Now is the time to review financial plans

In the event of stock market panic, read this:

Many of my recent articles and blog comments about financial planning surround the concept that a financial wake-up call and a reality check are very badly needed by individuals and small business owners today. Recent news about the unhealthy global stock market makes it clear that many others share these same concerns. Investors around the world are taking a hard look at their prospects to keep their money safe and earn a decent investment return in the future. Many do not like what they see. The risk of depreciation, deflation and financial loss is greater now that at any time earlier in our lives. A worldwide economic devaluation of 10% or more not only seems possible, but may actually be forecast this week. This may be only the beginning with even tougher times ahead.

The Wall Street Journal caries a headline today “Investors flock to U.S. Treasury bonds, as many rip up playbooks for what will work in 2015”.  The articles says “Stubbornly low government-bond yields world-wide underscore soft global demand for goods and services as many countries are grappling with an aging population, falling productivity and restrained borrowing and lending after the financial crisis.” One reader comments “This is because so many working people who used to have money to spend no longer have it, though they continue to work.   The concentration of wealth, as a result of “over globalization” and increased technology, into the hands of a few doesn’t support a basic economy, locally or globally long term.”   Another writes “It shocking to see how few “experts” realize this is the beginning of the new norm.  It will never change until money is re-distributed back to the middle class and working people so they can once again by the products they produce…  Unfortunately it won’t happen in a clean manner.” A third concludes “too many goods and services are chasing too little money in the global marketplace — that’s a recipe for deflation and depression — accredited investors with cash will soon be feasting on bargains — everyone else should be under cover”. Clearly these are not problems that will disappear anytime soon.

Yes, the financial news is bad and the longer term economic outlook even worse. So what can a small investor or business owner do to cope with these new economic realities? Basically we should follow the same personal financial advice as always, summarized in these ten rules:

1. Create a mindset that your financial success is determined by your own actions, not by the government or the economy.
2. Keep your job or business secure as possible. Make certain that the lifeblood of your financial security is not pushed out of focus as a result of life’s distractions.
3. Continue to vigorously trim bills and expenses in order to have some surplus money for savings. Adopt a “whatever it takes” attitude toward forcing personal savings.
4. Build emergency funds in a bank account.
5. Contribute to social security and retirement savings plans.
6. Invest in index funds and avoid the inevitable downsides of market timing, forecasting and stock picking.
7. Do not react to the news and emotions of others.
8. Make investment decisions based only on your life’s timeline of events, not how you think the market will perform.
9. Ignore day-to-day financial news and your current economic situation. Focus on long-term goals.
10. Ask for help when you need it. It is no longer realistic to expect in today’s world to solve all of your financial challenges without occasional professional help. Staying “stuck” too long has a serious long-term impact on your financial success.

Turn the bad news into an opportunity by taking the time to formally re-evaluate your own financial situation. Now is a perfect time for many of us to bring in an expert second opinion on our most stubborn financial obstacles. We have all experienced that even the most difficult problems in life can melt away once we see a new way of looking at it. I would be pleased to schedule an online or telephone personal financial review; please see my website for details.