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By Barbara O’Neill, Ph.D., CFP® and
Martie Gillen, Ph.D., MBA, AFC®, CFLE

U.S. consumers haven’t just experienced a “perfect storm” of financial challenges…they have experienced a “perfect tornado!” Challenging financial events include sustained high inflation (and increased costs for food, utilities, rent, gas, insurance, housing, etc.), recession fears, increased interest rates, bank failures and government bank takeovers, volatile stock prices, lower savings rates, and increasing household debt.

Personal Finance Managers (PFMs) routinely answer questions from clients about many types of challenging financial situations. Below are ten financial management strategies to share with military families:

  1. Address Financial Fears- Ask clients to describe (or write down) their biggest financial fears. Then discuss how realistic these frightening events are and steps that can be taken to proactively address them.
  2. Avoid “Analysis Paralysis”- Narrow down options to a small number of viable alternatives. Otherwise, when people are stressed out, they lose “mental bandwidth” to make good decisions or “freeze” and do nothing.
  3. Tune Out Market “Noise”- Advise clients to avoid daily market reports that can induce fear-driven panic selling and ill-timed asset allocation transfers. Remind them that they are investing for long-term goals.
  4. Don’t “Time the Market”- Teach clients that market timing is futile. When investors move in and out of investments (e.g., stocks), they inevitably miss “good days” that follow downturns and reduce their return.
  5. Rebalance Periodically- Reset the percentage of total investments held in stocks, bonds, cash equivalents, etc. to target asset allocation weights at least annually or as market conditions warrant.
  6. Reach Out for Help- Refer clients to community resources to help address stressful issues such as repaying outstanding debt and food insecurity. Examples include non-profit credit counseling agencies and food pantries.
  7. Claw Back Inflationary Expenses- Ask clients to estimate what high costs due to inflation are costing them monthly (e.g., $300). Then brainstorm ways to “find” this money through targeted expense reductions.
  8. Accelerate Debt Repayment- Tell clients to pick a debt acceleration method to add more money to existing debt payments: avalanche (start with the highest interest rate first) or snowball (start with the smallest balance first).
  9. Honestly Assess Risk Tolerance- Tell clients not to invest in any security they do not understand or feel comfortable with. They can self-assess with the University of Missouri Investment Risk Tolerance Assessment.
  10. Keep Tabs on Finances- Teach clients to use various “check-up” resources. Examples include net worth and cash flow statements, a spending plan (budget), credit reports/scores, and a consumer debt-to-income ratio.

For additional information, review the OneOp blog post, A One-Hour Financial Check-Up.

Photo Credit: iStock/monkeybusinessimages