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  • Writer's pictureGary Grewal

How Proper Financial Planning can help you Navigate Stock Market Drops and a Recession

Updated: Jun 22, 2022

I hope as you're not reading this while lying in bed and shaking after looking at your investment portfolio. The S&P 500 Index is down about 17% so far this year, not the greatest track record I might say! Plenty of people have taken to forums and social media to vent about how they are "freaking out" about the stock market's performance so far this year, how volatility is out of hand, and how inflation is going to "tank" them.

Still, to this day, I don't understand why people think the stock market always goes up. If that was the case, who in the world would invest in Treasury Bonds or even a savings account? Why get a measly 1%, if that, on your hard-earned savings when you could get 7% or more in the markets?

I can sympathize with others who are uneasy about seeing thousands of dollars disappear from their accounts but remember, investing is a long-term game.

What is Financial Planning?

Financial Planning, put simply, is organizing a plan around what you want your money to do for you. That's pretty much it. How do you reach financial stability, how to prioritize various financial goals, and how to prepare for different stages of life, such as retirement.

Oftentimes, people think financial planning is something you do when you are rich or are about to retire. That's simply not true. Making sure you have at least some kind of financial plan in place is important, even if it's as simple as opening a savings account.

The easiest example I can provide is creating a roadmap for your vacation. Let's say you want to do a road trip from Arizona to Florida. First, I'd say you're crazy, because who would want to drive that far! Kidding.

Just like when you plan a trip though, your money needs a plan. You don't just wake up one day and drive thousands of miles. You make sure your car is in good order, plan your route, fill up with gas, pack food, and have a backup plan if bad weather or car trouble bubbles up.

Same for financial planning. If you want to one day buy a house, you start with how much the home you want costs. Then, calculate your down payment, closing costs, what kind of credit score you need, and other costs such as moving, furnishing, and renovations.

Once you break that down, you can start to set aside a certain amount or percentage of money to contribute towards that goal. Retirement, college funding, starting a business, protecting your assets, and other goals all revolve around proper financial planning.

What does Financial Planning Have to Do with the Stock Market?

Uh, pretty much everything? Well, almost everything. Think about it. When you have goals, such as retiring or saving for that lake cabin, you probably have time right? And time is your greatest ally when it comes to investing. The stock market is one of the greatest generators of wealth in our society.

If you look back at 2010, if you had invested in the stock market with 10,000, you'd have almost tripled your money. If you left it in a savings account, you might just barely break $2,000 in interest depending on your APR.

When we are just out of college, working adults, or raising young children, we often have a narrow vision of what we want to do, such as buy a new car, get a bigger house, or save for a vacation next summer. These are all great goals, however, the day will come when we are 10, 20, or 30 years older, and that's if we're lucky!

What do you want for yourself at that age? Financial Independence? The ability to help your kid start a plumbing business? The ability to support your favorite charities without being concerned about your financial stability? With proper guidance and discipline, the stock market can do that for you.

Where do you go to get a good Financial Education?

Oftentimes, people think financial planning is synonymous with stuffy, austere, and boring offices with big books on the shelves about economics and tax law. Well, this isn't your grandparent's financial planner we are talking about.

It used to be your uncle Ken golfed with someone who knew someone who was your parent's "financial advisor" who managed their portfolio and often got a kickback for selling certain products or earned a percentage of the assets held under them, known as AUM.

Have you ever heard of an external wholesaler? Many mutual fund and financial products companies have them, and their job is pretty much to sell their company's funds to private financial planners. Hmm, now I know why advisors never paid for their fancy lunches, these wholesalers took them out!

Today, in the age of social media, people demand transparency. Fee-based online advisors exist, as well as Robo-advisors that can help craft an investment portfolio tailored to your goal and comfort level with risk.

Many websites I've referred to in the past, such as and, are excellent sources to get a straightforward financial education, such as the difference between a Traditional IRA and Roth IRA, or if it's a good idea to get disability insurance to protect your income and how to shop for it.

Proceed with caution when it comes to social media though, as too many "influencers" have been using their platforms on apps like Instagram, TikTok, and YouTube to shell our financial advice, or even share which stocks are a buy or not when many have zero formal financial education or experience in the space.

Never, ever take the advice seriously from someone just sniffing for more likes or exposure like that. Or at least proceed with caution. Just so you know, true financial planners have licenses and credentials, such as CFP, and are pretty highly regulated.

You can find the background and any notable history of your financial planner on sites like FINRA Brokercheck, and many planners act in a fiduciary capacity.

How to Obtain Financial Peace

Peace of mind is crucial. Especially when it comes to times like these when the stock market is falling, and volatility is causing you unnecessary heart palpitations.

The best way to get financial peace of mind is by giving yourself a buffer when things go awry. The performance of the stock market is out of your control, so why get worked up when it's volatile? The way to get peace of mind is knowing that you invest for the long term, and volatility is just part of the game for long-term wealth.

Having a healthy savings account is important here as well, so you can be ok even if a recession is on the horizon. If you are laid off you lack enough business to keep the income flowing, an emergency fund will help you weather the storm until you can get back up on your feet.

If you just invest in cryptocurrency and tech stocks, you'd be in a very hard place when you are forced to realize losses on those investments just to keep yourself afloat in a recession.

Morgan Housel makes excellent points on saving just to save, saving to give yourself freedom, and how the "fee" to participate in the stock market is the volatility it comes with. Check out his book at your local library!

Stay calm, my conscious consumers. Every hill has a descent, it's up to you to enjoy the view on the way down until the next one comes along.


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