Below is a blog entry I wrote on May 6th, 2010. If you do not remember, this was the day of the infamous “flash crash.” As I was thinking about what to send out this evening in preparation for what could be a very volatile (prices go up and prices go down) period in the market, I found this article said it all. I encourage you to not panic and to make decisions based off of emotions. If you have a long-term plan in place, there is the high likelihood you do not need to do anything different than what you are doing now. If you do not have a long-term in place, you may want to consult with a professional to help put a thought-out and objective plan together. As you read the article below, please remember how you reach financial security. You do not reach it overnight but rather by taking “one step at a time!”
By: Kevin F Jacobs
Written: May 6th, 2010
Today was an unprecedented day in the stock market. At one point the Dow Jones was down nearly 1,000 points (I can’t believe I am even writing that number).
I want to stress that the best thing to do is to remain focused on the things you can control, i.e. your savings rate, your asset allocation, your debt-to-income ratio, etc. You can not do anything about what the market does day to day, but you can do something about those things mentioned above. You are going to hear many “talking” heads on the radio and TV give various explanations for why things happened the way they did. However, the real question is how these events are going to affect you and the ones you love. We have a tendency to get lost in the stress of everyday life and we forget to make note of the blessings we have each day.
I am not telling you to be oblivious to what is going on in the world but that you need to work on the things you can do something about and let everything else take care of itself. It is important you do not overreact to short-term market events. During times like these it is important to remember the basics regarding your financial life:
1.Live on less then you make
2.Have $0 consumer debt
3.Don’t buy more house then you can afford
4.Pay as little in taxes as you are allowed
5.Have proper cash and emergency reserves
6.Save for the short-term and invest for the long-term
7.Spend time with your family and those you love instead of watching the latest stock market charts.
As for the rest of it, take a deep breath and remember to control the things you can and let go of those things that are outside of your power.
Kevin Jacobs, doing business as Step By Step Financial, LLC, is registered with the State of Oklahoma as a Registered Investment Advisor.
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