10 Money Tips for Right Now

Hey, what's up, everyone, and welcome to the School of Personal Finance. In today's video, we're going to go over 10 personal finance tips for the current market environment. I find myself talking about these things all the time, so I thought that it would be a good idea to go ahead and share them with you. I hope that you find it helpful. Let's get to it. Real quick, before we get started, go check out my education center over at schoolofpersonalfinance.com for a limited time, $97 one-time fee, lifetime access, as I'm building out all the content in the education center. So go check it out. So as I'm making this video, it's Wednesday, March 9th, and we are having a nice rebound day in the stock market. So the Dow Jones is up like 600 points, and NASDAQ's up a little bit over 300 points. But the first few months of the year, I mean, the markets have been painful. We've seen some pretty heavy selling, and just the world in general is just terrible, everything that's going on. So I'm having lots of conversations with people, and people are worried out there. They're not sure what they should be doing with their money. So in times like this, I try to take a step back, put my financial advisor hat on, and give some solid advice on things that you can be doing with your money. So I'm going to run through my 10 tips for right now, and hopefully you find these helpful. So tip number one, and I wrote about this on LinkedIn on Monday. If you're not connected with me over there, come connect with me. But it is to throw some money in the market when things feel completely miserable. So Monday was kind of one of those days where the market was very volatile, and the sell-off just accelerated, and everything just felt terrible, everything that happened over the weekend. So it's always a good time when you feel miserable about the markets in general, and you feel the pain to just make a contribution. So even like an IRA contribution, an HSA contribution, 401k to increase your payroll deductions for a period of time, I always find that it works out in my favor when I'm feeling very bad about the markets, to just go ahead and throw some money, even in an index fund, an S&P 500 fund, or the NASDAQ index fund, to just go ahead and maybe accelerate a contribution that I had planned for later on in the year. So even with IRAs, you have until April 15th to do for 2021. You could also be making contributions for 2022. So on miserable days, throw some money at the market. I think that you'll be happier from a financial standpoint later on in your life that you did. Now, number two is to look for opportunities to make Roth IRA conversions. So when the market sells off, when all assets are much lower than they were just a few months ago, it presents a good opportunity to make Roth conversions, if that's something that fits into your world. Now, I did make a video all about Roth conversions, and I will link to that down below, because it's very specific to your situation, your tax situation, where you are in life, if Roth conversions make sense at all. But if it is something that is on your radar, that you do want to be doing to move traditional IRA money and convert it over to Roth money, when the markets are down, that is a good time to do it, because you're reducing your tax burden by converting when it's at lower dollar amounts. And then as you get the rebound in the markets, it's now growing in those tax-free buckets in that Roth IRA. But it will add taxes to your life in the year that you make the conversion. So you really want to understand how all that works before you go ahead and do it. But when markets are down, typically, it's a good idea to pull the trigger and do that. And just to sneak my disclosure in here, this is all for educational purposes only. None of this is personal financial advice. It all depends so much on you and your specific situation. And then number three, this one always makes sense. And that is to make a shopping list of companies that you would love to own, and at the price that you feel comfortable owning them. So it's always a good idea to have a price level. And then you can even just put those orders in like whatever your brokerage is, a TD Ameritrade or Schwab or whatever. You have a limit price where maybe it's $100 below where it's currently trading at now. Maybe it's a price that you think it might never get to, but you throw some orders in there so that if the price does happen to drop down to that, you get filled and you now own the stock at a price that you've always wanted to own it. So it's always a good idea to have your buy list ready for companies that you would love to own, but maybe you'd like to own them at a lower price. Number four is tax lost harvesting. Now that is just a fancy way of saying sell some of your losers. So if you have some stocks or a fund or anything that has lost a lot of money over the last few months, it could be a good time to get those losses, lock in those losses for the tax advantages of doing that. Now you only want to do this if you don't want to own the stock anymore, and you have to be careful if you want to buy the stock back because of the wash sale rule. But you know, crypto is another idea. So crypto does not have the wash sale rule. So if you've bought like Bitcoin and Ethereum over the last four or five months, and you're down a lot on it, you could sell those positions, lock in the tax loss, and then buy them back right away. So there's talk about them changing that rule and having crypto be subject to the wash sale rule. We have to wait a certain period of time before you could go ahead and buy it back. But as of right now, there is not a wash sale rule with crypto. So you could sell it, you could buy it right back, and lock in those losses right now. So just a thought, an idea to do some tax loss harvesting when you have some stocks that have been, you know, beaten to hell over the last three months. And then number five is to reallocate your future contributions to parts of your portfolio that have gotten beaten up really bad. So it's almost like a way of rebalancing through your contributions, through addition, right? So if you have a piece of your portfolio that has been shrunken down because it has gone down in value, because it's been getting sold off so hard, then maybe you put more towards those to bring them back into line. This is another way of trying to buy low in the market by buying the things that have pretty much underperformed everything else in your portfolio. And then number six, and this could be a riskier one, so you have to look at your risk tolerance and your time horizon and all that fun stuff. But pick a stock or two that has completely been killed that you might like to own and go in and buy some. Like two that come to mind for me are PayPal and Facebook. The two of them over the last six months or so have just, you know, completely been beaten. So if we look right here, Facebook is down about 50% from its all-time highs. PayPal is down almost 68% from its all-time highs. Here are two other ones. Redfin is down 74% from its all-time high, and DocuSign is down 68% from its all-time high. So now just because it's down that much from its all-time high, that doesn't mean that it can't go lower. It could definitely go, all of these could definitely go much lower. But to step in here and throw some money at them, maybe you'll be happy a few years from now that you did. But again, it's a risk. But I always like the idea of buying a company that I think is a quality company, who has a lot of potential, who has been around for a long time and has a track record like PayPal and Facebook, and you know, buying them at such low, so much lower prices than they were just a few months ago. And then number seven is to not chase the craziness. Don't chase the things that have been exploding higher because of everything going on in the world. So yes, we all wish that we had a lot more money in oil and energy right now because those prices are just exploding higher. But it's usually not a good idea to go in and start buying these things when they're up 50-60% in just the last few months. Now they could continue to go much higher. Who the hell knows what's going to happen in this world right now. But I wouldn't throw a lot of money at them right now because they are very volatile and depending on what happens in the world, they could come back down pretty quickly if things change. And then number eight is to diversify your cash holdings. So I've been talking the last few months that I think it's a good idea to raise cash, to have some dry powder on the side. And I usually don't say that. I'm not a big fan of holding a lot of cash, especially in these inflationary times, but there's just so much uncertainty right now that having some safe and secure money there to deploy if we really have a downturn in the market or just to keep your personal finances, you know, in a position of strength, I think being extra heavy on cash right now is a good idea. But diversifying that cash, what I mean by that, and I mentioned this in a previous video, I think last week, how IBONs are pretty attractive right now. I'll put a link down below where you can learn more about those, but they're currently paying 7.12% and that rate is locked in for six months, but they do come with strings attached. You have to hold it for at least a year. And if you sell them before five years, then they take back three months worth of interest. But that is a good place to park some cash for at least a year or so where you know that you're keeping up with inflation by investing in those and then having your money market savings account where it's just cash where you're earning basically next to nothing. And I've been talking about gold now for God knows how long, you know, owning some physical gold or holding the gold ETF. But I do look at that as a form of currency as a sort of cash reserves, even though it's definitely more volatile. But I think having all three of those things, that is a nice way to diversify your safe and secure money in this high inflationary time. And then number nine is another thing that I'm always saying, and that is don't pay off your low fixed rate debt. So things like your mortgage. I mean, for me, I have a ton of debt because I own real estate and I own rental properties and I have mortgages on all of them. And I'm not looking to pay off any of them any sooner than they make me because the rates are very low. And if we go into a very high inflationary period, I'm going to be very happy that I have this low fixed rate debt where I have other people basically paying off those mortgages slowly over time to the point where eventually they're going to go to zero and I'll have the asset that's going to be appreciating in value. I want to keep that debt as long as I can. Now, I do joke around when people ask me if they should be paying off debt. Nobody ever went broke paying off their debt. So it's not a terrible idea to pay off your debt. And a lot of people like to go into retirement, especially without having a mortgage on their house. But in these periods, like if you just invest your cash into I-bonds and could get 7% and your mortgage is below 3%, that is a nice little delta right there where you're able to kind of arbitrage the difference. So I'm not paying off any fixed rate debt any sooner than anybody is going to force me to. I enjoy holding this long-term fixed rate debt that are tied to assets. Now, on the flip side, any variable rate debt, any credit card debt or home equity lines of credit or adjustable rate mortgages, I want to pay those things off as fast as humanly possible because the rates are probably going to be going up on all of that stuff. So I want to get in front of that and I want to get rid of all that stuff before those rates increase. And then tip number 10 is doing nothing is okay. Don't feel like you have to make any major moves right now. Patience is a good thing. Remember, investing, it is a long-term game. So it's not like you have to go in and try to time what's going on in the market. That is very hard to do. So to just sit back, continue doing what you're doing, that is not a bad idea through all of this. All right, everyone, that is it for this one. I hope that you found that one helpful. Please make sure to like this video if you enjoyed it. Subscribe to the channel if you are not subscribed already and I will see you again in the next one. Thanks.