Photo Credit: Mek Frinchaboy / Stocksy
By Courtney Connley
A bear market, rising inflation, layoffs, and a supply chain shortage. The ongoing economic uncertainty has caused people to feel, in short, anxious. More than a quarter of surveyed Chief Members say that they are more focused now on nurturing their personal finances — and for good reason. Ally Donnelly, Editorial Director at Fidelity Investments, contends that women are likely to feel the brunt of the downturn.
“For women, the challenges of a difficult market environment can be particularly damaging,” she says. “The reality is women need to save more for retirement than men because of the pay gap, increasing healthcare costs, and caregiving responsibilities that can interrupt our careers. So it's all the more important that we make planning and investing for our future a priority.”
Currently, the average woman has 70% of the overall retirement income a man has due to the wage gap, reports the American Association of University Women. Ahead, we spoke to a team from Fidelity about the tools needed to not only survive a possible recession, but also navigate it as an opportunity to help build and generate wealth for the long haul.
Know the Who, What, and When of Your Financial Plan
When creating a solid financial plan, Ryan Viktorin, VP Financial Consultant at Fidelity, says one of the first things she tells her clients to consider are the people and things they care most about in order to create an appropriate budget.
“So what I mean by that is, first, who are the important people in your life,” she says. “If that is just you, I love that. But if it's also siblings, children, spouses, parents, [we have to think about] who are the people that we're planning for.”
After considering the who, Viktorin says the next thing to consider is the what. “So it could be college for your kids. It could be retirement planning, buying a home, buying a second home investment property. Whatever it may be, ask yourself, What are we actually planning for? What type of life are we trying to live? And what type of legacy do we want to leave behind?”
Once you’ve gained a clear understanding of the who and the what, Viktorin says you then have to narrow down a timeframe for when you’re trying to achieve these goals. Whether it’s in the next few years or the next 30 years, she says setting parameters around the when is all tied to how you can construct a solid plan for your future.
Stash Away a Rainy Day Fund
As with any financial market, having an emergency fund is always a safe bet, and according to Fidelity VP and Financial Consultant Michelle Howell, you should always aim to have at least three to six months worth of living expenses stashed away for a rainy day. This money, she says, includes not just the dollars that are sitting in your savings and checking accounts, but it also includes any certificates of deposits you’ve accumulated and any money that is not invested but sitting in a brokerage account. As life happens, she says you want to be sure to replenish this emergency bucket, but you also want to be careful to not over-replenish it with excess cash that isn’t working for you.
“Given this inflationary environment, the excess cash can lead to lost opportunities for growth over time,” she says. Save, but make sure you’re not over-correcting and continue to invest the money when you can.
Consider Buying the Dip
While seeing your money tank in the stock market is enough to scare anyone, Denise Chisholm, Director of Quantitative Market Strategy at Fidelity, says that an economic downturn is not the time to become a fearful investor. Rather, she says, it’s the time to strategize and capitalize off the discounted share prices of top companies.
“As an equity market investor, I love volatility because what it usually creates is opportunities,” Chisholm says. When looking at history, she says stocks tend to increase over the long-term despite market pullbacks, explaining that “75% of the gains off of any recessionary low over the next two years are in by the time the recession is over.”
“So you can't use bad news to sell and wait to buy on good news,” Chisholm adds. “That's actually not the way that the math of the market works.” When investing, Chisholm, along with other Fidelity financial professionals, say it’s always best to invest for the long haul and ride out the ups and downs of the market in order to see your best potential returns.
Keep a Diversified Investment Portfolio
When working with clients who have stock investments, Howell says one of the biggest tips she likes to reinforce is “that concentrated stock positions can be a great way to help grow wealth, but they aren't the most effective way to help preserve wealth.”
“You want to look at how all of these stock options fit into your overall portfolio and how you still remain diversified,” she says. “Being diversified means not having too much of your portfolio, including your 401k and your IRA or other investments in a brokerage account, or invested in one singular stock or singular industry.” Reason being, is that the economic stability of different industries changes over time so not having all of your eggs in one basket is the best way to ensure that you’re getting the best returns on your overall portfolio.
Don’t Make Rash Decisions
While it’s completely understandable to go into panic mode during moments of economic uncertainty, Howell says it’s critical for all investors, particularly women, to not move their money into cash if they want to build long-term wealth.
“After every economic recession stocks have recovered and because of that resilience in the stock market, we often hear that phrase stay the course,” she says. “But it is more than just a cliche; history supports that action. And as women, this is a core competency of ours because research shows that we actually tend to be more disciplined and patient investors than men. So we simply need to lean into that strength and remember that sometimes doing nothing is actually the action that will pay off over time as the market recovers.”
During times of change or uncertainty — in the markets or in your personal life — can actually be the most opportune time to reassess your financial situation. Added Viktoirin, “Take time to review and update your financial plan in order to ensure that it’s keeping you on track to reach the goals that are most important to you. Think of it as financial self-care, for your finances but also for your peace of mind.”
One option: Fidelity offers complimentary consultations to review your finances any time to help identify the best next steps. To learn more, join Fidelity’s Women Talk Money community for monthly live events along with additional resources. Women Talk Money was created to provide an open forum for women to ask questions about money and investing, get information on relevant trends, and zero in on the gender differences that make planning for the future unique for women.
Have you listened to the Chief podcast? Tune into "The New Rules of Business" as Chief Co-Founders Carolyn Childers and Lindsay Kaplan unpack today's most challenging leadership questions. Be sure to leave a review and follow wherever you get your podcasts. New episodes drop every Tuesday.