RBC Wealth Management: How to thrive

How to thrive in uncertain times

The statistician and risk analyst Nassim Taleb said “history doesn’t crawl; it leaps.” The last few months sure feel like a leap.

I am not going to show any graphs or charts today. As the global economy has slowed, and as the stock market has declined, and our favorite small businesses have closed for the greater good, it can be scary to look at retirement account statements and to think about the financial future.

Our brains are designed towards preservation, and in these moments of pain and anxiety, our natural fight or flight instinct kicks in. Emotional financial decision making has historically led humans to do the opposite of what would have been best for their finances. Knowing this: I urge you to pause. Avoid the instinct of trying to catch a falling knife. Take a breath. Reclaim your body and your mind from all the news and fear, and let’s focus on what you can control.

First up: Revisit your personal rule on emergency savings. If you are feeling at all uncomfortable with your emergency cash on hand situation, consider setting aside time to do the math and setting a rule for yourself or your family and using this as both a lesson and a goal for working towards that number in the future. Doing the math means looking at your monthly expenses, and deciding a prudent number of months of backup that you need for yourself or your family, and then multiplying your monthly spending number, say $3,000, by the number of months you have decided to have as backup, for example, 9 months, and $27,000 would be your target emergency savings account balance. Emergency savings should be kept in cash (versus invested in anything that could possibly change in value, i.e. a stock or even a bond). It’s also best practice for this account to be separate from your checking account, so you don’t risk overspending in your checking account and borrowing from your own emergency savings.

Do a spending audit. Do you know what your monthly spending has been? If not, pull out the former month’s bank statements and credit card statements, and go through all the spending items and categories. What in your current spending is discretionary that you might cut back on?

Look at refinancing any debt you have. The Federal Reserve’s recent rate cut may mean that you could obtain a better interest rate on your loans. First you need to know your current interest rates and terms. Next look at what you might be able to obtain if you were to refinance, add the cost to refinance, and decide if the benefit is worth the cost. That’s your “breakeven”: how many months of the lower payments it takes to cover the cost of refinancing.

Is now a good time to pursue additional education to help improve your resume or general skills? With so many educational options online and many people on self-quarantine, now could be a perfect time to take advantage of #CoronaUniversity.

Have you been wanting to start a side hustle? Now may be a wonderful time to write out the business plan and get started. Many of the best business models were built during the last recession, out of a period when there were problems that needed solving and people had a bit more KIMBERLY R. SHAPPEE Financial Advisor RBC Wealth Management

time to tinker and execute on those opportunities.

And lastly, different questions get you different answers. In times of volatility humans naturally rush to drastic conclusions and to ask less-than-helpful questions (i.e., how much worse is this going to get?).

Pivot here, and ask yourself questions that can help you thrive during this time of uncertainty: How can I use this to gain long-term advantage? How does this change my next year? How confident do you feel that you can positively impact your financial future? How clear are you about your financial plan and priorities? What is most important to you? Use this time to write down how you are feeling, and how you’d like to feel about your finances in the future.

In the last two centuries of American business, down markets have been followed by up markets. If you can be patient and use this as a time period to focus on what financial health and freedom look like for you, you can turn this challenging period into a productive, positive financial event in your life. Prime yourself to seize opportunities that will emerge from the turbulence and maximize your financial wellness as the dark clouds disperse.

Kimberly Shappee is First Vice President and a Financial Advisor with RBC Wealth management in Missoula.

Investment and insurance products offered through RBC Wealth Management are not insured by the FDIC or any other federal government agency, are not deposits or other obligations of, or guaranteed by, a bank or any bank affiliate, and are subject to investment risks, including possible loss of the principal amount invested. .

RBC Wealth Management, a division of RBC Capital Markets, LLC, Member NYSE/FINRA/SIPC