By Matthew Gaude & Shawn McGuire
During unstable economic times, it’s easy to let panic set in. With global unrest, political instability, and rising inflation, we have daily reminders of just how unreliable life can be. It’s during these times investors tend to panic as well, and we see big losses in the stock market. If all these ups and downs make you question how to plan for the future, you aren’t alone. What can we do to help quell that feeling of uncertainty? Here are 6 money moves you can make to feel a little more prepared for whatever comes next.
1. Keep Saving Your Emergency Funds
As the old proverb says: “Prepare the umbrella before it rains.” Building an emergency fund is the same as preparing the umbrella—it’s the foundation of financial preparedness. Generally, you should have enough money to cover 3-6 months of basic living expenses (mortgage, utilities, groceries, etc.). This money should be held in a highly liquid account such as a savings or money market account so it’s readily available should an emergency occur. The goal is preservation of capital for when you need the funds, not earning a high amount of interest. Even with the increase in interest rates, banks are not passing the increase to your accounts.
2. Track Your Spending
If the emergency fund is the umbrella, then budgeting and tracking expenses are the sturdy rain boots you wear when the storm clouds come rolling in. Tracking spending habits can be difficult, especially in trying times, but thankfully there are several apps or programs such as Quicken that will do it for you. I’ve been reading a lot about inflation lately and the potential impact it can have on households. Some thoughts around this issue relate to a “personal inflation rate.” In other words: How does the current inflationary environment affect individuals?
Everybody spends their money differently. Budgets tend to be more impacted in the areas where you absolutely need to spend money, or the non-discretionary part of your budget such as rent/mortgage, car payments, insurance premiums, food, and energy usage. Of course, if the high levels of inflation continue, the potential for inflation to impact the discretionary part of your budget may also become an issue. We are seeing this now where households are spending more money on gas and groceries and spending less on furniture, clothing, going out to eat, and appliance upgrades.
Once you have a good idea of where you currently spend money, you can begin to build a budget around where you want your money to go. This can be modified as needed as time goes by and life changes so that you are better prepared to withstand potential fluctuations in income.
3. Analyze Your Risk
Risk management is a great way to safeguard what you’ve already built. Unmanaged risk can mean the difference between maintaining an ample emergency fund or not having enough when you need it the most. Be sure to review your insurance policies, taking care to bring them up to adequate coverage levels. This should include life, health, auto, and homeowners insurance at a minimum, but disability, umbrella liability, and long-term care coverage should be considered as well. These risks are often overlooked and can be devastating to a financial plan. Making sure you are adequately covered now will save you time, money, and energy in the future.
4. Assess Your Investment Allocation
Investment allocation and risk tolerance are important factors to consider when assessing financial preparedness. If your investment allocation does not align with your risk tolerance, it can lead to unwise investment decisions. It’s common for people to feel worried when they see their investment values fall during a financial crisis, but a properly diversified investment allocation specifically tailored to your level of risk tolerance can alleviate quite a bit of the stress surrounding market volatility. This helps to keep you invested through the downturns so you can benefit from the potential growth when the market eventually recovers. In this case, “stay the course” is tried-and-true advice, especially if you have a long time frame before retirement and a sufficient emergency fund to get you through difficult times.
5. Pay Down Debt
Stay on top of your debt by paying off any credit cards and high-interest rate products now while economic conditions are generally still favorable. With the Federal Reserve raising interest rates, the credit card companies are increasing the interest rate they are charging you on carried balances. If you carry balances from month to month, this should be a priority to pay off to avoid paying high-interest rates. You should also focus on improving your credit score in case you need to borrow in an emergency. If you have not already, it may be prudent to check into applying for a home equity line of credit for funds to access in times of an emergency or to pay off a larger debt charging a higher rate of interest.
6. Partner With a Financial Advisor!
It’s always wise to enlist the help of a professional who can provide objective advice—especially when it comes to something as important as your finances. Making smart financial decisions doesn’t have to be difficult or overwhelming, and we at Live Oak Wealth Management are here to help you along the way. If you’re ready to take the next step in your financial journey, we’ll be here to walk with you through all of life’s most unexpected roadblocks. Call our office at 770-552-5968 or email [email protected]. Or, if you prefer, you can simply click here to schedule an appointment online.
Matthew Gaude is an *investment advisor representative and the co-founder of Live Oak Wealth Management, a financial services firm in Roswell, Georgia. He serves the planning and investment needs of corporate employees, those approaching or in retirement, and 401(k) plan sponsors. Working first as a commodity broker and then as a Business Development Manager for a national broker-dealer in previous jobs, he has the insight and experience to help clients understand the complexities of the market and implement strategies to minimize risk. To learn more about Matthew, connect with him on LinkedIn or visit www.liveoakwm.com.
Shawn McGuire is a financial advisor and the co-founder of Live Oak Wealth Management, a financial services firm in Roswell, Georgia. He serves the planning and investment needs of corporate employees, those approaching or in retirement, and 401(k) plan sponsors. He has worked in financial services since 2002 in positions ranging from financial advisor to stock broker and portfolio manager. As a CERTIFIED FINANCIAL PLANNER™ professional, he is trained to help clients with virtually all their financial needs. To learn more about Shawn, connect with him on LinkedIn or visit www.liveoakwm.com.
Securities offered through American Portfolios Financial Services, Inc., member FINRA/SIPC. Investment advisory services offered through *American Portfolio Advisors, Inc., a SEC Registered Investment Advisor. Live Oak Wealth Management, LLC is independently owned and not affiliated with APFS or APA.
Any opinions expressed in this forum are not the opinion or view of American Portfolios Financial Services, Inc. (APFS) or American Portfolios Advisors, Inc. (APA) and have not been reviewed by the firm for completeness or accuracy. These opinions are subject to change at any time without notice. Any comments or postings are provided for informational purposes only and do not constitute an offer or a recommendation to buy or sell securities or other financial instruments. Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk, and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors. Seek tax advice from a tax professional. Neither APFS nor its Representatives provide tax, legal or accounting advice.