By keeping plenty of cash available for spending in the near future, retirees can avoid drastic spending cutbacks as a result of market volatility in the present.
By following good financial practices such as budgeting, saving for emergencies and paying down debt, consumers of all ages can cushion themselves against financial shock.
"You need to be more focused on your own fiscal health and making sure you are creating an environment you cannot just survive in, but dominate in, regardless of a poor economic environment," says Evan Shorten, CFP and president of Paragon Financial Partners in Los Angeles.
In addition to establishing good basic financial habits, investing for the long term can help consumers meet their savings goals over their lifetime. To invest successfully, use instruments that are in line with your risk tolerance and time frame to help you get through nerve-wracking periods of instability.
It sounds counterintuitive, but planning for the market to go down will also add to peace of mind.
"People should have portfolios constructed with alternative investment strategies in addition to traditional asset classes such as stocks and bonds. They should make every attempt to diversify not only across asset classes but with varying correlations as well," says Bernard Wolfe, CFP and founder of Bernard R. Wolfe and Associates in Chevy Chase, Md.
"You don't want all the pieces of your portfolio to move in the same direction, whether up or down. True diversification means always having a couple of investments that underperform. Assuming you are properly allocated, people should stick to their strategy and not let the daily headlines affect that long-term game plan," he says.
Like the proverbial ant in Aesop's fable of the ant and the grasshopper, consumers who plan for the worst can relax in hard times rather than react. Knowing you've done everything possible within your realm of influence will make it easier to live with events that are far beyond your control.
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