4 steps to protect your financial life

Andres Garcia-Amaya, CFA is CEO and Founder Zoe Financiala wealth platform that accelerates wealth creation.

How often have you heard the “R-word” in the last few weeks or months? It’s normal to think. When you know the economy is in (or is coming) a recession, you wonder if your assets are protected and what you can do to ensure that. maybe.

Recession or not, your starting point is to unlock the mystery of the word itself.First, remember that it’s normal to feel are not alone; 65% of Americans Investors surveyed are also afraid of loss and are keeping their money out of the market as a result. Then focus on what you can control. No one can control gas prices, oil prices, stock prices, or monetary policy. but, That doesn’t mean your hands are tied! Here are four things you can do to make yourself more resilient in a recession.

1. Check your emergency fund

An emergency fund is a safety net that prevents life’s sudden turns from turning into financial headaches. Your money won’t grow in an emergency fund like an investment, but it can be mitigated against the risk of unexpected road crashes like unemployment, home repairs, large medical bills, and economic downturns. .

When building your emergency fund, set a goal (usually 3 to 6 months of expenses). Given the current economic climate, now is a great time to check your savings. Doing so will help you analyze if you have enough to cover your expenses for a few months, or if you have gone too far and need adjustments. Make sure it matches your average monthly spending. Some families go too far and even put a few years’ worth in a contingency fund. Make sure your emergency fund is sufficient to keep you covered.

2. Focus on the long term

It’s easy to fall into the trap of shortsighted valuation of investments driven by anxiety. Making hasty investment decisions based on fear and impulse is one thing you cannot afford to do in this economic climate. Historical data shows that no one knows how the market will perform, but fear-driven investment decisions often do more harm than good. Instead, expand your frame of reference long-term. Patience is much easier when you can see the big picture. After all, we must never forget that the market hours are often earlier than the market timings.

3. Evaluate your investment

Focusing on the future doesn’t mean forgetting about investing. On the contrary, an assessment should be performed to ensure that “your home is fine.” This should continue, but quality checks are important during periods of high market volatility.

Keep two things in mind when evaluating your investment. First, your assets should not keep you up at night. To avoid this, be honest with yourself (and your advisors) about how much risk you are willing to take. Each type of investor is different, and the best investment for each is also different. Then assess investment diversification to reduce risk and ensure that assets fluctuate when other assets fluctuate.

4. Get an expert perspective

Don’t wait to ask for help.if you are part of 38% of Americans If you’re working with a financial advisor, reach out to them! Volatile markets present a great opportunity to leverage wealth management strategies such as tax loss harvesting. Your advisor can strategize how to mitigate the potential impact of a recession on your life. Most importantly, your wealth is protected and well managed during difficult times. It helps to give you a sense of security that you are there.

If you don’t have a financial advisor, now might be a good time to assess the value of their experience and expertise. Investing yourself might have been enough while the market was soaring, but getting an expert eye to assess and strategize your investment strategy can make all the difference. I have.

Don’t be caught off guard by the recession

In a low-growth, high-inflation environment, many things can feel out of control, but you can be well prepared in your day-to-day life. Instead of fearing a recession, assess your situation and make sure you are prepared to face it.

Set up an emergency fund, avoid making anxiety-driven decisions, evaluate your investments, and consult an expert to ensure your finances and strategy are where they should be. Preparation can be a game changer. Thank you for preparing in advance in the difficult economic situation.

The information provided here is not investment, tax, or financial advice. Please consult a qualified professional for advice regarding your specific situation.

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