Why This Matters

For those that have a cash “cushion” to survive market ups & downs, it might be ok. That will depend on your financial plan, the way that you have kept money to pay for expenses, foreseen and unforeseen.

The issue here is that the long run is a series of short runs. All timeframes, both long and short, are depicted in this image. The past years have conditioned people to believe that “it’s going to be fine in the long run,” or “buy the dip.” In theory, this isn’t really accurate, as you can see in the picture: the issue is that you are always starting over, with a clean slate, where the arrow points.

In “theory,” you can say to yourself that you are in it for the “long run.” That is 100% fine. However, if you are using the balance of your accounts to pay for current expenses, then you are effectively “selling at the low.” If you face a large unexpected expense, same thing.

Ultimately, planning is important because only then can you tell whether or not you can weather the storm.

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