Oh boy, the stock market meltdowns of 2020 and 2022 really shook us all up, thanks to the ongoing pandemic challenges. But it’s a good thing we’ve been smart about our investments, maintaining a diversified portfolio and keeping on top of our financial game through constant rebalancing.
Now, let’s talk about the nitty-gritty of what these meltdowns mean for different folks. Yes, it’s tempting to just shrug it off as temporary market noise, especially when we’re focused on long-term goals. However, things can shift significantly over the next few years if the market continues to take hits.
Let’s dive into some scenarios and what they could mean for you, whether you’re a startup employee, an entrepreneur, or just trying to make it through to your next paycheck.
For Startup Employees
It’s time to face the music: your startup may not be the golden ticket to riches, and that’s okay. The key is to enjoy the journey and make informed decisions along the way. Now’s the time to ask the tough questions about your company’s financial health—like its burn rate and how long it can survive if revenues don’t improve. Be wary, as the volatility in public markets might make investors tighten their wallets, making it harder for startups to secure the funding they need. And remember, it’s okay to prioritize your financial stability. If you have a chance to cash out some of your equity, especially in later funding rounds, weigh the pros and cons away from any peer pressure.
For Entrepreneurs
Think twice about taking your company public. The allure of an IPO can be strong, but the reality involves intense scrutiny and additional masters in the form of shareholders and regulators. If your business is not ready for such transparency and accountability, stay private and tap into venture capital while it’s still willing to fund you. Also, keep in mind that maintaining a lean operation and securing enough runway in these times is more crucial than ever.
For Everyday Employees
If your financial wellbeing is tied to a regular job rather than startup equity or an entrepreneurial venture, consider this a time to reinforce your safety net. The reality for most is a career spanning decades with incremental raises. Diversifying your income streams through side hustles can provide not only additional income but also a fallback if your main job disappears. Think of downturns as opportunities to buy assets at lower prices, especially if you’re regularly contributing to retirement accounts like a 401k, where your contributions buy more shares when prices are low.
For Real Estate Owners
Real estate markets often react to stock market downturns with a delay. If stocks are down, real estate might soon follow. Use this time to refinance your properties at lower rates if possible, and prepare for potential declines by ensuring your investments can withstand some loss in value.
For the FIRE Community
For those committed to achieving Financial Independence and Retiring Early (FIRE), market downturns can be particularly nerve-wracking. The key here is liquidity and diversification. Ensure you have enough cash on hand to avoid having to sell investments at a loss. Staying invested and resisting the urge to panic sell can preserve your long-term financial strategy, even if it means enduring some short-term pain.
Everyone needs a plan tailored to their unique financial situation, especially when the market seems to be on a roller coaster. Stay informed, stay rational, and, most importantly, stay focused on your personal financial goals, whether they involve growing wealth rapidly, securing a comfortable retirement, or simply surviving the next market dip. Keep an eye on your investments, but also on your overall financial health—it’ll help you navigate through any market conditions we might face.
