The new year is upon us and what a start it has been for the markets. The market has declined significantly in the first week of 2016 with the Dow -6.21%, S&P 500 -5.98%, and the NASDAQ -7.26%*.
2015 was full of uncertainties and 2016 is no different. China, the world’s second largest economy, seems to be slowing with the government setting a target growth rate of 6.5% for 2016, half of what it was in 2010 (Driebusch, Corrie & Gold, Riva. “China’s Woes Reverberate”. The Wall Street Journal 8 Jan. 2016: A1-A8. Print). Oil prices continue to drop to levels not seen for some time and the Federal Reserve has set a policy to raise rates; however, it is unclear how fast it will happen. We are currently riddled with the unknowns and simply put, uncertainty in the short term creates volatility. So, what should you do during such turbulent times?
Saving money is a difficult task. Even though I am a Registered Investment Advisor, I still fall into the temptations of spending a few bucks on fishing lures. In order to curb such temptations, I view savings in a different light. Savings should be looked at as a non-discretionary expense, or a need such as your rent, when developing a personal budget. In simple terms, savings is an expense. If you build savings into your budget, you are automatically saving money thereby allowing you to spend additional excess cash flows on items like fishing lures.