Follow and listen to our podcast

StashLearn
Get the app
Get the app

Join millions of investors on Stash

Investing, simplified

Start today with as little as $5
Get the app
Teach Me

How to Manage Your Money During Good (and Bad) Times

November 26, 2018

5 min read

You wouldn’t go into the jungle without a map. Why would you create a financial plan without a survival guide?

After all, no one knows what the future holds. The market, by nature, is unpredictable. So is life. We never know when the rain may fall.

If we’re in the throes of a market correction, bear market, or personal financial crisis, you’ll probably be glad you have a set strategy in place.

Here are some FAQs to help keep you on the right track:

Saving money

Establish a budget

Budgets don’t have to mean depriving yourself. Think of it as a blueprint to reaching your goals while still getting your bills paid.

We get it, it can be scary to face the facts about your financial situation. You may not even fully realize how much you’re spending on random things—and how quickly these things add up.

Looking to get started? Check out how to set up a 50-30-20 Budget.

Why do I need an emergency fund?

An emergency fund is the most important aspect of any economic survival guide. This money, which sits in your saving account, should be easy to access in times of crisis.

A crisis can be a medical emergency, a move, or a layoff. It’s not for groceries, vacations, or holiday or birthday gifts.

How much should I save in my emergency fund?

At Stash, we recommend 3-6 months of expenses that you’ll need to pay: rent, food, credit card, and student debt payments. This money should be used for when the chips are down and you need to break the glass. You can always rebuild it.

You can use Auto-Stash to keep funneling your money toward your emergency fund. That’s probably way easier than remembering that you have to put aside money to save.

Investing

Why should I create a diversified portfolio?

Wait, what’s diversification again?

A quick refresher: Diversification means making multiple investments, so your portfolio’s performance is not tied to a single asset class, industry, company, or region.

You can create a diversified portfolio in a number of ways, which leads us to another important concept: asset allocation.

Why does asset allocation matter?

Asset allocation is the process of dividing the investments in your portfolio into different asset classes across the globe. These classes include stocks, bonds, cash, and alternative asset classes like commodities. (Learn more about commodities here).

In a nutshell, the term refers to the particular mix of investments you own, and you can calculate the allocation out to get an idea of how diversified your portfolio is.

So, if you want to create a diversified portfolio (or further diversify your portfolio), your goal should be to hold a balanced mix of investments. A well-diversified portfolio has exposure to a variety of different industries and companies, asset classes and geographical areas.

Asset allocation is a big part of the Stash strategy. With Stash, you can get diversified exposure to stocks, stock sectors, bonds, and commodities through exchange-traded funds (ETFs).

Should I keep Auto-Stashing if the market goes down?

We say yes. If you continue to invest regularly, contributing small amounts to your investment account during both market highs and lows, you will be improving your long-term outcomes in two ways. You can maximize the potential for growth in your wealth and help smooth out your risks over time.

Auto-Stash is a tool that helps you invest regularly in a disciplined way. You won’t need to worry about predicting where the market will go. (Fact: almost no one can do this successfully.)

When economic times are tough, you won’t have to remember to keep adding money to your savings. By keeping Auto-Stash turned on, you can take the emotions and worry out of the equation. You’ll keep saving on a schedule without the pain of remembering to do it.

Since Auto-Stash also helps you to invest regularly, it may lead to lowering your average share price in a given investment. Wait, what? That means that you’re buying shares at different prices, so that your average purchase price is neither at a market high or low. As always, keep in mind, that investing always come with risk.

If the market goes down, should I sell my investments?

At Stash, we want you to think long term. Don’t think of your investments and savings in terms of days or weeks. Think years, or even decades ahead. If you sell your assets during a market correction, or even during a full-fledged bear market, you’re locking in your losses. That’s something you do not want to do.

In short, you can ride it out—markets typically bounce back, and if you sell during a drop, you might miss out on potential recoveries.

Retirement

Should I open an IRA or retirement account?

It may seem counterintuitive. Why save for retirement when the market is down? This is where thinking long term comes into play.

It’s about time in the market and not timing the market and the sooner you start investing, the better off you will likely be in the long-term.

In short, we recommend staying the course and holding steady.

Should I take money from my retirement accounts?

No. Your retirement accounts are for one specific goal: retirement. If you withdraw money from them at an early age, you’re really only doing two things—losing a percentage of your savings to taxes and fees, and setting your retirement plan back.

Plus, you may have to pay a penalty.

You’re way better off creating that emergency fund to tap into if you get hit by a layoff or you need to pay an emergency bill. Consider your IRA or 401K  to be a “do not touch” account.

Stash for life

Creating a plan to get you to your goals is a great way to keep calm and carry on with your life.

Keep saving so you don’t get caught out in the rain without a financial umbrella.

Investing, simplified

Start today with as little as $5

Get the App

By Stash Team

Next for you
Bull Market vs. Bear Market: What’s the Difference?

Investment Profile

Bonds Worldwide

An International Bond ETF on Stash

Learn more
Explore more articlesChoose a topic to learn more about
love and money budgeting social media pop culture Technology
Disclaimers

This material has been distributed for informational and educational purposes only, represents an assessment of the market environment as of the date of publication, is subject to change without notice, and is not intended as investment, legal, accounting, or tax advice or opinion. Stash assumes no obligation to provide notifications of changes in any factors that could affect the information provided. This information should not be relied upon by the reader as research or investment advice regarding any issuer or security in particular. The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. There is no guarantee that any strategies discussed will be effective.

Furthermore, the information presented does not take into consideration commissions, tax implications, or other transactional costs, which may significantly affect the economic consequences of a given strategy or investment decision. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance. There is no guarantee that any investment strategy will work under all market conditions or is suitable for all investors. Each investor should evaluate their ability to invest long term, especially during periods of downturn in the market. Investors should not substitute these materials for professional services, and should seek advice from an independent advisor before acting on any information presented. Before investing, please carefully consider your willingness to take on risk and your financial ability to afford investment losses when deciding how much individual security exposure to have in your investment portfolio.

Past performance does not guarantee future results. There is a potential for loss as well as gain in investing. Stash does not represent in any manner that the circumstances described herein will result in any particular outcome. While the data and analysis Stash uses from third party sources is believed to be reliable, Stash does not guarantee the accuracy of such information. Nothing in this article should be considered as a solicitation or offer, or recommendation, to buy or sell any particular security or investment product or to engage in any investment strategy. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. Stash does not provide personalized financial planning to investors, such as estate, tax, or retirement planning. Investment advisory services are only provided to investors who become Stash Clients pursuant to a written Advisory Agreement. For more information please visit www.stashinvest.com/disclosures.