Here's a personal finance pop quiz. In an economic crisis, people should:
A. Sell all their stocks
B. Invest in gold
C. Bury all their cash in the backyard
D. Abandon hope and leave the country
Rob Weagley would answer: E. None of the above.
Weagley, who chairs MU's Personal Financial Planning department, does have financial advice for people as they try to weather the current meltdown on Wall Street.
Instead of advocating clever investment tricks or radical moves, Weagley offers the following suggestion: Ride it out.
"When the world looks like it does right now, it causes everyone to panic," he said, adding that now is not the time for "knee-jerk reactions."
Instead, Weagley encourages people to take a look at their financial strategies.
"The important question to ask is, 'Do you have a plan?'" he said.
Weagley maintains that the best thing for individuals to do right now is reevaluate their priorities and recommit to basic economic principles — disciplined spending, a diversified investment portfolio and saving 10 percent of paychecks.
He thinks a good strategy will survive the twists of the market, even those as dramatic as Monday's. Given the $1.2 trillion loss in the stock market on Monday, a 10 percent savings plan may seem inconsequential, but could create a buffer for the long haul.
The rules of good financial planning, he said, don't change as a result of an economic crisis. Weagley doesn't downplay the potential for the current economic situation to wreck havoc on the job market and retirement funds.
"The bad news will trickle down to Main Street," he said, adding , "we're going to be dealing with this for a couple of years."
He thinks that a government buyout, like the $700 billion plan rejected by Congress on Monday, is necessary to protect the economy.
But Weagley remains optimistic that this will also pass. He urges people to trust that the government will deal with this successfully, and to remain confident that the market will rebound.
Confidence is the cornerstone of Weagley's advice to the public.
"I don't really think any of us thought we were going to have a day like" Monday, he admitted.
But he said that families need to be confident that their financial plans will survive today.
"This is an opportunity to reevaluate where we are, what matters to us," he said.