Fearful of Your Personal Financial Statements

By Sarah Carlson, CFP®, CLU®, ChFC®

Are you fearful of looking at your personal financial statements this month? You are not alone.

Market pullbacks are never comfortable. We have so much to feel wrong about: crushing inflation, the war in Ukraine, school shootings, and so much more. 

Suddenly your visions of a comfortable financial future may not seem so realistic with your essential living costs rising so much in just the last year alone. Here are a few things you should consider before you get frozen by your fear. 

1. Acknowledge that You are Uncomfortable

Don't try to avoid or block those feelings. Instead, recognize the discomfort and realize that when you sit with this feeling, those emotions should pass in a few moments. If those feelings don't fade, talk to your partner or trusted friend about them. 

Talk to your financial advisor as they have information and a perspective that you may not. Being sad or uncomfortable will not change anything, but acknowledging that emotion and then coming up with a plan will help you move through it.

2. Remember the Past

Most likely you have been through other market pullbacks including one market dip we had not long ago at the beginning of the pandemic. There was so much uncertainty at the beginning of the pandemic, the market lost about 30%. Then things bounced back once the drama subsided. 

3. Where You are at Financially 

This includes:

• Your assets
• Liabilities
• Cash flow

Open those statements, look at the information, and perhaps you are due to rebalance your asset allocation. It may be counterintuitive, but market pullbacks actually make some opportunities better such as Roth conversions and buying into a portfolio using dollar-cost averaging. 

Consider adding high-quality stocks that pay a consistent dividend regardless of whether the economy is growing or slowing. Even though cash is losing buying power in this rising rate environment, your short-term or emergency money is safe and a reasonable option for the short-term conservative portion of your portfolio. Your long-term money is your most opportunistic pool of money as suitable for your unique time horizon and risk tolerance.

4. Look to Your Future

Remember, you will likely live longer than you anticipate, and financial security can make the ride more comfortable. Enjoy your post-pandemic life and connect with loved ones and family; maybe that involves some travel, but don't do it at the cost of abandoning your retirement or long term goals.

Conclusion

The more you acknowledge your whole financial picture, and take the drama out of your plans, the better you will do navigating the market's ups and downs without feeling lost. 

As a Spokane financial advisor, I remind my clients to be mindful of what you control and that you have no control over. You don't have to be fearful of your personal financial statements.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss.

Dollar cost averaging involves continuous investment in securities regardless of fluctuation in price levels of such securities. An investor should consider their ability to continue purchasing through fluctuating price levels. Such a plan does not assure a profit and does not protect against loss in declining markets.

Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.

Dividend payments are not guaranteed and may be reduced or eliminated at any time by the company.