Two nights ago, financial markets tumbled worldwide – and then rebounded – in response to the news that Donald Trump had just won the 2016 U.S. Presidential election. On social media, reactions ranged from panic at the possible effect on individual 401(K) plans to: “Quick, everyone, buy the DOW!”
Since then, experts have expressed certainty about one thing: Uncertainty!
I suspect the guessing game about the effect that a Trump Presidency will have on markets and the economy will go on for some time. But for those of us concerned about our financial security, the result of this election changes surprisingly little. Not because a Trump administration’s policies won’t affect the U.S. economy in general and your investments in particular, but because the core building blocks of your financial well-being haven’t changed.
If you’re feeling nervous about your money right now, my advice is this: Stay calm and stick to your game plan. Here are 5 specific steps you can focus on right now to help you stay on track financially, whatever winds of change may be blowing around you.
- Have a plan for your money. You need a comprehensive, up-to-date financial plan. A good plan will make a full assessment of your financial situation, including your income and expenses, and assets and debts. It helps you understand your financial picture and gives you your next steps in a clear, accessible way. Knowing your most important next steps will keep you focused when distracting events hit.
- Have six times your monthly expenses saved, as a cushion for emergencies. Emergencies do happen. Having this cushion will give you a great sense of security and freedom. It will also free you up to work on other savings goals without getting derailed by unexpected expenses. Remember to rebuild your emergency fund every time you use it.
- Have enough insurance. Protecting your financial health over the long term (and especially in times of uncertainty) means preparing for the unexpected. Review your home, health, life and auto insurance policies to make sure you have enough coverage to protect your savings and your family from catastrophic losses in case of a medical or legal emergency. If your health insurance is provided by an ACA Plan, pay close attention to changes in your state and be ready to make adjustments as providers and plans change for 2017. It won’t hurt to set start a separate medical savings account to cover rising costs.
- Max out every type of retirement account you are eligible for. This is probably the simplest and most tax-efficient way to save for retirement, so contribute the maximum allowed, to every account for which you are eligible. Have no clue how? Get help. Reputable companies like Vanguard and Fidelity have experts ready to guide you through this process, for free. And whatever happens, be disciplined about never borrowing from your retirement accounts. They are for one thing only: funding your retirement.
- Save 10% of your income every year. Saving 10%, no matter how much you earn, gives you the confidence of knowing you are living within your means. Think of saving 10% as the way you ensure that you will be able to make ongoing investments in your financial health, year after year, such as starting or building your investment portfolio. Make the changes you need to make now – downsize, look for new sources of income – to get your savings where they need to be. You will feel great once you have it rolling.
There are choppy waters ahead, but there’s no need to be blown off course with these foundational steps for a secure financial future.