings. Whenever you take out that business loan, do you have enough to support you and your family for an extended amount of time? These are things that many do not consider until it is, sadly, too late.
I know all you have seen on the news and on Twitter how bad the market has done since COVID-19 struck, or how the oil and gas industry has hit an all-time low.
“Or the fact that there might be aliens!? Please, tell me what is going on.”
While some of that information is true, it has not necessarily been the best for investors during this time period, I can say with confidence the market will recover. Do I or anyone else know when that will be? No. However, I can say over the last one hundred years the market has fallen on many occasions. For every time it fell, it recovered. So, if you have any investment account and you can hold on to it, do not sell. The money you put into these accounts should be money you are okay with not touching for at least five years.
One of the most formative moments in my life was spring football my freshman year of high school. I had a really good season and a lot of the older guys were waiting to show me what varsity football was like. I vividly remember the first practice -I lined up against our senior linebacker, Julian Gay, thinking I was going to lay him out like I did during every practice against the freshman team. Boy, was I wrong. Julian ran me smooth over, and I don’t think he broke his stride. What did I learn from this? I learned that they were grown, and I was still a kid. And whenever he had the ball, I avoided the A gap. I went on to have a great spring because I knew not to try a guy who was 220 pounds and running a 4.6 forty.
What am I getting at? I am saying that whenever we have painful, or maybe even an uncomfortable, experience in life we should not just forget about it because it hurt. We should use that pain to help us make informed decisions so that we may avoid that situation that brought us discomfort.
So, to make it simple
1. Whenever you start working ,or even if you are working right now, set up an emergency fund ASAP. No one is saying we will have another international pandemic, but we do know something else will happen that will bring us all a sense of financial stress. So, do yourself a favor and be prepared.
2. Invest for the long run. You get a substantial return on your investment by allowing time to work for you. So, whenever you put money away into any investment account, make a promise to me, yourself, and your pet fish that you will not touch that money for at least five years.
3. Ask your friends who have boasted about their great financial algorithm that can predict what the market will do. Ask them how their return has looked in comparison to its benchmark, and if you want to understand this concept more, go back and read my blog post called “The Dangerous Game Called Day Trading.”