My Two Cents
Personal-finance columnist Charlotte Cowles asks the nosy, revealing, sometimes uncomfortable questions about money so you don’t have to.
Photo-Illustration: by The Cut; Photos: Getty Images
It’s easy to spiral when, in the past week alone, gas prices have jumped to record highs, the stock market whiplashed, and the war in Iran has raged on. “I’ve had a number of clients ask me, ‘Should we leave the U.S.? Should we sell everything?’” says Valerie Rivera, a Chicago-based certified financial planner and founder of FirstGen Wealth. “People want to take action, to feel like they’re protecting themselves.” One of her clients decided to buy a second home in the Caribbean, partly to be close to family but also to have a sense of escape, she says.
Buying a house on an island isn’t in the cards for most of us, but we can all relate to the urge to do something — anything — about the rising cost of living due to bungled trade policies, immigration crackdowns, and, of course, the war that no one knows when or how we’ll get out of. (Needless to say, there are many reasons to be upset about those things aside from their economic impact, but their effects on day-to-day spending add an extra sting.)
Grocery-store anxiety feels particularly intense. One person I know has been buying and freezing raspberries whenever she finds them on sale; the fruit is notoriously precious now that shipping and labor costs have spiked (in Boston, raspberry prices are up 40 percent). Another friend just bought a chest freezer for his apartment so he can get more mileage out of his Costco runs; he believes it’ll pay for itself within months. Personally, I’ve been simmering my way through a box of dried beans I received for Christmas. A recently revised USDA outlook predicted that certain food prices (notably, for beef and veal) will increase by about 10 percent this year.
How much worse prices will get, or when they might stabilize, is anyone’s guess. “Energy costs are likely to remain high, and that’s going to affect the price of shipping, flights, groceries, and manufacturing. It’s going to show up in everyday expenses across the board,” says Rivera. “I know it sounds bad, but it’s the reality.” The war could even push up costs on seemingly unrelated things, like health care; the conflict has disrupted supply chains for pharmaceutical companies, which will trickle down into higher drug prices and already-unaffordable medical bills.
When I reached out to financial experts about what they recommended doing (or not doing) right now, they generally agreed that there’s no good answer — a strong financial plan should be roughly the same no matter what’s happening in the world. “If you’ve got a solid budget and savings plan in place, stay the course,” says Rivera. “If not, let this be the encouragement you need to make one.”
It might feel dumb to focus on your finances when World War III seems imminent, but remember that financial security enables you to take care of others, too, says Georgia Lee Hussey, a certified financial planner and founder of Modernist Financial. “Generosity is one of the best antidotes to anxiety, but it’s a lot harder to help others if you’re struggling to make ends meet,” she says. For starters, if you can spare any money, she recommends donating to local food banks; if you can spare time, volunteer for them.
Meanwhile, do the stuff you know you should anyway: Review your spending, make sure you have some cash saved, work on paying down high-interest debt, automate contributions to your retirement accounts, and invest in a well-diversified portfolio that includes both U.S. and international companies. “It sounds boring, and maybe you’ll hear about quicker fixes that seem tempting, but the boring stuff is what works,” says Hussey. “My rule of thumb is, if it sounds exciting, you’re probably doing it wrong.”
While you’re at it, review your worst-case-scenario contingencies. If a recession hits and you get laid off, what could you do? How long could you go without a salary? “Create a written plan for steps to take if you experience some kind of major financial setback,” says Hussey. (Writing makes it more concrete and helps you share it with others who might be involved.) Hers includes a list of nonessential expenses she could cut immediately; she also recommends securing a zero-interest credit card or line of credit, which you hopefully won’t need but will be glad to have if you do. (If you sense that your job might be vulnerable, do that now — you’ll have a better chance of getting approved for a line of credit while you’re employed.) Polish your résumé, keep your ear to the ground, and make sure your references are up to date so that you can hit the job hunt running if you need to.
When I asked if there’s anything we should buy right now, before prices get even worse, everyone agreed that hoarding is rarely worth it. “It’s a complicated time to be a consumer,” says Hussey. “I’d definitely cut back on unnecessary travel if you can, especially now that gas prices are so high.” That said, if you have any big expenses coming up in the next year, start budgeting for them now. Do you have any weddings to go to? Family trips or visits? Is your computer, phone, or car about to die? Do you anticipate moving? It’s not too soon to research prices and set money aside.
Still, a lot of our biggest expenses — health care, housing, transportation, child care — are both essential and outpacing wage growth, and it’s impossible to money-hack your way out of them. “Budgeting can only go so far,” says Rivera. “Don’t beat yourself up over what you can’t control.”
On that note, sometimes it’s best to do nothing, at least where your money’s concerned. “The market is going to continue to swing back and forth, which will put everyone on edge, but that doesn’t mean you should act on it,” adds Rivera. If you’re looking at your 401(k) — or sky-is-falling headlines — and freaking out, take a deep breath. The worst thing to do is panic and cash out your investments or do something weird and impulsive, like buy a bunch of bitcoin. “I’m telling all my clients, ‘Lose your logins, delete your investment apps,’” she says. “I even force myself not to check my own accounts, because I know that I’ll be tempted to move things around if the market looks bad.” Remember, the market was a roller coaster last year, too, but the S&P still rose by 16 to 18 percent overall.
Some people recommend investing more when the market is down, and there’s some merit to that philosophy (buy low, sell high, etc.). But the truth is, no one knows how to time it perfectly. “The best strategy for building wealth is to consistently invest in a well-diversified portfolio over time,” says Hussey.
While it’s smart to keep cash on hand, don’t go overboard. “Cash feels safe, especially when the rest of the world does not,” says Rivera. “It’s good to have an emergency fund — enough cash to cover three to six months of living expenses — but beyond that, you want to invest your savings. Otherwise it’s just losing value.” Use an investment calculator to see what $1,000 will do in the market versus what it will be worth in cash ten years from now, and you’ll see what she means. “You’re playing the long game,” she says. “This country is going through a lot right now, but we’ve been through a lot before, too.”
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