As our team has been meeting with clients during the first quarter and throughout the tax season, many people have asked about our perspective on the recent market volatility. Understandably, uncertainty can produce concern or even fear when it impacts your livelihood and financial security. However, no one truly knows what the market is going to do from day to day, or even month to month. Rather than trying to anticipate what will happen next, it’s best to focus on the things you can control.

Although you might not be able to influence income tax rates, tariffs, economic policies, or stock market moves, you can positively affect these four aspects of your personal finances:

Cash Flow

Now is an appropriate time to audit your household budget and look for opportunities to reduce expenses. It remains important to focus on managing debt, particularly paying down high-interest loans and credit cards. However, it is wise to trim back in other areas by shopping smarter, canceling unused subscriptions, and delaying large purchases for a more stable time.

Taxes Owed

Although you can’t control income tax rates or in which bracket your household falls, conducting proactive tax planning can uncover ways to reduce your tax liability and ensure you aren’t paying more than you need to. Take full advantage of credits and deductions available to your income tax bracket. Optimize how you’re contributing to and withdrawing from retirement accounts. Avoid common pitfalls like paying unnecessary capital gains taxes on the growth of your investments.

Preparedness

There are many aspects of the future that remain uncertain, which is why it’s more important than ever to have sufficient emergency savings in place and insurance policies to protect against potential risks. Continue building those reserves and maintain life insurance and short-term disability policies that can supplement lost income in the event of injury or death. However, now is a good time to evaluate existing policies to ensure you have the coverage you need at a competitive rate.

Consistency

Market volatility is never comfortable, but making emotionally driven decisions like panic selling in a downturn can often be more damaging than the volatility itself. Selling during volatility simply locks in financial losses, but patience and consistency can allow you to capitalize on future corrections. Historically, the S&P 500 has been positive 53% of the time on any given day. That probability rises to 63% over one-month periods, 75% over one-year periods, 89% over five years, and 94% over 10 years.¹ Down markets are a good time to review your asset allocation and take advantage of buying opportunities, but otherwise it’s best not to get overly caught up in market enthusiasm.

It’s unpleasant to sit tight while your portfolio balance fluctuates drastically, but it is an inherent part of investing. Try to remain calm and stay on track with your long-term plan while the market ebbs and flows (as history shows it is prone to do). In the meantime, focus on the aspects of your personal finances you can control so you are well positioned to withstand inevitable market drops.

¹ Bespoke Investment Group. Past performance is no guarantee of future results.

Disclosures:

* Asset allocation does not assure or guarantee better performance and cannot eliminate the risk of investment losses.

*The S&P 500 is an index of 500 major, large-cap U.S. corporations. You cannot invest directly in an index. Past performance does not guarantee future results. Investing involves risks, and investments decisions should be based on your own goals, time horizon and tolerance for risk. The return and principal value of investment will fluctuate as market conditions change, when sold investments may be worth more or less than their original cost.