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Over the past 25 years, investors have lived through an extraordinary range of economic disruptions: Wars, global financial crises, recessions, a pandemic and surging inflation.
I’ve walked with clients through all of these moments, listening intently to their fears and reassuring them each time: “Stay calm, stay invested. This has happened before and it will happen again.”
This is the go-to script for most financial advisers, because it’s mostly always been true. Markets fluctuate, and economies cycle. Over time, patience tends to reward investors who stay the course.
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At this moment in history, however, something feels different. As Eleanor Roosevelt once said, “This is no ordinary time.” So, it raises the question: Is this time-tested advice still relevant?
Another day, another ‘unprecedented time’
We face a long list of challenges here in the U.S. and abroad. Some, such as climate change, an aging population in most of the developed world and the threat of technology running amok, have been lurking around for a while.
Others, such as fractured geopolitical alliances, the willful destruction of multilateral trade and a self-inflicted war, are threatening to trigger the greatest energy crisis the world has ever seen.
When uncertainty rises to this extreme, some people panic and sell, stashing cash under their mattresses. Others ignore everything and hope it works out. Others become paralyzed, unsure what to do next or where to look for advice.
Under the pressure of it all, it’s understandable that any “business as usual” financial advice sounds like rearranging chairs on the deck of the Titanic.
So, to meet this particular moment we are in, I’m advising clients to reassess, redirect and reflect on the following: Their financial vulnerabilities, basic financial habits and community support systems.
Ask, ‘How exposed am I, personally?’
Take this time to examine your financial life through a resilience lens. If the “worst case scenario” — whatever that looks like to you — were to happen, are you prepared to withstand the impact?
Job security. How dependent is your financial plan on your current income? In a world where automation and artificial intelligence are changing industries rapidly, it’s wise to ask how replaceable your role might realistically be.
Interest-rate exposure. Increased inflation, high energy prices and global uncertainty all point to interest rates remaining relatively high or rising. If you carry significant variable-rate debt, such as variable-rate mortgages or credit cards, reducing that exposure can significantly strengthen your financial footing.
Consider paying down your high-interest-rate debt first, or refinancing to a fixed-rate loan if possible.
Climate and property risk. Extreme weather events are no longer rare occurrences and can affect any of us. If you live in an area vulnerable to hurricanes, earthquakes, flooding or wildfires, it’s important to review your insurance coverage carefully.
Look closely for gaps that would require specialized coverage, such as mudslides, smoke, wind or secondary impacts (business interruption, temporary housing, debris removal).
Return to the basics of financial planning
When the global environment becomes unpredictable, the best thing you can do is to return to the fundamentals of financial planning, focusing on the levers you can actually control:
Spending habits. You may not control global inflation rates, but you can examine where your money goes each month and make intentional choices about what are “nice-to-haves” and what are necessities.
Cash reserves. If you’re at risk of your income being disrupted, or if you’re feeling stressed about the what-ifs, putting money in an emergency fund is a smart move. Look into moving your emergency fund to a high-yield savings account, which will earn you higher interest rates (around 3% to 5%-plus) than a traditional account (less than 1%) and can help protect your cash from the full impact of inflation.
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Investment risk. Ask yourself whether your portfolio risk truly matches your life circumstances. For example, if you are a 30-year-old with an unstable income, you may want to consider a less aggressive portfolio (lower exposure to volatile stocks, higher exposure to bonds). In uncertain times, liquidity becomes valuable.
Being able to access your funds when you suddenly need cash can give you room to respond quickly to emergencies — and opportunities, too. If you are nearing retirement, consult with your financial planner to see how little risk you must take to make sure you have money to last your full life expectancy.
Take stock of your support system
Research conducted after the 2008 global financial crisis found that people who maintained high levels of social engagement with others were about 1.5 times less likely to experience worsening mental health, even when facing financial strain.
Further, the studies found that support from friends, family and community members significantly reduced the negative psychological and physical effects of financial stress.
In short, community is not just emotionally valuable. It can be economically stabilizing.
During times of financial uncertainty, strong relationships with others can lead to opportunities for shared childcare, housing support, job leads, emotional grounding and practical help. In an unpredictable world, social capital is a tangible form of wealth.
History has always moved in waves of stability and chaos. We don’t get to choose the era we live in, but we do get to choose how we respond to the crises of our time — even if that time is anything but ordinary.
After all, we’re all in this together.
