How Coronavirus Is Impacting Your Money — and What People from 20 to Retirement Age Should Do

Step 1: "Stay calm — I don't want anyone panicking," financial planner Michelle Perry Higgins tells PEOPLE

Photo: Mario Tama/Getty

As coronavirus continues to quickly spread across the globe, disrupting businesses worldwide, the financial markets have plunged in recent weeks and Wall Street suffered its worst day since 2008 on Monday.

With the markets see-sawing since then, and daily headlines warning of a looming financial crisis, what should jittery investors do?

“Stay calm, corrections are normal. Wise investors do not move with the herds,” says Michelle Perry Higgins, a financial planner and principal at California Financial Advisors. “Buy if you have extra cash. We will look back and say these were great buying opportunities.”

“I don’t want anybody panicking. This shall pass,” she continues. “Your investing strategy should not change. Most of us will never catch the bottom but you can nibble the whole way down.”

Keep focused not on external events but your financial goals and when you need to accomplish them, says Roger Ma, a certified financial planner at Lifelaidout and author of Work Your Money, Not Your Life. “That will ultimately influence what you should be investing in and what changes, if any, you should be making as a result of the recent events.”

“I think it’s super easy to want to make a rash decision based on what’s going on in the market when you don’t know what you want,” he says. “I think this is a great time for people to just revisit their goals and say, ‘Am I saving for a house? Am I saving for retirement? When do I need to achieve those goals?'”

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Think About When You Will Need Your Money

“Someone who is 20 has 40, 50 years to retirement to ride out the ups and downs,” says Ma. “And that can be tough when you’re reading all these different headlines. I always tell people it’s not going to be a smooth ride.”

“One of the things that I like to do is show a person the S&P 500 index performance via Google Finance. And when you look at it on a day-to-day basis, the swings up and down can look really crazy.”

“But when you start to zoom out and look at five years, 10 years, you get that bigger perspective of over time it’s up,” he continues. “I’m not telling you that it’s guaranteed, but that’s been the performance.”

If you are approaching retirement age, says Higgins, your investments should be more conservative, with a higher percentage of fixed income in what she calls a “defensive barrier” — in bonds and cash, which will also soothe panic during downturns.

Know What You Need Your money For

If you need to touch your money in the next seven to 10 years — for your child’s schooling, or for a downpayment on a house, for example — it should not be sitting in the stock market, Higgins says.

Ma recommends that clients saving money for a home or any financial goal they wish to achieve within the next five years put the funds in an extremely conservative account, such as a high-yield savings account with Ally or Marcus.

“For the people that are saying, ‘My goal timeline is fixed, it’s within the next five years and I would be really upset if I didn’t achieve it,’ I say, put that money in cash,” he says. “You have to figure out what your goal is, when you want achieve it and then how upset you would be if you were not able to buy that house because your down payment decreased by 20 percent.”

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Don’t Make Panic-Driven Investment Changes

“A 40-year-old called me and was nervous and I asked him, ‘When are you touching these dollars?'” says Higgins. “If you are not touching the money for 25 years, do you believe the stock market will recover by the time you are touching these dollars?’ People say of course.”

“What’s best to do when you are in your 20s, 30s, 40s, you should be buying, buying, buying because you are not touching these dollars for decades,” she says. “It’s all with the caveat that it’s a well-diversified portfolio — holding large, mid, small, domestic, international, and potentially, fixed income, and not just one sector.”

Make Contributions on a Regular Basis

“All my clients who are still working, they have 401(k)s, and are basically dollar cost averaging into the market with their paychecks,” Higgins says of the practice of buying equities every few weeks or every month. “So instead of going into your 401(k) and panicking, and turning it off, this is when you want to crank it up and buy into your 401(k).”

Ma agrees. “I don’t see any reason to stray from your plan or your schedule,” he says. “I think if anything you’re getting an opportunity to buy at lower prices now.”

Look at Other Opportunities

This might be a great time to invest in buying a home, Higgins says, since interest rates on a mortgage are at historic lows. “My husband is a real estate agent and he is very busy,” she says. “This is a great time for new home owners to consider buying with cheap money, assuming you can afford the mortgage, the property taxes and have an emergency reserve if you lose your job to pay for this house.”

Ma points out that there are also opportunities for people to refinance a mortgage and save money that way due to interest rates being at all-time lows.

Seek Help to Stave Off Financial Fear

“If people never pruned their profits, never reallocated, lived in this euphoria zone and never planned for a correction, I can see why they are panicked, and that’s when some serious planning needs to happen ASAP” with help from a financial planner, says Higgins.

For some time, Higgins has been telling clients that a market correction will occur and they’ve made decisions accordingly. Now the advice is to not expect as much from the market as past returns.

“Could this lead into a recession and slow stock market returns? Yes,” says Higgins. “I’ve been telling them you are not going to see anything close in the next decade to what we saw in the last decade. Reasonable returns in my opinion will be 3 to 5 percent.”