The market was volatile last week, based on concerns about trade and a soft manufacturing report. Overall, we are still positive over the last month and for 2019. Three of our five recession watch indicators have turned yellow, or “on watch”: these are the Treasury yield curve, leading economic indicators, and the purchasing managers’ sentiment. Both market breadth and market valuation are still green, indicating we still have room for the market to grow.
Looking at the other side of your balance sheet, if you’re worried about debt, there are approaches that may work to help you pay that down in the new year. And before you tackle that, there are two other important things to consider. First, it’s important to have an emergency fund. Even if you’re saving $10, $20, $50 a paycheck; building a cash reserve is critical because life happens. Second, if your employer offers matching funds for retirement savings, consider contributing enough to take full advantage of that match. It’s free money.
Once you have those two things under control, you can work on your debt in three ways. First, and I have to say it’s my least favorite, is the avalanche method. You pay the minimum on your debts, and everything extra you can spare goes to the account with the highest loan balance. Once that is paid off, you focus on the next largest balance, and so on. The problem I have with this method is that it takes a while to see concrete results and requires serious discipline to keep at it without any sense of satisfaction.
The second method is the snowball method; it’s the opposite of the avalanche. You put all your extra money towards the account with the smallest balance. This provides significant psychological satisfaction, and reasons to continue – you feel success each time another account is paid off.
The most financially sound method is to pay off the account with the highest interest rate first. You will pay the least amount of interest overall and finish the soonest. However, sometimes the positive reinforcement you receive from the snowball method will encourage you to stick with the plan. Regardless of the method you use, tracking your financial picture with regular reviews of account balances – both savings and debt – will help keep you moving towards your goals. Dr. Edward Deming, an NYU professor, often said “That which is measured improves.” A big part of achieving your financial goals is having a plan, and regularly reviewing it to make sure you’re on track.
If you’re interested in learning more, our calendar of educational events for 2020 is up on our website, www.covingtonalsina.com/events. This coming Saturday we will be hosting Second Saturday, a workshop for women who are contemplating or in the early stages of divorce.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Great Valley Advisor Group, a Registered Investment Advisor. CovingtonAlsina and Great Valley Advisor Group are separate entities from LPL Financial.
All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult with your attorney, accountant, and financial advisor or tax advisor prior to investing.