Your financial game plan for uncertain times

* Transcript created by AI – may contain errors or omissions from original podcast audio

Last week on the podcast, I spoke about the effects that global conflict and instability can have on your household finances. And in today’s episode, I wanted to talk about how you can set your finances up so that you can stay calmest during challenging times. Because it’s one thing to understand what’s happening in the world.

It’s another thing entirely to manage your money well when things feel uncertain. So today I’m gonna walk you through. Your calm money management framework.

Just a quick note before we dive in. Everything I share on this podcast is general in nature and does not take your personal circumstances into account. I’m not a licensed financial advisor, and nothing you hear on this podcast should be taken as personalised, financial, business, taxation or investment advice.

Before you make any financial decisions, please seek guidance from your accountant or a qualified licensed financial advisor who understands your specific situation.

So to start, and again, I touched on this in the last episode, but the foundational thing to understand when it comes to being across your numbers and not panicking during challenging times is understanding the psychology of financial panic. Here’s what can happen for us internally. We read the news headline and see markets falling, watching influencers on TikTok talking, and we start to spiral.

We are in an emotional state, and when we’re in an emotional state. We panic, we make rushed decisions. And I know this firsthand because I have done exactly this at times in my own life. An example, my husband and I owned a property in Sydney, and due to our circumstances at the time, I was at a really anxious, really stressed state, and we made the decision to sell that property.

In that moment, it felt like the only option. But do I look back with the wisdom of hindsight and think, I wish we’d maybe done things differently there? Yeah, I do. And the point I’m trying to make is this, when you aren’t in a calm state, when you’re watching the value of your property fall, your share portfolio decline, your savings drop.

It’s very easy to make a panicked decision that is not aligned with your long-term goals.

So the first step is awareness of your emotional state and how it might be influencing your financial decisions.

 The next foundational piece is having a buffer, aka, an emergency fund. So right now, have a think.

Do you actually have an emergency fund put aside? And when you do have cash put aside, it needs to be a liquid asset. Now, let me explain what I mean when I say a liquid asset. Liquidity is about how easy it is to convert something into cash. So some people might say I don’t have an emergency buffer, my house is worth a lot of money.

Now the problem with this is that in a crashing market, there is often an influx of supply. So lots of people selling houses and not a lot of buyers, and that means it’s actually not that liquid. Liquid means I need the money straight away for something and that you are able to easily access it. So having an emergency fund is critical.

So now’s a great time. Have a think, how much do you have set aside? How many months of expenses does that cover? Can you access that money quickly if needed? So for example, something like a term deposit, even though it’s a relatively secure in investment, a lot of times your money’s locked in. So that is not a liquid asset.

So having an emergency fund is something that is a great thing to have regardless of what’s happening in the world.

 But strengthening your liquidity in uncertain times gives you options and options reduces panic.

Okay, the next thing to do is to protect and diversify your income. What do you actually have in place to protect your income?

Do you just have one income stream? Do you just have your job or your business or whatever it might be? And how secure or stable is that? There are some jobs that are recession proof. Something like a nurse is usually in high demand at a lot of times. But there are other jobs that are very dependent on what’s going on in a wider macroeconomic level.

So what are you doing to protect your income? And then having a think how can you diversify your income stream or streams so you’re not overly reliant on one source? This might even mean having a think about diversification just within your household. For example, if you and your partner both work in the same industry and that industry is volatile, you could both be exposed to losing your jobs at the same time.

Next is start thinking about creating additional revenue streams. That’s a whole other conversation, so we won’t go into that today, but really start to have a think about like, how can I create my own financial security? I also think it’s a good time to, check in on your insurances. Do you have income protection insurance in place, trauma insurance. And really have a think about your income resilience because again, that plays a huge role in being able to stay calm in uncertain times. The next foundational thing to do to set yourself up no matter what’s going on, is to diversify your assets. Now, diversification simply means not having all of your money in one place or in one asset class.

 So what I mean by this is some people hold all their wealth in, their household home.

And others hold all their wealth in a particular type of share.

Now, I’m not able to give personal financial advice, so please seek advice specific to your circumstances from a qualified financial professional.

But as a general principle, you don’t want all your eggs in one basket. Diversification, that means owning things in a lot of different areas spreads risk. This doesn’t mean that it eliminates risk, but it does reduce the impact if one particular area was to decline.

So the last thing that I wanna highlight is to create your plan. What is my long-term strategy when it comes to wealth creation? What are my long-term plans and how can you make sure that you stick to them even when there’s wobbles on a global scale? So this is about just sticking to the game plan because markets, whether you’ve got shares, property, superannuation will go up and down over time.

This is just the nature of markets. They will go up and down. So how do you stay aligned with your long-term plan during those fluctuations? If you keep your investment horizon on the long-term, the short-term volatility may feel uncomfortable, but it won’t change your destination.

 Calm money management is about zooming out.

What I mean by this is that when you see housing prices crushing, if your intention is to hang onto a property for the longer term, don’t make a rush decision to sell it just because you’re seeing house prices go down. Now, I’m not saying that’s gonna be right for your particular circumstances in all cases, but all in all, you want to focus on the long term rather than get getting caught up in what’s happening short term.

Now the last thing, when there’s fluctuations volatility is to be aware of opportunities. Now, I say this with caution and respect because when I talk about opportunity spotting during downturns, I wanna say this very carefully. When I use the word opportunity, I do not mean being opportunistic at the expense of people who are suffering.

There are real human costs in times of conflict and instability, and I am not suggesting that you take advantage of that. What I do mean is this markets move all the time and certain sectors contract and others expand. There are always people who make money during downturns because they understand cycles.

So what I’m saying is simply just be aware of what might happen during these times and really be cognizant of how you can stay informed without being reactive, and how you can remain steady and calm enough to see things clearly when it comes to your finances. So to bring this together, being a calm money manager isn’t about ignoring risk.

It’s about understanding your psychology, strengthening your emergency fund, protecting and diversifying your income, diversifying your assets, and sticking to your long term strategy.

 Being calm is about being rational and focused on the long term.

Focusing on what you can control when a lot of things aren’t controllable.

And if you know that your money needs some attention, check out the Intentional Money Membership. My Hands on membership where you get live coaching with me community, hand frameworks being right across your money. Thanks for tuning in today’s episode of The Intentional Money Show, and I can’t wait to chat to you again next week.

* Transcript created by AI – may contain errors or omissions from original podcast