Are we freaking out about the stock market?

Holly and her mom.

We all know the stock market is constantly going up and down, and then up, and then down again.  We don’t regularly watch the market, but when Holly’s mom called multiple times over a couple weeks to see how we’re handling the changes in the stock market and the news that a significant downturn is coming…well, we freaked out just a little!

As Holly was talking her mom off the ledge, we realized WE needed to remember all of the things we were telling her.  Here are a few of the basic strategies we’re using to protect our money and ensure it lasts as long (if not longer) than we do:

Stay steady

A long time ago, one of Holly’s mentors asked her whether she’d rather work for money or have her money work for her.  Well, the answer seems obvious, but it’s not always as easy as it sounds. Plus, now that we’re retired, we need our money to work for us for 40+ years.

So, what happens if the market goes through another mini-crash?  We work closely with our financial advisor to ensure we’re moving investments when needed.  But, for the most part, we just stay put and don’t make a bunch of hasty decisions that could impact our ability to stay retired.  We used this strategy in 2008 when the market took a nosedive, and it worked.  Our investments bounced back and gained over time.

Cash reserves

Before we retired, our financial advisor recommended we start building our cash reserves. Just in case the market crashes, we have a separate cash account big enough to cover 2 to 3 years of expenses. We can access these funds without worrying about taking losses on our investments.  Basically, we don’t want to take regular losses on investments when we pay ourselves each month (check out our post on why we pay ourselves each month).  If the market has a big enough negative adjustment, we pull money from our cash account to cover our monthly expenses vs. relying on interest income or dividends that might have dried up in the short-term.

Even though we’ve gone through a couple of market adjustments in the last 2 years, we haven’t had to use this strategy.  Our investments are still performing well enough that we don’t need to worry about taking losses to pay our monthly expenses.

Emergency funds

We all know we need to have emergency funds.  Well, Holly takes this to the extreme.  She has emergency funds for her emergency funds.  In all seriousness, we have at least 5 emergency funds at all times.  We have an emergency fund for the house.  We have an emergency fund for our vehicles.  We have an emergency fund just in case we get audited by the IRS and owe more money 😊.  We have an emergency fund for healthcare.  We have an emergency fund for family.  We could go on and on!

Clamp-down

Our little bitty park model in Arizona could be home
12 months of the year.

Our annual budget includes vacations, gym memberships, entertainment, restaurants, and summer travel for 5 months each year.  We are fully prepared to cut most of these expenses from our budget and simplify our lives even more.  Additionally, if the market makes a signifcant adjustment and we need to cut costs, we can stay in our winter home in Arizona all year.  That’s not what we really want to do, but we’d eliminate at least 1/3 of our annual expenses by staying in our park model vs. traveling all summer.

Work it, baby!

Carter, heading out for a little side hustling.

We both have little side hustles.  Carter drives for Lyft and Holly focuses on secret shopping and online re-sales.  If the market should take a significant downturn, we’re ready to put more effort into our side hustles or even go back to work part-time.  Obviously, we don’t WANT to go back to work, but we’d do it if it meant better financial health going forward.

We love being early retirees!  But, we realize it comes with a few sacrifices and the need to be more in tune with each other and with our finances.  These basic strategies help us stay focused and have the confidence we need to STAY retired even during a stock market adjustment!

We pretty much followed all of these strategies before we retired. The only major difference is that since we don’t have traditional paychecks coming in each month, we have larger cash reserves. If we weren’t retired at 45 and 50 years old, we’d likely have most of our cash reserves invested in the stock market!

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