IndyBar: Creating a Financial Plan to Get Through a Market Recession

By Steve Henke, Hackman Hulett LLP

With the choose-your-own apocalypse nature of today’s new cycle, it’s hard for young attorneys to prioritize financial health. To that end, James Munder of Northwestern Mutual gave a great presentation last month on creating a financial plan to get through a market recession. You can view it at indybar.org/onlinecle, but here are my (slightly editorialized) takeaways:

Keep it simple

You aren’t being paid by the hour to manage your finances — but it needs to be a priority. That starts with knowing your own numbers (I like Personal Capital, which collates my financial accounts, loans and investments behind bank-level security). Financial planners can also help.

The same goes for investment strategy. With the Great Recession firmly in mind, it’s natural to be suspicious of the stock market. James emphasized that the long-term numbers matter more. Looking at one-year returns between 1926 and 2018, he noted that the stock market provided positive returns 73 percent of the time. You can expect the market to decline, but remember that (statistically) most years are good.

Don’t try to tell the future, just invest

A correlation: trying to “time the market” has a high probability of missing an upswing and hamstringing your returns. Looking from 1999 to 2018, investors who invested in the S&P 500 had nearly a 4 percent advantage on those who missed just the 10 best days. You’re better off investing consistently than trying to be a part-time market prophet.

Know your options

Everyone’s financial picture is different, but planning will always help. James spoke about emergency options included in the CARES Act, which allows certain COVID-19-affected people to make early, penalty-free withdrawals from retirement accounts or take loans from their retirement accounts. Check out James’ presentation to hear how high-level investing philosophies can impact planning for a recession.•