Is this crisis an excuse to stop saving?

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Last Updated on April 2, 2020 by Mark P.

It’s hard to go anywhere or listen to anything right now and not hear of the terrible wave of financial chaos sweeping across the country. From thousands of hard-working Americans being put out of work due to the threat of the Coronavirus or companies scrambling because of panic selling at the stock market, these Wall Street woes alone are making millions of Americans question as to whether they should put long-term investing towards their retirement aside in order to take care of the uncertain short-term challenges, or continue to be disciplined in their finances.

According to an insightful article from Reuters, you need to first establish a clear train of thought in order to assess your immediate needs and your long term goals, crisis or not. According to certified financial planner Peter Palion from New York, all one needs in order to take care of short term and long term financial challenges is a slow “slow and steady” process.

According to the article, “As the market drops precipitously, it may seem like you are throwing good money after bad to keep contributing a percentage of your income to a 401(k) or a similar workplace retirement plan when you have an urgent need for cash. But as we learned from the recession in 2008-2009, stopping regular contributions and pull out of stocks left investors further behind than those who stayed the course.” Why is that? Because despite every economic downturn and travesty our nation has faced, the market always bounces back.

Palion points out that “If you’re still getting a paycheck, what’s the point of stopping contributions to get a little more cash? It’s not like your cost of living is going up – your mortgage and utilities, are, for the most part, still very close to [the] amount you paid last month.” Essentially, by stopping regular contributions might “not give you as much extra cash as you are expecting anyway, because it increases your tax bill. You also miss out on a matching contribution from your employer, which is essentially free money.”

So while things might be bad now, you need to understand that this too shall pass, and if you can, you should continue to keep with your regular financial discipline skills so you don’t take from your financial prosperity tomorrow to satisfy the immediate needs of today. So while you’ve still got a paycheck coming in, stay focused and know the long term gain is the overall goal.