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Your Q4 2022 financial management playbook

Depressed earnings reports and Fed monetary policy concerns are feeding increased market volatility as we race toward the fourth quarter of 2022, meaning that it’s time to revisit your financial management plan as it relates to your goals and risk tolerance.

Financial management made simple

To simplify what you should be doing now and for the rest of the year, your playbook should only have one play, and it’s cyclical: Plan, assess, adjust, repeat.

Here are a few financial management questions you and your financial advisor need to consider as part of that high-level course of action, heading into what could be a rocky fall season.

How close are you to retirement?

Your financial management plan is based on specific goals like retirement, which usually involves a fixed time horizon that is constantly getting closer. Before considering any big moves, talk to an advisor about your current wealth management strategy with your advancing retirement date in mind.

You may find that your timeline hasn’t changed significantly enough since you last assessed your plan to warrant changing your risk tolerance. That’s when you and your advisor can get creative with plan adjustments.

Are your cash reserves adequate?

Inflation means cash is losing value, but it’s still important to have at least 3-6 months’ worth of cash available for expenses and big-ticket goals. Beyond that, your cash may work harder in the market. Only you and your financial management consultant can determine whether your cash reserves would serve you better waiting out the bear market, or purchasing some additional investments while prices are low.

Should you invest now?

Maybe. There are plenty of well-reasoned arguments for buying in a down market. While investors are seeing red in their portfolios and may be a little gun-shy about sinking more money into trading, your “should” depends on your unique set of circumstances and special considerations. If you’re in a position to buy stocks when they’re essentially on “sale,” now might be a great time to do that.

Should you sell now?

It depends. While it’s not ideal to sell for a loss as part of a successful investment strategy, your larger financial management strategy may include a need to offset capital gains for year-end tax purposes. Now is certainly the time to sell for a loss, and you can always reassess and reinvest later while still taking advantage of low stock prices.

What is your risk capacity?

Risk tolerance and risk capacity are not the same thing. Risk tolerance is mostly seen as subjective, while risk capacity is an objective assessment of your total financial strategy and its ability to absorb risk. How do you determine whether your risk capacity has changed? That’s right; you meet with your financial management advisor to implement your one-play playbook, and plan, assess, adjust, repeat.

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