Two weeks ago, the S&P 500 was down about 1%. Last week, it was up just over 1%. These are normal swings, and a reminder that investing is a long-term proposition, not something you do for a day, a week, or even a year.
This week brings some key economic data, as companies including NVDIA release their earnings reports for the fourth quarter, and the Federal Reserve’s preferred measure of inflation, the CPE, is announced. All of this data will invariably cause stock prices to rise and fall in the short run. In the long run, it’s company growth and earnings that drive stock prices. In fact, almost 90% of the increase in the S&P 500 last year can be directly attributed to earnings growth, or companies selling more goods and services, generating more revenue.
But what is a family supposed to do now, before they tap into those long-term investments? Many people we work with don’t consider themselves wealthy, because that wealth is in retirement accounts and home equity. They don’t feel rich; they feel like they are living paycheck to paycheck.
Some of this comes down to blocking and tackling, or handling the basics. This means looking at lifestyle creep, unnecessary spending, and unconscious spending.
For many of us, as our income has grown, so has our lifestyle. Things that were luxuries when we were starting out are now commonplace. That’s not to say you shouldn’t buy the latte or go out to eat. Having a housekeeper or buying a more expensive car is fine. But when you’re staring at a large credit card bill or waiting for pay day, it may be time to reassess.
Likewise, just because you can buy something doesn’t mean you need it. I get it. Seasonal home decor, kitchen items, and candles are a weakness of mine. But do I really need another set of Easter dishes? Sure, I can afford them. But would it make more financial sense, and make that credit card bill a little smaller, to use the ones I already own?
Using a credit card for spending, if you’re able to pay it off each month, can be a great way to earn cash back or travel more. But it also encourages spending; our brains don’t see it the same as cash. It’s easy to click “buy”, swipe our card, or tap our phone without directly correlating that with cash coming out of our checking account.
Since we’re in lent now, consider using the next month as a time to focus on your spending. Not any one purchase; spending in total. While you’re probably not going to trade in your car for a less expensive one this week, maybe you can delay replacing yours for a few more months. Grab coffee or lunch out, but one or twice a week instead of every day. Cancel a streaming service you don’t watch that often. Having that little cushion each month when the credit card bill comes can give you room to breathe and the ability to build your emergency savings.
Your action item this week is to remove your credit card numbers from online shopping sites. That extra work to type in your credit card number can give you time to consider if the purchase is necessary.
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CovingtonAlsina is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.