FinancialCalculations_coffehouse

Illustration by Mike Forbush

When something in our life is headed in the wrong direction, our natural tendency is to make changes to get it back on course.

With oil prices plummeting to levels not seen since the early 2000s, China’s fast-growing economy slowing, and global stock markets undergoing one of the worst first quarters ever, our natural reaction is to turn to our investments and ponder whether we should make changes by overweighting the energy markets and underweighting the Chinese markets. Or is it the other way around?

In short, with our portfolio balances below the lofty levels of July 2015, there is a tendency to want to do something, anything, to get our portfolios headed back in the right direction.

It is time to take action, but not the type of action you might be thinking. Instead of turning outward to analyze global markets and trying to make changes that might impact a portfolio in the short run, now is the time to turn inward and take action based on that financial plan you created for yourself long before oil plummeted and China’s economy stalled.

Here is the action I am taking with my financial plan.

I am revisiting my financial calculations to determine whether my updated account balances would require an increase in the amount I save each month to reach my goal of retiring at a specific age while maintaining my current lifestyle throughout retirement.

Most likely, the current market decline won’t necessitate any changes in my saving rate. This awareness gives me peace of mind in knowing that I, not the price of oil or the Chinese stock market, am in control of my financial destiny.

I am taking action in my financial plan by reviewing my allocation between stocks and bonds. If the market has dropped enough, it would warrant shifting some fixed-income investments back into the stock market to get back to my original allocation.

In times past, when fixed-income investments were generating returns of 5 percent or more, this stock-bond decision might not have carried the importance it does today. However, with most intermediate-term bonds and bond funds generating a 2.5 percent return, I don’t want to have more money than I need in this asset class generating such a paltry amount.

Despite the dismal returns of the stock market this past year, domestic and international economies continue to expand, although at a slower pace than in the recent past. When the stock market goes through daily gyrations of 300 points or more, it can be a mighty challenge to tune out the negative media exposure and focus instead on financial decisions that actually matter to your wealth-building efforts.

These are found in the personal choices we make in our everyday life, and most of us wouldn’t have it any other way.

This article originally appeared in the March 2016 issue of “425 Business.”