4. Live within your means
Experts typically recommend spending no more than 30 percent of your net income (that is, earnings after taxes) on discretionary items. It’s a good idea to create a monthly budget to ensure that you’re living within your means and not overspending.
“You have to pay your rent; you have to pay your car insurance; you have to eat to live. Your groceries, your utilities — those are all going to be essential expenses,” Anastasio says.
“But dining out, vacations, cable — anything that you would potentially consider a luxury or a lifestyle expense — that’s discretionary spending.”
5. Focus on the long haul
Stocks plunged sharply in March, as investors worried that the pandemic might cause irreparable damage to the U.S. economy. But markets have since rebounded to astounding new highs, amid a “whatever-it-takes” response from the Federal Reserve and a massive fiscal stimulus package from Congress.
Nonetheless, the path forward is uncertain, meaning the weeks ahead could still be choppy. Even with the S&P 500 at a record high, investors have still endured several volatile days in the red.
Changing your long-term strategy, however, would be the worst thing you could do, McBride says.
“It will take a tough stomach, because in a recession a stock market will easily fall 30 to 40 percent, peak to trough, but making regular contributions and reinvesting all of the distributions will make those market gyrations work to your benefit,” McBride says. “A recession is a tremendous buying opportunity.”
That goes for all individuals, whether you’re 20 or two years away from retiring, he says. If you’re planning to retire in the next few years, it might be a good idea to have your first few years of withdrawals already in cash. But don’t shy away from equities in your portfolio. Those are often where you’ll get the most returns that provide inflation protection, he says.