It is commonly said that the best time to plant a tree is 20 years ago, but the second best time is now. The idea is not exclusive to horticulture. When managing your finances, planning for what's ahead is critical, especially so in times of market turbulence like that created by the coronavirus.
Creating and sticking to a plan will put you in the best position to accomplish your long-term goals, said Kimberly Bridges, senior vice president and director of Financial Planning at BOK Financial. Making emotionally charged decisions is the biggest threat to long-term planning.
"As part of our financial planning process, we stress test the plan for market volatility and what that does to the ability to meet long-term goals," said Bridges. "We typically 'solve' a plan to achieve an 80% or better probability of success."
Poor returns during bear markets are already factored into such a plan, she said, so market pullbacks are of lesser concern with a long time horizon.
While it's natural to feel panic during short-term market declines, managing emotions and keeping the focus on your long-term goals is crucial, Bridges said. Market pullbacks are typically followed by rebounds with above-average returns, and remembering that in the middle of the storm could be the difference between "realized" and "unrealized" losses in your portfolio.
Bridges advises clients to recognize media sensationalism for what it is, turn off the TV if necessary, and rest assured that you are a long-term planner, not an emotional reactor.
"Emotions can cause us to make irrational decisions," said Bridges. "Take deep breaths, go for a walk, enjoy a hobby. Focusing on the volatility can cause you to react emotionally. Remember, this too shall pass."
While those with a plan can take comfort, what about those who don't have a plan in place? Bridges said there is no better time than now to start planning.
"Rather than worrying about what the market is doing day-by-day, focus on defining financial goals and determine if you are on a successful path to meet those goals," said Bridges.
You can learn more about BOK Financial's financial planning services here.