The Stock Market is Crashing! What Should I Do?
In March of 2020, the stock market crashed 37% in less than a month. The craziness of Covid caused everyone to freak out! But within just a few short months, the stock market recovered and continued to have exponential growth over the next 2 years.
We were winning baby! Mr. Bean and I reached CoastFI as our investments continued to grow!
Then, starting at the beginning of this year, 2022, the market started slowly going down again. It hasn’t been a sharp drop like back in 2020, but a long march down.
The economy is trying to figure out what to do as inflation is raising. Production issues are causing supply chain issues from all over the world. Gas prices are growing. And Russia decided to be a big butthead and throw a war into the mix as we’re all trying to get back to normal while a worldwide pandemic is still messing things up.
With all this craziness going on, the stock market is a reflection of the general feelings of most people. Companies may be coming back stronger than ever, but fear and greed are what control how the market moves.
So with all this craziness going on, what should I do?
Well, I’ll tell you what we’re doing… “the same thing we always do Pinky, try to take over the world.”
Yeah, I’m a 90s baby, sorry.
But for real, we just keep on doing what we always do: Build our safety nets and invest in our future.
What Should I Do? Build a Strong Emergency Fund
With a 6+ month emergency fund, we are confident that if something bad happens, we should be okay.
We keep our emergency fund in a high-yield savings account and some in a CD so that it is easily accessible in case we need fast cash.
The status of the stock market won’t affect our Emergency fund. Because it is not invested, we won’t be forced to sell our investments at a loss in case we need to money for a job loss or other family emergency.
The stock market can do its thing all it wants, but we will be okay.
What Should I Do? Look For Extra Streams of Income
As prices at the grocery store, gas pump, and seemingly everywhere else goes up, it is always nice to be able to earn some extra money.
According to the internet, most millionaires have at least 7 streams of income.
If you’re relying solely on your job to bring in money each month, you could be setting yourself up for a hard fall if that job suddenly goes away.
Mr. Bean and I have learned over the years, that it is always good to have some extra money coming in, in addition to his full-time job.
I work as a very part-time real estate associate agent. He teaches jiu-jitsu twice a week (extra income, great exercise, plus our kids get to attend the class for free because their dad’s the instructor.)
We have our regular brokerage account earning dividends and high yield savings accounts earning minuscule interest.
When there’s overtime to be worked, Mr. Bean has no problem signing up for a few extra hours to get the job done and pad our bank account a little bit more.
We use this extra income to add to our investments, save up for vacations, and give ourselves a bit more breathing room. They are all things we enjoy doing anyway, so why not earn some extra money too.
And if anything ever does happen to Mr. Bean’s primary job, we know we will still have at least some income to help our emergency fund last longer while he finds something else.
What Should I Do? Buy More Index Funds While They’re On Sale
I am a huge endorser of dollar-cost averaging with automatic investment contributions. (Check out my article on Hiding Money From Myself)
Every paycheck, we have a set dollar amount that goes into our 401k, Roth IRAs, and regular brokerage accounts.
By contributing every paycheck, no matter what the market is doing, we are able to average out the purchase price and grow with the market over time.
But right now, the market is on sale!
As Warren Buffet says, it is wise to be “fearful when others are greedy, and greedy when others are fearful.”
While everyone else is freaking out and dragging the stock market down, we are making sure to throw a few extra dollars into our index funds while prices are low.
We’re not going crazy and throwing all our cash in, we need that in our liquid emergency and expected expenses funds. But when we have a few extra dollars come in, we are making sure to buy a little extra VTSAX at the end of the pay period.
When things start to balance out and reenter a bear market, I think we will be glad we did.
Because we are invested in strong index funds (check out my article on Super Simple Investing) we have no reason to freak out and pull our current investment out of the market. We can just let them ride the market wave.
What Should I Do? Become More Frugal
I consider myself to be rather frugal. We have no need for the newest and latest gadgets. I’m perfectly happy sitting on our no-designer Costco sale couch. (But I do want it clean, check out my favorite couch cleaner.) And I try to find fun activities for the kids every season that won’t break the bank.
As inflation is rearing its ugly head, we are trying to become even more frugal where possible:
Frugal Ideas
- Shopping for healthy, yet low-cost groceries
- Find Free or Cheap Activities around town to stay entertained
- Keeping our cars for as long as possible and only buying as much car as we can afford when we actually NEED a car
- Not over extending ourselves on a big home (Why we love our small home and Why We Choose to Rent)
- Getting creative instead of immediately going out and buying something new
- Do kids want a toy? Build one together with stuff around the house, trade with friends, or find something else to play with
- Are birthday parties coming up? Instead of running out for wrapping paper and bows, look around the house. Reusable bags, newspaper (my kids like to wrap in the comics), or plain paper the kids can draw on and decorate themselves.
- Join Facebook Free Trade Groups in your local area. I’ve traded coffee mugs, decorations, empty peanut butter jars for storage, and more.
Find ways in your own life to save money on the less important things so that you don’t have to worry about affording the important things as much.
Wrap-Up
Stock Market waves have gone up and down ever since the New York Stock Exchange was started over 200 years ago.
While it may dip and rise in the short term, the stock market as a whole has provided over 10% average annual returns. Companies and industries grow. Innovation increases faster and faster every year.
I have no worry that all humans will suddenly stop inventing new technologies. People will keep increasing their standard of living. Businesses will grow and new industries will be created.
As time goes on, the stock market will rise again!
For now, we will just continue doing what we’ve always done and I encourage you to do too: build safety nets for yourself and continue to invest in your future.
How are you handling this bear market of 2022? What are you doing to keep yourself sane and your family protected?
Leave a comment below.