5 Financial Strategies in Times of Uncertainty

Bank / Financial

Accountants and other experts present financial strategies for dealing with inflation, a volatile stock market and other economic concerns.

While the consumer price index rose 9.1% year over year in June and the S&P 500 stock index fell 22% in 2022 (at press time) , some consumers are reassessing their savings, budgeting and retirement strategies. And as broader questions about the outlook for the U.S. economy are now fueled in part by the Federal Reserve’s 0.75% interest rate hike in June, financial preparedness may be especially important in this unpredictable climate. , which also includes geopolitical concerns.

Although the world of financial advice is full of various investment options and strategies, basic financial approaches, such as the following strategies, can help pave the way to financial stability in uncertain times.

It is important to point out that it is also advisable to seek expert help during these times. According to Neal H. Rotenberg, office managing partner of accounting firm Marcum LLP in Saddle Brook, “Life is unpredictable, the economy is cyclical, and events in the world can impact the way we live, work and live. ‘save. That’s why it’s so important to work with an experienced and credible advisor to plan your personal and professional financial future.

Emergency Savings Fund

According to accountants and other experts, creating emergency savings funds is one way individuals and families can plan to have enough money to cover between three and six months of living expenses, if needed. These emergency funds can be used for everything from surviving layoffs and making crucial home repairs, to paying for vehicle maintenance and/or medical expenses, the latter of which the maximum family expenses (for a 2022 market plan) can be as high as $17,400.

“Cash isn’t always king, but when you need it, it is,” says David Boak, CFP®, financial advisor at Wiss Private Client Advisors, LLC in Florham Park. “It’s important. Having that [emergency fund] liquidity in a tough time is going to feel a lot better than having to scramble and look at other accounts to try [to] draw money.

Meanwhile, Marcum’s Rotenberg notes that most homeowners have equity in their home they can borrow against in an emergency and, separately, most 401(k) plans also have borrowing options. .

He also cites a “silver lining” with inflation and rising interest rates: individuals are finally making income through their bank savings accounts.

“In recent years, it was difficult to put money in a bank when [clients] were receiving less than 1% interest rate while the stock market was generating high rates of return,” says Rotenberg. “Now individuals are looking at money market accounts and CDs as an investment option.”

Broader Strategies

Overall, Rotenberg says his firm’s clients “seem to have learned” from recent economic downturns, that most have saved and invested well over the past few years of strong economic growth, and that they have personal debt to ” very low levels.

He adds: “Individuals are much more cautious than we have seen in the past. In general, they did not overspend their finances. The biggest problem has been the cost of housing.

But the path can nevertheless be difficult. Rotenberg says, “Conflicts around the world are causing such rapid change that our clients are struggling to keep up. World events cause markets to fall so rapidly that most of our clients cannot change their investment strategies quickly enough.

“With [the] current situations in the world, most of our retail clients are reducing their debt and continuing to invest in the stock market.

Reduce debt

In the realm of debt reduction, the proven strategies for eliminating credit card and other so-called “bad” debt remain, ranging from attacking the lowest credit cards first, or, alternatively, by paying off bigger debt first, higher interest credit cards.

Experts such as Kelly Raso, CPA, associate partner at accounting firm Alloy Silverstein, with offices in Cherry Hill and Hammonton, point out broadly, “You don’t want to have a lot of credit card debt. Their interest rates have always been high anyway, but if they go up even more…it’s really like a last resort for any type of financing – or emergency savings – on an individual level.

There are other debt considerations: Marcum LLP’s Rotenberg says, for example, that given rising interest rates, his firm suggests clients consider reducing variable interest rate debt. . He explains: “Higher monthly interest payments from our customers, particularly those with large variable rate home loans, or our business customers with variable or high rate unsecured debt, could potentially put a dent in significant in their disposable income.

Budgeting

Obtaining the highest disposable income is of course also inextricably linked to budgeting, and various online tools can help reduce the boredom historically associated with it.

The Wiss Private Client Advisors book states: “The first part [of budgeting] is certainly to have an idea of ​​what goes in (income) and what goes out (expenses). Boak also says it’s helpful to know what’s in your budget — whether that’s for retirement or to increase emergency savings, for example. He further advises funding 401(k)s as much as possible and availing of 401(k) matching funds from an employer.

He says globally: “If someone has not done [budgeting] in a while are usually good times (rising inflation) to do so. We’re noticing credit card bills and everything else are a little higher than they used to be due to the increased cost of food to gas, pretty much everything we’re buying right now.

“I don’t know what’s cheaper today than a year ago, except maybe stocks.”

Invest in the stock market

In the stock market, while the S&P 500 index has gained an average of 24% between 2019 and 2021, this past performance obviously does not guarantee future success. Experts say, however, that the S&P 500, other indices and/or individual stocks present investment opportunities for individuals investing with long-term goals.

But Alloy Silverstein’s Raso also points out: “It’s not a great [situation] for people approaching retirement age – it’s very scary for them – as they’ve probably seen their retirement fund dwindle significantly over the past few months.

For more business news, visit NYC News Now.

Related Articles:

Valerie J. Wallis