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How To Get Your Finances Back on Track
By Debra Ohstrom, CFA
I know during times like these, when there are constant reports in the news of the stock market going down that investing seems scary.
Overreacting to short term political and economic events by not investing at all, can prevent you from getting the benefits of a long term view. I have always said that markets don’t go up in a straight line but automated contributions and the compounding of your investment returns over time will allow your money to grow faster than any savings account. I teach more about this in my Free Workshop in the Womenhood community and on my website www.DebraOhstrom.com
There are ways to help protect your investments during down markets and one is very straight forward. That being said, this could be considered a bit of an advanced strategy but I will only talk about the basics here.
It’s called an Inverse Exchange Traded Fund. These are ETFs built to move in the OPPOSITE direction of the Indexes I teach about in the KEYS TO INVESTING course. These Inverse ETFs often have a multiplier effect built in, so the big question is how much to purchase so at least part of your investments will go up if the other investments are going down.
Using these Investments as downside protection can be helpful but you also need to consider that when the stock market bounces back these Inverse ETFs will fall in value so remember nothing is perfect. They do need to be watched and monitored more often so it does take more of your time.
But if you hate to see your account value fall, even if you know it’s only for a short period of time then investing a small percentage of your money, for a short period of time, in Inverse ETFs can help buffer your investment account against losses and sometimes even the psychological benefit of that can be priceless.
The most important thing of all is to get started by making contributions to an investment and I know I have said that it is easier now more than ever. Time is an important asset and it can help you grow your wealth.
Let me tell you a story... If you have any siblings you might understand what I mean when I say sometimes I feel like a polar opposite from my sister.
I was always conservative with my money growing up and rarely went shopping or used credit cards unless I needed to for school because I wanted to have money in the bank for financial security. My sister on the other hand spent money like there was No Tomorrow!
She is actually older than me and when we were in our late twenties and early thirties, I would really nag her about her spending with No Success. Growing up in the New York and New Jersey area involves a lot of Luxury Brand competition and keeping up with the neighbors. (Please don't fall into this trap!)
I finally gave up nagging her on the spending but I Didn’t give up on getting her to contribute to her Retirement Account (it was a 401K account in her case) and taught her how to pick a mix of Funds and think long term. Now, fast forward... to our 50's and she STILL hadn't stopped spending!
She finally called me one day and said she wanted to get her finances on track because she realized she was going to need to Retire in 15 years.... I figured better late than Never. To her credit, she got rid of her expensive car, her expensive apartment, and started paying off her credit cards, she even bought a small co-op so she now owns her residence!
BUT Guess What, throughout all of her spending she always contributed to her Retirement Account. She always contributed and invested and it grew to Hundreds of Thousands of Dollars and she still had 15 more years to have it grow for her!
It took her about 3 years to get rid of her credit cards and she has stopped her spending ways. She also now knows that she will have a secure retirement because she still contributes to her Retirement account and invests the way I Taught Her.
Sorry for the long story but whatever you do, Don't put-off investing for your retirement and I can teach you how to do it too!
This story is why I have a somewhat controversial belief around debt since so many so called "Financial Experts" tell you to live a Debt Free life. I get it but I believe you should Always Pay Yourself First and stop paying off debt early if you haven't started investing for your Retirement.
I am not talking about racking up your Credit Cards but I am talking about other low interest, long term debt like student loans, car loans, personal loans and mortgages. If the interest rates are 5% or 6% and below then start investing for your Retirement first. This is especially true during times of high inflation like we have now.
The most important point of this story is about getting started and not worrying about perfect timing. Just take a look at my sister. Despite her spending, she always contributed as much as possible to her 401k and also got matching over 20 years. A lot happens in economic and business cycles over 20 years, there was the Internet Bubble bursting and the real estate Bubble bursting as well. She made it through all of that and her money grew for her so she has a secure path to her retirement. Not everyone has a sister to nag them like she did but I am happy to teach you what I taught her and if you want me to nag you as well, I can do that too!
It doesn’t need to be overly complicated and by doing a few steps on your own you can save a lot of money in fees. You really just need to get started.
Bye For Now
Debra
I offer the Womenhood community a $50 discount on my courses and if you have any questions, feel free to email me at debra@debraohstrom.com
About the Author
Debra has worked in the financial industry for over 27 years at firms such as Merrill Lynch, Morgan Stanley, Citi Private Bank and Allianz Global Investors. She has worked in different roles such as research, asset allocation and account management. She has an MBA in Finance and the Chartered Financial Analyst designation. Debra created her education business, DebraOhstrom.com to help women get the education they need to become confident investors and be in charge of their financial future.
Debra Ohstrom, CFA
Founder | DebraOhstrom.com
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