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The market rollercoaster ride continues. 🎢

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Today, in 5 minutes or less, you’ll learn:

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The S&P 500 dropped 10.5% in just 2 days.

That was the fifth worst 2-day period for the stock market since 1950.

I'd be lying if I said it didn't feel painful looking at the red in my accounts.

What am I doing in response?

In this edition, I’m going to walk through exactly what I’m doing right now financially as a Coast FIRE solopreneur and why.

Let’s get into it:

My wife is employed full-time and I’m a solopreneur. No kids.

For the most part, we’re sticking to our financial plan:

Not predicting the future. Not making rash decisions.

Whether markets rise or fall, our household is still progressing towards our life goals.

This doesn’t mean I don’t think the world is changing. Or that our plan shouldn’t adapt to a potentially more uncertain future.

Our financial plan should be pressure-tested against reality, tailored to our lives, and updated periodically.

Just not as a knee-jerk reaction to the market drop.

I learned this the hard way in March 2020.

I sold a portion of my US stocks while COVID battered the market.

Then once the market recovered, I got back into the market too late, missing out on thousands of dollars of gains.

I know, I know. Classic market timing mistake. I reacted emotionally.

Since then, I’ve put more time and energy into making a good plan.

It’s been worth it.

Here are the building blocks I laid out earlier:

Last year, we had a 6-month emergency fund, but I no longer think it’s enough given potentially more uncertainty.

Our income is healthy right now, but I want to be prepared in case shit hits the fan.

Furthermore, I expect continued challenges in the tech hiring market.

Product Manager job openings are still down ~90% since March 2023. I foresee companies following Shopify CEO’s lead in asking for new hiring to be justified to be better than AI.

In a worst-case scenario, I have no issue with going back to a full-time role (as part of my portfolio career). But I also don’t want to take a role I’d regret due to limited runway.

A 12-month reserve helps us build have more flexibility.

Our portfolio has been a mix of US and non-US investments for years.

But the recent events confirmed why we prefer international diversification.

While US equities have outperformed over the last decade, I can’t predict what will happen in the next decade (or the 30 years prior to “retirement age”).

Here is our rough household portfolio mix:

Our current equity allocation:

Our target equity mix mirrors VT, which tracks the FTSE Global All Cap Index:

Currency is another component.

While most of our funds are USD-denominated now, we’re also considering increasing our non-USD cash/equity over time.

(We live outside the US and spend non-USD in our day-to-day lives.)

Further market declines might open up rebalancing opportunities.

For example, in my taxable brokerage I own:

I wanted to consolidate to VTI + VXUS or even VT, but I couldn’t sell off my ETFs without getting hit with a sizable capital gains tax.

More blood on the streets may allow me to make this move without the extra taxes.

Last year, we created a plan to build sinking funds for future kid-related expenses:

Despite the market turmoil, nothing’s changed on this front.

We are still pursing our life goals.

With a bit of discipline, we are on track to fully funding our 529 and childbirth/first year funds by EOY.

This isn’t part of my financial plan per say, but still important.

I suspect the layoffs we’re seeing is just the beginning. More established companies may struggle to adapt to the brutal market landscape, leading to further restructuring.

So if full-time employment is no longer stable, then what?

It becomes crucial to learn how to build a business around your skills, reputation, and distribution.

Even if an employer takes your job away, they can’t take away what you’ve built for yourself.

This is at the heart of building leverage and optionality for yourself.

So there you have it. Those are a few of the building blocks in my plan.

Ben Carlson, Director of Institutional Asset Management at Ritholtz Wealth Management, recently wrote:

I completely agree.

The one thing I will add:

It’s important to design a plan that fits you.

While I shared our plan, yours may look very different depending on your stage of life and unique household situation.

And if you don’t have one yet:

There’s no better time than now to start building your financial plan.