By now, you might be sick of hearing the “R” word everywhere—yes, we’re talking about “recession.” But all of our friends, family, and coworkers are thinking about it for good reason. In the past few months, major companies including Oracle, Shopify and Lyft have all announced layoffs. Inflation is making more of us rethink our spending choices everywhere, and the housing market has turned from a seller’s market to a buyer’s market seemingly overnight. The Fed is doing what it can to bring us in for a soft landing by raising interest rates four times now, but will it be enough?
During times of uncertainty, it’s easy to panic and feel like we have to do something—anything—differently to brace ourselves. But any decision we make with our money should be dictated by data, not by anxiety. What data should we look to now? What stats about the market can we use to guide our future financial decisions—to survive, and thrive, during an economic downturn?
We talk about the hard facts and figures with Nick Maggiulli, the Chief Operating Officer at the financial advisory firm Ritholtz Wealth Management. He’s also the author of the book, Just Keep Buying: Proven Ways to Save Money and Build Your Wealth, where he answers the biggest questions in personal finance and offers evidence-based methods for building wealth.
Jean and Nick talk about how many people’s beliefs about money are often based on assumptions and emotions, rather than data. One of those beliefs is the infamous Wall Street mantra, “Buy the dip.” Nick breaks down exactly why that strategy doesn’t work in the long term, and why people should “just keep buying” investments over time instead of holding their cash for a dip that may never come.
We get into what Nick calls the biggest lie in personal finance: that you can cut your spending to build long-term wealth. He explains why penny-pinching often leads to unnecessary stress, and why people have to worry less about saving than they think to have a good retirement. The data shows that many retirees—almost 60%—are over-saving and withdrawing less money on average than their investments earn. The best way to prepare for the future and still enjoy the present, Nick says, is to focus more on increasing our incomes through raises, promotions, or job hunting. Nick also gives us some handy tips on how to alleviate our spending guilt while still saving enough for the years ahead.
In Mailbag, we tackle questions on downsizing your home after a divorce, and what to do after receiving an unexpected inheritance. And in Thrive, we share our best tips for shopping for the holidays during a period of high inflation.
You can read more of Nick’s insights on his personal finance blog, Of Dollars and Data.
This podcast is proudly supported by Edelman Financial Engines. Let our modern wealth management advice raise your financial potential. Get the full story at EdelmanFinancialEngines.com. Sponsored by Edelman Financial Engines – Modern wealth planning. All advisory services offered through Financial Engines Advisors L.L.C. (FEA), a federally registered investment advisor. Results are not guaranteed. AM1969416