Sometimes things go all in the right direction. Your income is up, your portfolios have increased in value, and your expenses go down. This was the case for many in 2021.
Your portfolios were doing great... Maybe you received a raise at work? You probably refinanced your mortgage, reducing your total interest paid and monthly payment.
Some years however, things can go the opposite...
In 2022 so far, we are seeing rising costs, and lower returns on our investment portfolios.
It can help to focus on what you can control, versus the factors that are out of your control. One of which, is increasing your income.
The other, is reducing your expenses.
When portfolios are temporarily down in value, it can feel natural to want to take action.
If you own high quality investments, the best action in relation to your portfolio is typically no action at all.
So if you feel you need to do something, a good way to be proactive is to shift your focus on temporarily reducing your expenses.
Here are a few examples.
1. Gas is currently very expensive! Try to carpool. If you drive 50 miles to work, times 5 days a week, that =250 miles per week. With a 25mpg car, you are using 10 gallons per week. At $6 per gallon that is $60 per week and $240 each month. Find a friend or coworker to split it with and you can save $120 each month.
2. Skip the alcohol order alcohol at dinner. 2 people, $10 each, 4 dinners a month, $80.
3. Review your debt. High interest credit card balances have payments that go heavily towards interest. Look at transferring to a credit card that offers a promotional 0% rate.
Depending upon the balances you keep, this can save $200 or more per month.
4. Go outside! Skip the typical $100 family outing by going to a park. Its free and the
weather is great (At least here in California).
5. Review your monthly subscriptions. They have a way of slowly building up. Reflect upon the ones that are no longer bringing you enough joy to justify the costs. Example savings amount: $50.
6. Review your investments. Some investments have high internal costs. You may not be paying it directly, but a 100k investment with a 1% fee internally is 1k per year, versus a .1% investment fee of $100 per year. This type of change would create savings of $900/year or $75 per month. Be extra careful of course of any tax implications or fees when making this type of change to your investments. (consult your financial advisor or tax professional)
Total savings in this hypothetical example: $625!
Bonus Activity: Sell something you aren't using! Use Spring time as an opportunity to reflect on the items you own. If you haven't used something in a year or more, maybe it's time for that item to find a new home. With social media, it's easier than ever to find a new owner for that old bicycle you haven't ridden, or the guitar that’s collecting dust.
Sometimes simple actions like these can help us cope with the dismay we feel from bad headline news.
Remember to focus on what you can control, and that these are times where the days feel long, but the years are quite short.