How to Protect Your Wealth Against Economic Uncertainty

Do one thing: Don’t try to time the market. It’s human nature to want to take action when times are tough. But when it comes to the stock market, history shows us that hanging in there for the long haul can pay off. 

Keeping Your Money Safe in Trying Times

Having a good handle on your financial life is important in the best of times. And when the economy begins to feel a little more shaky than usual, and people start tossing around the R word – recession – knowing the best strategies for handling your money becomes even more crucial.

Stay Calm

Whether or not we officially slide into a recession, it’s important to remember not to panic. After all, many of us have been through rough times before when it comes to the national economy, and our personal economies, too. Fortunately, there are some steps you can take to protect your wealth – and your peace of mind – against economic uncertainty.

Focus on What You Can Control

With market fluctuations and much of the broader economy beyond our control, Eric Roberge, Certified Financial Planner and founder of the firm Beyond Your Hammock in Boston, says he tries to help clients focus on what they do have some say over. 

Keep Your Emotions in Check

“Don’t start tinkering with your investment portfolio when emotions are running high and you’re feeling worried,” he says. Instead, “stick to your long-term investment strategy, and if you don’t have one, now may be the time to get a financial plan and investment strategy in place.”

As we continue to navigate what can feel like a rocky financial road ahead, consider this guidance for protecting your money.

Diversify, Diversify, Diversify 

Daniel E. Milks, CFP, founder of Fiduciary Organization & Woodmark Advisors, says it’s wise to diversify every corner of your financial life, from investments and income to where you stash your cash. What does that mean, exactly? Here are some examples:

1. Investing. Diversification of your investments helps ensure you don’t put all of your eggs in one basket or your risk in one place. You should strive to have a healthy mix of investments, including hedge funds, real estate, stocks, bonds, and annuities, which should help reduce risk and historically has proven to be a solid strategy over time.

2. Income. One way to diversify your income would be to not rely on a single job. For a household with at least two adults but only one earner with one job, that could mean another adult in the home could start a side hustle or a part-time job to create a second income stream. If you are single, the same strategy applies. Look into other ways to bring in more money each month by finding a side gig. (Need ideas? Here are some creative suggestions.)

3. Cash. While it’s smart to make sure you have some of your money in high-interest savings and money market accounts, don’t keep more than the FDIC-insured limit in any one checking or savings account. The FDIC, or Federal Deposit Insurance Corporation, insures individual accounts up to $250,000 and joint accounts up to $500,000. Aim to stay a little below those limits to make sure you’ve got capacity to continue to earn interest within the limits of safety. If you have more than $500,000 in a single credit union or bank, move any amount over the FDIC insured limit to another financial institution. 

Don’t Stop Saving

Milks reminds his younger clients that every dollar saved today is exponentially more valuable in the future. That’s because when you save money and then invest it, and your returns on those investments are compounded over time, you are taking advantage of compound interest.  

Tighten Your Budget (And Build Your Emergency Fund)

When times get tough, “pull out your budget and start trimming costs now,” explains Roberge. “Bank the money you don’t spend into something like a high-yield savings account to build your emergency fund.” Emergency funds are there to protect us when life happens and we need a financial cushion so we don’t pull out a high-interest credit card. 

Pay Down Debt

And speaking of high-interest rate debt, Roberge suggests you start attacking it aggressively to get it paid down as soon as possible: “This will also require you to focus on your expenses and reduce your spending so you can free up money to use to get rid of your debt.”

Hit Pause on Big-Ticket Spending

Regular readers know I’m a big believer in living below your means. One way to do that is to buy only what you can afford. If you can’t afford it, don’t buy it. “Avoid any major purchases that are non-essential,” Roberge says, “and delay big decisions that require serious financial commitments. That doesn’t mean you have to do without something forever … just spend a little more time saving up for these big purchases.” 

With reporting by Casandra Andrews