The more MiddleAge Money Finance I get the more I start to see patterns in life. This is probably due to having had more life experiences and thankfully being able to recall them. From time to time I’ve felt that the ‘sky is falling’ and what I like to do is reflect on the last time the sky was falling and remind myself how we came out the other side ok. We find ourselves again in such a situation with the stock market having fallen but 6% this past month and fears or more to come. Layoffs are starting to pop up in the news again and although thankfully I am ok at work I start to get that sinking feeling in my stomach that times are not so great. Finally we are facing what might turn into a trade war with 10%+ tariffs across the board
What is a young professional to do in a time like this? Should we sell our stocks and go all cash? Should we bulk up our emergency fund with extra cash? Should we update our resumes? All good questions and things to consider but in my opinion I think we should be ready (i.e. have an up to date resume and also have an emergency fund) but (and I can’t see the future so it’s impossible to know for sure) I’m not personally selling stocks and going all cash myself.
The stock market on average returns 8% year over year but in reality you’ll never get 8%. Some years it’ll be 20%+ like we’ve had in recent times and other times (think 2008/2022/2025) it’ll be negative and we’ll lose money. I’ve learned it’s impossible to time the market and to time it you have to get lucky twice (sell near top and buy near bottom). The only way to get the average is to stay in the market! Of course if things really get bad in all likelihood our stocks and investments will be the last thing we’re worried about and that zombie kit we all have in our cars (or wait is that just me) will be top of mind. I actually read a book recently called Wealth, War and Wisdom that covered investments during WWII and surprisingly on both sides stocks held up best – assuming you held on to them. Here’s to hoping we go nowhere near WWII but I like to keep worst case scenario top of mind.
So, here’s a quick look back at my previous posts and you’ll notice the content remains the same, I’ll just update it with some 2025 commentary. For reference, past posts were around when COVID first hit and also when Russia invaded Ukraine and finally one from 2014 when there was what felt like a big drop in the market.
The Dow Jones Industrial Average (thanks Google Finance)
Stock that Emergency Fund
The number of times I’ve written, recommended or reminded about the importance of an emergency fund over the past few years is amazing to me. Guess it’s a reflection of these interesting times we’re living in.
To not beat a dead horse, I’ll try to keep this brief. An emergency in our own lives happening is not a matter of if but when. Most of these emergencies will come with a financial component to them, meaning you’ll have to shell out cash that you had not planned for. This may be a little expense or a big one, and it might be several of them or just one big one. To not prepare for this event risks setting you way back in your financial journey or worse; potentially putting you back at square 1. You’ve worked too hard and for too long to let that happen!
Having an emergency fund not only makes it physically easier to get through trying times (ie having cash when you need it) but also mentally/emotionally. Just knowing you’ve got a safety net will hopefully help you worry less and sleep better at night.
Make sure you have an emergency fund of 3-6 months of expenses stocked away in cash. In these trying times it could make sense to bulk it up a bit more of you’re in the 3-5 month range but I feel like 6 is plenty even for a big emergency. Don’t have that? Start now and start with what you can. Squirrel away $25, $50, maybe even $100 or more until you hit $1,000. Hitting $1,000 is a huge milestone and you’ll instantly start feeling a little more secure. From there build up to 3 months and from there 6 months of expenses.
Keep this in a separate savings account. Do this to make it slightly more difficult to access, which will ensure you are touching it only in a true emergency. I keep mine in cash even though it’s only earning 0.5% interest (whereas it could be earning more in a lower risk index fund or a US savings bond) because it gives me peace of mind [2025 update – interest rates are up to 4%!]. This is my safety nest egg and I won’t risk it for anything.
Finally, it’s not the worst idea to have some emergency supplies at the house. I don’t mean to sound like a prepped with a bunker or basement stocked full of years worth of food and water but a little is probably smart in my mind. Grab an extra gallon of water or two and keep it hidden away. Maybe buy a little more meat for the freezer. Make sure you know where a first aid kit is and keep stocked up on your medicines. You don’t have to go overboard but thinking about this a bit is wise!
Make hay while the sun shines
There are some dark clouds over the horizon and plenty to worry about if we let ourselves worry but there’s still plenty of work to be done and money to be made. In practical terms, I’m continuing the status quo of working hard at work, and continuing to advance and grow my career. I’m continuing to set aside 30% of my income to retirement and my employer stock purchase program [2025 Update – might even be a smidge higher!]. Mrs Money and I are continuing to invest in index funds and are going to keep looking to buy a rental house (or two) [2025 update – we got one and aren’t looking right now for another]. Until there’s a true reason to panic I’m keeping my foot on the gas and going to keep working hard to grow my net worth! That way, if the proverbial sun does stop shining, I’ll have stocked up and hopefully be a lot more prepared to weather the storm.
Don’t do anything stupid with your investments
Despite feeling way too young (although I’m not so YoungMoneyFinance anymore) to be able to say this but I’ve seen quite a few stock market ups and downs already. I was too young for the 2008 financial crash to lose any money but I remember seeing my parents and family lose money. I was very much invested in the stock market during the March 2020 (right when Covid hit) and also have been for this market drop of 2022.
During these times, I’ve not sold any stock or stopped contributing like I always do. One thing I’ve learned about myself is that I’m not very good at timing the market (ie knowing the perfect time to sell and buy) so I’ve given up trying. I also like zooming out of the day to day chart and look at the stock market over many years. I see an upward trend which means that things will always get better. It’s a cycle, good times then bad times then good times again but overall more good than bad. Stocks have always come back. I’ve had friends try to time the market (ie panic selling and going all cash) but time and time again that’s proven unwise and they would have been better staying out.
I’m no expert and if I could time the market I would but I can’t so I don’t. I’m sticking put and trying to not doing something foolish like panic sell. It’ll come back and if it doesn’t I’ll have much bigger problems to worry about (food, water, survival) than the balance of my 401(k).
Be aware but don’t obsess over the news
This might be a thought unique to YMF but I’ve as of late really stopped reading the news. In 2020 I (along with many others) started doomscrolling and found myself just worrying over everything. It started affecting my mental health negatively. Fast forward to Jan 2021 that was a dark day and even today’s news can worry me. I don’t want to sound like I’m just putting my head in the sand but I’m very much trying to focus on what I can control and to worry less about what I can’t worry about. You do you but I will say this has really been working for me! [2025 Update – Ugh kind of back on to reading the news again]
Summary
It’s funny to be able to look back at previous “the sky is falling” posts and think how they didn’t end up being all that bad in hindsight but also how things have a way of working out!
The post Sky is Falling 2025 edition first appeared on YoungMoneyFinance.
