Anyone who has tried to invest at the perfect time by selling high and buying low will tell you it’s nearly impossible. Most of us (including myself) simply give up trying to have perfect timing and are content to ride out the short term market fluctuations.
It can become frustrating when the markets do the opposite of what you’d expect. Just when you think they’ve bottomed out, they keep going lower. Or if you sell at what you think is the peak – they keep climbing.
What You CAN Control
Personally, I view market fluctuations like gas prices – they are never ideal and they usually defy logic, so why bother trying to make sense of them?
Instead of trying to time the market I try to focus on things I can control.
One of the things I have completely in my control is my savings rate. Our monthly income may be steady throughout the years, but our monthly spending is something I can control and focus my efforts on.
My logic is simple: the markets will continue to fluctuate and I won’t be able to control what happens, but how much we spend each month is 100% in my control – which is a missed opportunity for lots of people. There’s no sense in stressing over the markets if you don’t have a solid financial plan – starting with a monthly budget.
Our monthly budget is the guideline we use to show what money is coming in and what money is coming out, and it’s almost entirely in our control – especially the money being spent.
Unlike the stock markets, if something in the budget needs to be changed it can be done almost immediately. If one monthly expense goes up (ie. car insurance), we are able to allocate money from another expense to make up for the difference.
It’s liberating knowing that a monthly budget is something you can have complete control over.
Lifestyle inflation is another aspect of your finances that is completely within your own control.
If you get a raise at work or receive a bonus, why not spend a little and save the rest?
Personally, every year I’ve tried to slowly increase the amount I set aside each month for savings. As my career progresses I’d like to be able to maintain the same rate of savings while avoiding the traps that come along with lifestyle inflation.
Related: Things I Refuse to Pay For
Lifestyle inflation can mean different things – maybe it’s the need to always have the latest gadget, getting a new vehicle every 3 years or going out for lunch everyday rather than brown bagging it.
No matter what your version of lifestyle inflation is, it’s important to realize that the extra money you get over the years is within your control – you decide how it will be spent (or wasted).
Conclusion – watching the markets can be frustrating – just when you think you have them figured out, they do the opposite of what you expect. You may not be able to control what the markets do, but you can have complete control over your savings rate. Focus on the basics like spending less than you earn, maintaining a monthly budget and avoiding lifestyle inflation to keep your savings rate high and growth your money over the long term.