The economic effect of the coronavirus outbreak may have you thinking about — and let's be real, losing sleep over — your finances now more than ever.
With bills, investments and mortgage payments to consider, as well as looming fears about a recession, you may need an expert opinion to cut through the noise and calm your anxieties.
NerdWallet writers Arielle O'Shea and Kimberly Palmer shared tips at a recent forum on the challenges facing investors trying to navigate their way in one of the most volatile financial markets in history.
Q: What should I do as a long-term investor?
Arielle O'Shea: The stock market is inciting a lot of fear right now. If you are a long-term investor — you are not investing for a goal that is less than five years away, like a down payment for a house you want to buy in a few years — ride it out. The best reaction to these market moves is no reaction at all. People say that the stock market is the only market where people flee the store when things go on sale, but it's important not to flee the store right now.
Takeaway: When it comes to the stock market, playing the long game is the smartest money move. The best reaction is no reaction at all.
Q: What should I do if I am close to retirement?
O'Shea: If you are near retirement it's a bit of a different story, but not totally. You don't stop investing on the day you retire. You need your money to last 20, maybe 30 years, so you should still think of yourself as a long-term investor. Many financial planners recommend having a pot of "safe money," or cash available in savings or safer investments [such as bonds or target-date funds] that can cover you for at least the first few years of retirement. Take less risk as you approach retirement.
Takeaway: You still have a long time to invest, even if you are close to retirement, but have some "safe" money in cash or other investments — enough to last a few years — and rebalance your portfolio so that you're minimizing risk.
Q: How can I take control during a time of market volatility?
O'Shea: Control what you can control. See if you can lock in a high-interest rate with a certificate of deposit before rates fall further, shop around to find a high-yield savings account, increase your 401(k) contributions, max out an IRA, or consider investing more in a 529 plan.
Takeaway: Don't feel stuck. You can still open a CD, explore a high-yield savings account and max out your IRA, among other things.
Q: How should I budget during these times?
Kimberly Palmer: Make sure you have an emergency fund. In general, we recommend saving three to six months' worth of expenses. It's also important to apply the 50/30/20 budget — 50% of your take-home pay goes toward needs, such as groceries and mortgage or rent, 30% to wants and 20% to debt payments and savings.
It's the 30% wants that we have the ability to cut back on quickly if we need to. A lot of that cutting back is happening because we don't have a choice — commuting expenses and restaurant spending are going down naturally. Of course, other expenses are possibly going up as people are spending more on at-home activities for children and online exercise.
Takeaway: In addition to setting up an emergency fund, try the 50/30/20 budget as a way to manage your spending during this time.
E-mail: vlai@nerdwallet.com.
