Suze Orman says you can avoid 5 common mistakes people make in a stock market

Sue Orman says you can avoid 5 common mistakes that people make in stock market crises

Sue Orman says you can avoid 5 common mistakes that people make in stock market crises

Alarm bells are ringing in the stock market, and personal finance expert Suzie Orman has listened to them and given you advice because you have carefully watched your investment lose value.

The Women and money Podcast hosts fear that people will make fatal mistakes out of panic in a volatile market with recession forecasts.

“I know your trend is to start selling everything here and now,” Orman said in a recent podcast. “It simply came to our notice then. You had it. You can’t take it anymore and you’re out. “

It is understood that people are afraid. Some economists and market analysts say we are heading for a recession, casting doubt on the ability of federal monetary regulators to raise interest rates to the right extent to cool inflation without hurting the economy. In fact, Deutsche Bank recently announced that it believes a mild recession could soon occur due to rising interest rates.

Instead of panicking, Orman says it’s time to prepare and take these steps to avoid hasty mistakes.

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1. “You need to start stocking now.”

The first mistake people make during a recession is to continue spending normally, Orman said. On top of that, the epidemic has created a situation where Americans want to get out and spend by relaxing restrictions.

If you’re worried about the recession, cutting costs is now Orman’s top tip, he said in an interview with People magazine last month. Buy only the items you need and set aside to save the rest.

“Think of it as an economic epidemic, where you don’t spend, you don’t go out unless you have the money to do it,” he said.

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2. “You need an emergency savings fund.”

Once you cut costs, another common mistake is not to allocate money to the emergency fund. During the epidemic we learned again why emergency funding is a necessity when many people lose income or lose their jobs.

A recession can increase the uncertainty in the job market, and having an emergency fund to cover costs is important for your financial survival if you take time off from work or reduce your time. Orman says the goal is to save eight months of living costs, but if you don’t go there, all is well. Any amount is better than anything, he says.

“The recession is an exhibition of A, B and C why you need an emergency savings fund,” Orman wrote on his blog when the recession threatened in 2019. “Everyone is weak ৷ everyone!”

3. “Pay off your credit card debt … no excuses.”

Credit card debt is probably your highest interest rate. And if a recession hits, credit card debt will go first, or it could be the first cost that could be the problem.

If you lose your job and your hours are cut, credit card interest can be “a disaster,” Orman said in a blog post about preparing for the recession.

A great way to prepare is to look at other credit card companies that can offer you a deal. If you transfer your balance to a new company, it may offer to charge any interest for at least one year. But these offers may disappear in the recession, Orman says, so you should take advantage now.

“Transfer your credit card balances to one of these deals and then make it your priority to pay off all debts when no interest is charged,” Orman said.

4. “We do not actually have to choose between selling all or any of the shares we own.”

Sometimes people are reluctant to withdraw some of their money from stocks that are losing value, probably because they want to avoid capital gains tax or worry about losing profits when stocks rise, Orman says.

But he has a strategy to deal with this situation. With all its confidentiality, its basic principle is that you should not view the decision to sell stock as an all-or-nothing choice. To secure more of your money, consider selling something at once and cutting back on some of the stocks.

You can read his detailed advice in his guide about stocks. The decision to keep or sell struggling stocks must be a balanced one.

Orman suggests in a recent podcast episode that if you like the mix of stocks you have and have more than five years until you need the money, then “you have to invest – here and now is not the time if you still don’t Stay, but get out of the market. “

5. “In five years your market may not have the money you need.”

This idea highlights the mistakes that Orman sees in people from both groups. “First, you can’t stop contributing to your 401 (k) or retirement account during the recession,” he told People magazine. This is especially true for young people who save on back burners for leisure. Instead, think of retirement savings as paying bills, but set aside the same amount each month no matter what.

But retirees also need to be cautious during market downturns as they may need that cash for the next five years. If so, it’s important to have a “cash cushion” for three to five years to retire, Orman said.

“Every month you put your money in your 401 (k), just keep going,” Orman said.

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This article provides information only and should not be construed as advice. It is provided without any warranty.

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