Market downturns feel different once you’ve got a mortgage, kids, or a business with payroll to make. The instinct is to do something, anything. Usually the better move is less dramatic than that instinct wants.
Stop checking your balance every day
Real-time balance alerts don’t help you. They spike your stress and nudge you toward decisions that aren’t in your interest. Market volatility is uncomfortable in the short term, which is exactly why you shouldn’t invest money you’ll need within the next five years. Over the long term, those dips tend to smooth out. Checking daily just makes the ride feel worse than the eventual outcome.
Keep contributing if your budget allows it
If your income is stable and your bills are covered, don’t stop investing. Contributing to an employer-sponsored pre-tax retirement account, a 401(k), 403(b), or TSP, does two things at once: it lowers your taxable income now, and it captures any employer match, which is money you’d otherwise leave on the table. At minimum, contribute enough to get the full match. If you have room after that, a Roth IRA is worth considering if you qualify.
Regular contributions during a downturn mean you’re dollar-cost averaging: buying shares at a range of prices as the market moves, which tends to lower your average cost per share compared with trying to time a bottom. During the 2020 downturn, the 401(k) contribution limit was $19,500 and the Roth IRA limit was $6,000, a reminder that these figures change year to year, so check the current numbers before you plan around a specific amount.
Stick to the plan, adjust the short-term details
If retirement is still decades away, this isn’t the moment to rewrite your long-term strategy. What you adjust, if you need to, is the short term: trimming discretionary savings, delaying a car purchase or a renovation, or building a bigger cash cushion. If you’re struggling right now, prioritize at least the minimum payments on your debts and talk to your lender before you miss one. If you have savings, using them to pay off high-interest credit card debt can be the better trade.
Protect your own bandwidth too
Volatility is stressful, and it’s easier to make good financial decisions when you’re not running on fumes. Step away from the constant news cycle when you can, and lean on free, low-cost ways to reset: a walk, exercise, reading, a call with a friend. None of that changes the market, but it changes how clearly you think about it.
Educational only, not tax, legal, or investment advice. Check primary sources and speak with a qualified professional before making financial decisions.
