The Sprint to FI

I am excited!

I recently wrote a post about the COVID19 pandemic and the effect it’s having on us. Financially, the downturn in the market has me excited. I was actually concerned when the market did not drop after new year and I’ve been waiting for it to drop. I just wasn’t expecting it to happen this way. A pandemic; who knew?

So why am I excited about this?

The stock market is on sale right now. With the market as down as far as it is, I see a huge discount. I’m pushing as much money as I can into my investment accounts, and buying index funds. Once the market begins its rise back up again, that discount is money in the bank. I would be foolish not to do this.

So why do so many panic when the market drops? I think to a degree, it depends on what phase you are in; wealth accumulation or income. If you are reliant on your investments for income, then the effect can be a dramatic cut in income, and that is serious, especially if you are lean FI. Millennial Revolution has a great post about how to handle that situation with a yield shield. Currently Cat and I are still in the wealth accumulation phase so we see this downturn a little differently.

Why do people panic and why aren’t I panicking?

People panic for all sorts of reasons. If you are currently panicking, you need to acquaint yourself with JL Collins. He has written about this very scenario, and the crux of the matter is that the market will go back up, we just need to be patient.

We are currently a few weeks into the pandemic and the market drop has been about ~20% but we can already see some upticks happening. Will those continue or will it drop again? I have no idea, but its a good sign and I am not worried about the time it takes to come back. Looking back at previous market adjustments, the common denominator is that the market always recovers eventually. I am hoping for a full recovery in 6-18 months. Our time to retire for Cat is 3 years so I think this is still achievable. My time to retire is 5-6 years so this should be a distant event in the rear view mirror b the time I reach my retirement date.

So what is my current strategy?

Currently I am working on my 2020 backdoor Roth IRA. Once I have my allotted $7k in there, I can increase funding for my 401k and see if I can get the full $25k in there before the end of the year. I am not doing anything complicated;  all I invest in are total market index funds. In my case, I have my accounts with Fidelity so I buy FZROX.

What if it’s all too much?

If its all too much and you need an escape, I’ll let JL Collins lead the way with this guided mediation. I think you will agree that he absolutely has the right voice for this.

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