Stock Market Panic Highlights the Need for Personal Financial Planning

When the stock market begins to fall, it’s not uncommon for investors to be nervous. Some react by making snap decisions that prove costly over time, but those who have financial plans in place tend to stay the course, according to a 2008 CFP Board Pulse Survey. While it can be difficult to predict a crash, now is the time to prepare for the next one, says Wayne Titus, CPA, PFS, AIFA®. “If you were to learn today that your income would drop by 10 or 15 percent, you would likely take steps to prepare by saving more, budgeting better, or looking for sources of additional income,” says Titus. “So why wait for an inevitable market crash to make a plan?”

For those seeking the services of a trustworthy financial adviser, Titus suggests using these tips from the American Institute of CPAs (AICPA). He also recommends choosing a fee-only planner who will act as a fiduciary, placing the client’s best interests ahead of those of the adviser or the firm. “Not all people who provide financial advice do so with a ‘best interest’ duty of care, so it’s an important question to ask in the interview process,” says Titus.

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For those already working with an adviser, Titus advises discussing asset allocation and rebalancing, if necessary. “A good financial plan anticipates market downturns, and assets should be allocated to provide investors with a bit of a hedge against a potential crash,” he says. Titus also suggests developing some scenarios to determine how current assets may continue to perform, and what the potential impact could be on retirement.

No matter how dire the numbers may look, Titus says don’t panic. “Taking a long-term view is the best course of action,” he says. “As Yogi Berra once said, ‘90 percent of this game is half mental,’ so keep a positive outlook, and have a plan in place to deal with any future financial crises,” he adds.

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