How Do You Deal with a Stock Market Crash?
The stock market can be very volatile and unpredictable, which means that anything can happen in the most unexpected times because of unforeseen events.
When the signs of an impending crash start creeping in, it is only normal to be disconcerted, especially if you will consider its potential effects on your personal finances.
But, even if you may feel uneasy and anxious about the possibility of a crash, there are a few things you can do to be sure that you are ready when the worst case scenario happens. Here is a short guide you can use to help you deal with a stock market crash if and when it happens.
Before anything else, don’t panic. Although you might freak out and feel the urge to withdraw all your cash in the bank and keep them under your bed, this is not really the wisest move you can make. It is also not a good decision to sell off all your investments right away just to save yourself from the harsh effects of a volatile market. The logic behind this is simple – a market that crashes can always bounce back up again.
Cut Back on Your Expenses
Do you know how much you need to make it through day to day? Check your budget and identify those areas where it is possible to cut back on your spending. The best way to do this is by studying your bare-bones budget.
Why should you do this, anyway? When there is a stock market crash, you might need to be more frugal as you wait for the rebound. Instead of buying your favorite coffee daily, you can try to splurge on it once a week.
You might also want to determine the amount you need to pay off all your bills. After you set your budget for your mortgage or rent, transportation, food and others, you can identify the unessential areas and start cutting back on them. You can then figure out from there how much your expenses and savings should be.
Increase Your Savings
Stock market crashes can cause a ripple effect on different aspects of your life. For instance, your credit access might be limited, you might lose your job or you might find it hard to get clients for your side hustle. This is the reason why you need to be ready and save up some money.
Experts always suggest that you save expenses worth 3 to 6 months for your emergency fund although you can also increase it for up to 12 months. It might take awhile but it wouldn’t hurt to save more money at the soonest time possible.
An increase in savings can help you make it through the storm brought about by a stock market crash.
The financial uncertainties might be scary and daunting but as early as now, you can start taking the necessary steps so you can be proactive if a crash does occur. If a tumble occurs, never panic and always think long-term so you can stay on track while managing your finances in the meantime.