How to Manage Your Finances Through Inflation and Market Volatility

[MUSIC PLAYING] BRANDI GOMEZ: Hi, welcome to our podcast, MakingCents, brought to you by Navy Federal Credit Union. I'm one of your hosts, Brandi Gomez. And I'll be taking your questions to the experts to help you make sense of your money, pun intended. Hi, I'm Brandi Gomez, you're MakingCents podcast host. And in today's episode, we're going to be diving into a topic that's front and center these days, inflation. And what exactly does that mean for financial planning? 

 

Whether you're thinking about investing for the first time or more experienced and feeling concerned about the market, we're going to share tips and advice for what you can do right now to combat the financial stress of inflation. Today, my guests are Kevin Driscoll, vice president of Investment Services and certified financial planner, and Katie Hill, financial advisor and chartered financial consultant. 

 

Kevin and Katie, welcome to the show. To get things started. I want to hear a little bit about both of you. So Kevin, tell us about your role, a little bit about yourself, and a little bit about what exactly is Navy Federal Financial Group. 

 

KEVIN DRISCOLL: Navy central Financial Group is a wholly-owned subsidiary to Navy Federal Credit Union. And specifically what Katie and I, do we work within Navy Federal Investment Services. And I would say, Brandi, that we're students of the game. You mentioned that Katie is a chartered financial consultant. 

 

And I'm a certified financial planner. That means we have gone to extra lengths to get the necessary education and experiences to help our members out in all aspects of financial planning, whether that's estate planning, life-insurance planning, portfolio makeup, all types of things. There's just so much that goes into it-- tax evaluation. 

 

There are so many things that go into those designations. We are continual learners of financial planning. So I have the privilege of leading all the financial planners as well as the service staff that help members across the country with their investment, with their life insurance, with all their financial planning needs. It's really a privilege and an honor for me to lead this group of men and women as they help our members. 

 

BRANDI GOMEZ: We're grateful to have you. Katie, same to you. We're so excited to hear your perspective, as you're more of like a boots on the ground, helping our members every day. Tell us a little bit about you and your role. And what's something that you're hearing from our members these days? 

 

KATIE HILL: Well, I've been a financial advisor probably for about 28 years. And I've been in the financial services industry for about 30 years. So I've been through a lot of these ups and downs in the markets, inflation, interest rates, all kind of different things. I work with members daily. I work with clients that actually do investments with me plus members that don't have investments yet, that just have a couple of questions about what they need to be doing or what they should be doing. 

 

What we're hearing from members today-- there's a lot of concerns. I mean, the volatility-- it's been up and down. One day it's up 600 points. Next day, it's down 800 points. We have inflation going through the roof. We have gas prices, supply chain issues. We have interest rates going up. We're hearing a lot of different things about-- do they need to make any changes or should they be concerned? So my job is basically to take the emotion out of things, get back to the basics with each member. 

 

BRANDI GOMEZ: You know, you're right, Katie. And this isn't the first time we've seen this. And I think what's important about our chat today is-- what can we do? What are those things that we do have control over? I know where I am noticing sort of the impacts on the market today is even when I just go fill up my gas tank, or when I go to the grocery store. 

 

I picked up a gallon of milk last week, and it was inching towards $6, which hurts a little bit. This time last year, it was only $4. So can you tell us really what is going on? Help me understand the state of the market. And I know there's a lot of talk about it has to do with the pandemic. But two years in, why are we still seeing impacts like this? 

 

KATIE HILL: Well, it takes a while for the impacts to happen once we have an occurrence. So we have the pandemic. So the world basically shut down. So now, we're behind in production. We're behind in moving things, which is causing the supply-chain issues. Plus, everybody wasn't back to work at first. So people were at home. People lost their jobs. As people are getting back to their jobs and getting back-- we'll see some of these issues go away. 

 

Like the supply-chain issues-- of course, we all saw the pictures of all the ships being out in the ocean and nobody to unload the ships. Now that people are getting back to work, those will be able to be uploaded. But the production-- as people go back to work-- that'll increase too. But it takes a while once we have a major event for the things to filter down. 

 

BRANDI GOMEZ: Yeah, and it's not a quick fix from what it seems. You mentioned a term volatility. And I'd love for you to explain a little bit more about what that means, specifically when it comes to our investment portfolios. 

 

KATIE HILL: OK, so volatility is the ups and downs in the market basically. We're going to have times where the market's been great. Like at the end of last year to the beginning of this year, everybody's accounts went soaring up. The Dow was at all-time highs. The S&P was at all-time highs. And then, we see things come into play that inflation's rising, prices of gas have gone up, the Ukraine war. All these different things affect the market, which the market has to sell off some things, which creates volatility. 

 

We know it's not a straight line. There's not going to be-- we're going to earn 10% every single year. And we're never going to go down. We plan for that. But the important thing is to make sure that you're in touch with your account advisor or your accounts. Make sure you're updating anything, any life changes, and keeping on track with your risk, and that sort of thing. The worst thing you can do at a time like this is just say, I don't want to look at it. I'm never going to do anything. 

 

BRANDI GOMEZ: Yeah, you can't hide from what's going on. So tell me, what are some important things that our members should really be paying attention to? What should they know more about? 

 

KATIE HILL: OK, so we can look at different things of do they want to push back retirement? Even though there's been volatility in the market, are there goals still on track? Have they have any had any life changing events-- say, medical issues that came up or children going to college-- that they didn't plan for and needing more money? That's when we take a look and see through the portfolio of what we need to do. 

 

And I'm not just talking about their investment portfolio. I'm talking about their whole financial picture, OK? So we look and say, are they saving enough? Do they have enough emergency savings? Are they cutting out unnecessary expenditures in times like this? 

 

BRANDI GOMEZ: When would you say-- because we're speaking to those that maybe this is the first time that they're thinking about investing. Or maybe they've been doing this for a while. So to that point, when is a good time to start looking at this stuff? Is there like a sweet spot where you should really start getting involved? 

 

KATIE HILL: So I get this question all the time. I'll invest when the market starts getting better. And I use the example, OK, this car you've been wanting all of your life is now on sale. So you're going to wait until they take the sale price away to the original price to go back in and buy it? Any time you're planning for your future, now is the best time, no matter when that is. And how you invest is according to what's going on in the market. 

 

So if the market's low, you might want to put more money in the market while it's low. Markets are high-- you may want to put more money in longer periods of time, like monthly. That's why it's the importance of working with a financial advisor. Because we can guide you to tell you exactly when you need to put money in or when you need to just back off. But when the market's down, people really get afraid. And they don't want to invest. But that's actually the best time to make your investments. 

 

KEVIN DRISCOLL: I'll add on a little bit to what Katie said. What we see across the country too and the advice that we give from our financial advisors is we can give you the best advice in the world, but if you're losing sleep at night, that's where you as a member need to take into account your own feelings and your own ideas. No matter how much money you have or whether you earn 10% or lose 10%, we are very, very concerned about the overall member and how they feel. Are they going to be able to meet their goals in 10 years? 

 

So if somebody is losing sleep at night, they need to make changes to their portfolios. They need to make changes to lifestyles, a lot of different things. So we encourage members not to sell at the bottom. Don't buy at the top, like Katie said. Don't buy that car when it's full price. Buy it when it's on sale-- so buy low, sell high. So when your emotions get the best of you, really hang in there. And only begin to do things when you start to lose sleep. That's a big concern for us. It's the sleep factor. 

 

BRANDI GOMEZ: Yeah, and I think I feel better knowing that someone else who is certified or chartered in this is going to be really managing my investments in that way. So that's a good point. Question for you both in terms of personally. What are you guys doing to adjust to what's going on, if you don't mind sharing that? Is there something that you're doing yourself that's helping you navigate today? 

 

KEVIN DRISCOLL: For me, I am within several years of retirement. So my strategy may be a little bit different than somebody who's just beginning to get into the market. But as the market was going down, I had viewed this as buying opportunities. So rather than backing off, for example, my 401K, reducing the amount of money that I'm putting in on a weekly basis, I increased it. So kind of front loading when the markets are down-- I'm trying to buy more. Because in retirement, I'll need more of those assets to lean on for retirement income. 

 

But as I see the end goal in sight of retirement, one of my goals is to have a higher percentage of cash in my portfolio. I think that as we approach retirement, we should have two years of expenses in cash. Now if I'm 20, 30 years from retirement, I really don't need that amount of cash to cover my expenses. I need emergency finds. We talked about budgeting in the very beginning. I need an emergency fund but not necessarily two years worth of expenses. But as I get closer to retirement, cash is going to be king for me. 

 

I'm going to be able to handle some expenses and not have to dip into a portfolio that may be down 15%. We want to avoid selling low, buying high. So if I need an expense like cover my mortgage for the month, and I have cash to do that, that's going to be to my benefit as a pre-retiree and as a retiree. Versus if it's all invested in the market and I need to sell some at the bottom-- that's not going to be the best experience. 

 

So for me personally, I am definitely not backing off of my investment strategy today. Because I hope that I'll be in retirement for 30 years. So although people think that tomorrow I'm going to be next to retirement, so I need to be very, very conservative in my portfolio. That may not be the case for everyone. Everybody needs to evaluate their risk tolerance. But what everybody needs to do in retirement is have available cash so that you can in times like this withdraw to meet needs from cash versus your investments. 

 

BRANDI GOMEZ: Thank you for sharing that. Katie, on the other side of the spectrum, for those that maybe were struggling paycheck to paycheck to afford those items that we need on a day-to-day basis, for the members that you talk to that may be in this position, what are some of those smart money moves that they can make? Maybe they're dipping their toes in the waters and investing or, to your point, maybe we need to reevaluate what we're spending on. So what kind of advice do you give our members in that position? 

 

KATIE HILL: I have that question every day with members. And it could be just cutting out one expense. I know that everyone's cable bills are outrageous now. It's ridiculous how much we have to spend a month to watch TV. And half of us don't even watch TV that often, but cutting down on some of those expenses. My husband recently retired. So we had to go back and look at our plan. And say, OK, we're on track. 

 

Everything going on in the market-- you're going to be retired now. You're not going to be putting any more money into your 401K. What are our daily expenses going to look like? So I had to go back into my plan to make sure I was still on track with everything. But the person living paycheck to paycheck, even the simplest thing as do you stop it and get coffee every morning? 

 

We stop at Starbucks or any other coffee house-- that's $5 a day, just cutting out one expense like that. Do you need to reevaluate how you do your grocery shopping? Do you go every day after work or do you just go once a week? Those sort of things. But the biggest thing with my job and doing their investments or getting somebody into investments is making sure, like Kevin said, that you have that firm emergency savings. 

 

It's not going to do you any good putting money into the market if you need to pull that money out just to get gas or to pay a monthly bill. So I try to stress that with members. Always have at least three to six months of expenses in an emergency savings account when you're starting out as a fall back. We have hurricanes down here. And air conditioners are expensive. Roofs are expensive. And we need to have that extra cush there, so to speak, so that you don't have to stress or put money on a credit card. 

 

BRANDI GOMEZ: You're right. And that's a good point you make just about natural disasters. I feel like there's something new that we hear about on the news it seems more often than we used to. And I think about just houses. When we least expect it-- that moment we don't have that savings account is when the washer is going to go out or you're going to need to call someone to repair something. So very good points made. You touched on this some earlier. But what are some tools available? How can you all really be there as a resource for those who need it? 

 

KATIE HILL: Well, we do have portfolio planning software that we use. So what we do is I gather all the information from potential clients, which are members. And I enter it all into our portfolio planning tool. That tool has inflation. So I can run the number from-- inflation was down at two and half percent for years. Now, all of a sudden, it's at 9%. So I can do what-if scenarios. 

 

OK, you're putting X amount of dollars. Everybody wants to retire at 55 for some reason. That just seems to be the key age. I say, OK, well, let's look and see how much you have saved. What's the effect of inflation if the inflation goes up to 10, 11% like it did in the '80s? Or what if the inflation is low? 

 

So these tools that an advisor has can help you manage those times and volatilities. What if the market takes a crash like it did in 2008? What is your actual portfolio going to look like? And are you comfortable? Like Kevin said, can you sleep at night? If you can't sleep at night, then this portfolio isn't going to be good for anybody. 

 

BRANDI GOMEZ: Yeah, you say can you sleep at night. You're starting to sound a little bit like my therapist. So on that point-- 

 

[LAUGHTER] 

 

KATIE HILL: And sometimes, listen, we are wedding planners. We are therapists. We are vacation planners. We are everything. When you have a relationship with a financial advisor, you have to pretty much bare your soul. I mean, we know a lot more about you than sometimes spouses know. And that's an important thing-- talking about spouses-- is to make sure that everybody is on the same page. 

 

You want to make sure that you're all working together to get a plan to go. Because when you're married, you both want to retire eventually. And it doesn't matter. One spouse is usually very conservative. And one spouse is usually very aggressive. So we bring those two together to show you how we can make a portfolio work with both of your options in mind. 

 

[INTERPOSING VOICES] 

 

BRANDI GOMEZ: --I love that. I feel like there's a lot of trust there. Not only do I need to be able to be open and honest with my financial planner but also making sure you bring in that conversation with your partner as well. Kevin, did you have anything to add on that question? 

 

KEVIN DRISCOLL: I did. Absolutely. Thank you, Brandi. Katie makes it seem easy when she talks about the things she does with our members. But really, there's a lot of complicated issues behind the decisions that she helps our members with. But essentially, what she does in a three-step process is she has a discussion with the member that says, you have three choices here. You can accept what's going on, specifically risk. 

 

Because there are many types of risks. Longevity, outliving your money could be at risk. But inflation is a risk, right? And so when Katie talks to our members about risks, she says, here are the factors involved. You can either accept the risk, you can try and eliminate the risk, or you can transfer the risk. And so she will walk through those specific choices with the members so they feel much more comfortable about the decisions they make. 

 

Because everybody assumes that I just have to accept this. Everything that the world is throwing at me-- I just have to accept it. But the tools that Katie has at our disposal for our members-- the product manufacturers, the insurance companies, the investment firms-- are always coming up with solutions that will help members in accepting, eliminating, and transferring that risk. 

 

So unless you're a student of the game like Katie and I are, it's really difficult to know what I should do to accept, transfer, or eliminate that risk. And Katie makes it sound very easy the way she discusses it. But her mind is going five million miles a minute trying to figure out which one of those three the member is really trying to do. 

 

BRANDI GOMEZ: And it sounds like it's not all or nothing. You present multiple options on the table for members to look at, so they can make the educated decision on really what's best for them and their family. When it comes to getting started or meeting on a regular basis, how often should someone meet with their financial planner? 

 

KATIE HILL: Well, it all depends on the level of comfort the person is. Some people just want to meet once a year. Usually, I start a portfolio-- I tell everyone we are going to have annual reviews. The only way you can stay on track is if we look at your situation every single year. But that being said, if you're more comfortable just hearing my voice in six months, each quarter when we first start out, call me. 

 

It's important to know that-- like you said before, the trust has to be there. So we said that at the beginning. But I always tell my clients, listen, we're going to talk every year. But then something can happen in your life. You have life-changing event or you can have this market volatility, inflation, whatever. They need to know that they can touch base with that person whenever they need to for their own comfort level. 

 

And we might set out for the person saying, I'm so aggressive. I want to be aggressive I want to make as much money as I can. Well, then we have a market downturn like we have this year. And that doesn't really work. And then they get afraid. And then they want to sell at the bottom. So that's kind of why we look at the whole picture. And then we kind of get that gauge. Like Kevin said, I make it sound easy. It's not easy. I take on all the stress for everybody, believe me. 

 

I stress every day making sure I'm doing the right thing for my clients with this market environment and everything going on. And It is very important that they tell us everything. Because if I don't know everything-- I can sometimes just read in the conversation that you're not comfortable with an annual review, that you may be more comfortable speaking to me every quarter. And you don't even realize that. But I can tell by the way the conversation is going. 

 

BRANDI GOMEZ: You know, you're almost like a doctor. And I feel like it's similar to the way I approach it in that when I make my annual checkup with my doctor, I make an appointment with my financial planner. So thinking of it in a way that it's really about your financial health and well-being, and you have experts here that are here to help you through any season of what's going on is really good for us to know. 

 

KEVIN DRISCOLL: You referenced your physician. And it's funny because my terminology for what we do is financial physician. Because we, like medical physicians, will give advice. But I don't always follow my doctor's advice. And people don't always follow our advice. But the education, the tools we have-- we have pretty good advice. So I do call ourselves financial physicians. 

 

BRANDI GOMEZ: Financial physician-- I like that. I'm going to start using that. So to close out today's discussion, what are some things that you think our members should be asking you? You've shared what they are asking. What are some things you wish they were asking you when they came to see you or talk to you? 

 

KATIE HILL: Well, I think some things they need to ask are the tough questions on what happens if I lose a job? Or what happens if I get a divorce? Or what happens if I have more children? Those are the types of things that they need to be thinking about. We have a lot of military. And the transition sometimes-- the biggest thing I hear from people or don't hear is I'm going to be retiring from the military, and I'm going to start another career. 

 

Sometimes, the transition from military to civilian life takes a minute. And that job may not come as quick as you think. Now, they may have military retirement. But if they're spending more than they'd be making a military retirement, they might be depending on that second career, which may not happen right away. And that's one of the biggest things I see. 

 

So when I have a member that's retiring, I try to say, OK, you're coming from one phase of your life to a different phase of your life. So we need to kind of look at the worst case scenario and the best case scenario. So that's what I would say. They need to look and see what the worst case scenario would be in addition to how much they could make or best case. 

 

BRANDI GOMEZ: And that transition can be tough. I know that conversations about transitioning out can happen 16, 18 months before they actually get out of the military. But to be able to find a career that's fulfilling as much as it gave you purpose in your role in the military, I think can sometimes be a barrier. Anything else you all would like to share with our listeners? 

 

KEVIN DRISCOLL: I think what I'd like to share is a little, simple statement that if members prepare this way before they go meet with the financial advisor, like Katie, I think they'll have a more fruitful conversation. And that's planning for the worst but expecting the best. The worst-case scenario-- it's in my plan. 

 

The worst-case portfolio downturn, the worst-case loss of job-- like Katie talked about-- plan for it. But live your life expecting the best. Go out there every day and make the best of every day. But in the planning, you do plan for the worst but expect the best. 

 

KATIE HILL: I would say don't put all your eggs all in one basket. People get nervous and are afraid of the market, afraid of the risk in the market. So they want to put everything in CDs, or in their jumbo money market, or their regular money market account. You just have to remember that you want to spread out. You want to have real estate. You want to have some investments. You want to have cash available to you. But you don't want to have it in one. 

 

Some people tend to go, OK, real estate's doing really good. I'm going to put all my money in real estate. Or the market's doing really good, I want to put all my money in the market. We kind of get everybody situated to make sure that they're placed accordingly and diversifying their assets. That's one big thing that I want members to know, that you really need to have your assets diversified. 

 

BRANDI GOMEZ: And if someone listening wants to get in contact with you all, what's the best way to do that? How do we get started? 

 

KATIE HILL: OK, so it depends on where you live. You can go into a branch. And they can talk to one of the MSRs and ask to speak to a financial representative, if they have one attached to their branch or not. We have face-to-face advisors. We have virtual advisors. Our face-to-face advisors can be virtual too. So if you live say a distance away from me, two hours, and you want to meet with me but the drive is not going to be that-- we can make it happen virtually. That's not a problem. We also have on our website at Navy Federal, under the Navy Federal Financial Group, we have a list of advisors in different states. So they can always go look at that too. For states that we don't have a branch, we have our virtual advisors that cover that area. 

 

KEVIN DRISCOLL: You can always call 877-221-8108. And we'll be glad to get you to the perfect advisor for you. 

 

BRANDI GOMEZ: Well, Kevin, Katie, thank you so much for spending time with us today, really breaking down what's going on with the market and what it is that you all can help us with in terms of this mission to financial health and well-being. There are things that we do have control over. It's just a matter of planning, talking to a financial advisor, and feeling better about it. So thank you so much for your time. And we will hopefully talk to you very soon. 

 

KATIE HILL: Thank you for having us, Brandi. 

 

KEVIN DRISCOLL: Thank you, Brandi. 

 

KATIE HILL: We appreciate it. 

 

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ANNOUNCER: Navy Federal Credit Union is federally insured by the National Credit Union Administration. This podcast is intended to provide general information and shouldn't be considered legal, tax, or financial advice. It's always a good idea to consult a tax or financial professional for specific information on how certain laws may apply to your individual financial situation. 

 

References to and participation with the military community does not constitute organizational endorsement. Navy Federal is an equal housing lender. Navy Federal Credit Union, our members are the mission. 

 

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