4 feel good money tips you need to know regarding Corona Virus news…
(hereon referred to ‘CV’ because quite frankly I’m tired of hearing the phrase Corona Virus!)
Wow. Not many guessed that another virus would knock the stock markets into a fast and volatile correction*. Yet my prediction of an overdue market crash is not the same odds as picking how far it will fall, nor most importantly how fast it will recover. Here are 4 easy financial tips to benefit,
1. Interest rates are at an all-time low. Take advantage of it.
- Refinancing your home is a no-brainer right now. Consider not taking money out of your equity, but lowering your interest rate or term is smart math. I recently refinanced my 15 year at 4% to a 15 year at 2.75%.
- The next smart move after the primary mortgage concludes, is to get a fixed rate home equity line of credit (HELOC). Just remember, don’t actually take out debt out on the HELOC, just have it for additional liquidity and to help sleep better at night after watching the news.
2. Review your financial plan
- If you don’t have one, consider a fiduciary financial advisor to assist and provide an objective view. When a client calls concerned about the stock market, I re-focus them on their financial plan. We use a software called Simplicitree®, which displays a tree with ‘above ground’ assets as those subject to market risk, and ‘below ground’ assets as those guaranteed from market risk. It’s easier for a tree to weather the storm with a solid root system.
- Below Ground guaranteed assets are those assets to focus on short term to provide liquidity during down market years, allowing above ground assets to recuperate on the other side of a market correction.
- One key below ground asset is a properly structured Life Insured Retirement Plan (LIRP). As it is principle guaranteed, it doesn’t lose value in market declines, its Triple Tax Protected ™, and most importantly to me, its accessible. There is no 59 ½ age requirement to access it which is a superior to an IRA, 401k, Roth during working years.
3. Always remember Assets put money in your pocket, Liabilities take money out. Regarding the ‘above ground’ assets which are subject to risk, keep a two year long perspective.
- Stocks are ownership in a company, dividends are your salary. You aren’t losing ownership and the stocks owned aren’t taking money out of your pocket. Not unless you sell them, and remember for every seller there must be a buyer. That means someone thinks they are worth holding through the storm.
- I recommend dividend paying stocks for my client’s financial plans, because even in down markets, the dividends still put money in your pocket. If you reinvest the dividends, you are accumulating more shares of the company as prices drop, thus you have more shares working in your favor when the stock market recovers.
- Control what you let in your head and follow the money. The media is paid via commercials. The more they fan the fear of CV propaganda, the more money they make. Consider the peace and wellbeing you’d experience if you simply turned off the news. Personally, I don’t watch main stream media news shows such as CNN, FOX, or Good Morning America. I find their biases is so strong and it’s easier to research the news from reliable internet sources that are more objective.
One final thought, this virus is an equal opportunity infector. Let's put aside the way the media portrays "us versus them", the partisan views of political parties, and realize we are all Americans and we all are being affected. Beyond that we are all humans worldwide and let's all care for each other to the best of our abilities.
As always, I’m here for each and every one of you if you want to chat.
*See my previous article, 'Toto, I've a feeling we're not in Kansas anymore.' The math of a market crash.