Change is an inevitable part of life—whether we like it or not, whether we’re prepared or not, and whether we have something to lose or not. Unfortunately, most people don’t like it, aren’t prepared, and have a lot to lose. But, while change is inevitable, it doesn’t have to be scary or overwhelming. Preparing today can save you a whole lot of frustration, heartache, and worry in the future. Here are 5 ways to protect your wealth and feel a little more prepared for whatever comes next.
1. Maintain Your Income
This may seem obvious, but it can’t be overstated: your income is your greatest wealth-building tool. A consistent income stream will allow you to build an emergency fund and prevent the need to sell assets or take on debt to meet your basic expenses.
For those who are no longer dependent upon earned income and are taking distributions from an investment portfolio instead, consider tapping into your reserve fund or using the fixed-income portion from your portfolio to help maintain your cash flow to cover expenses. This strategy can be effective when you enter a bear market because it allows you to maintain your income without selling any of your portfolio assets.
If you are still in the accumulation phase and dependent on earned income, focus on building an emergency fund to cover 3-6 months of basic living expenses. This will give you a cushion in the event of job loss or reduced pay. You can also contact your service providers regarding your mortgage and other debts and explore forbearance options as a way to reduce cash demands and maintain as much of your income stream as possible.
2. Control Your Expenses
Another way to protect your wealth is to control your expenses. Budgeting and tracking spending habits are common ways to do this, but you can also consider consolidating or refinancing debt. List all your debts and the annual interest rates associated with each category: mortgages, credit cards, personal loans, or business loans. Next, investigate creative ways to refinance your high-interest loans and take advantage of lower rates. This can provide an immediate boost to cash flow and allow you to better withstand potential fluctuations in income.
3. Review Your Risk Management Strategy
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 and make sure they have 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 have devastating effects on your accumulated wealth. Making sure you are adequately covered now will save you time, money, and energy in the future.
4. Stay in the Market
It’s common for people to feel worried when they see their investment values fall during uncertain times, but the last thing you should do is pull out of the markets entirely. When you do this, you’re locking in the low value of your accounts instead of letting them rebound before you withdraw. Putting your money into a volatile market probably sounds like the last thing you want to do right now. But investing is not about timing the market, it’s about time in the market. Over time, consistent investing will lead to growth. It’s just hard to see when you’re looking at the short-term fluctuations that happen day to day.
5. Stay Current On Public Policies
Remember to pay attention to local and federal policies that could impact your personal or business finances. For instance, the proposed tax portion of the Build Back Better Agenda contains many provisions that could affect you if you have significant estate assets, plan to retire, or expect to have large capital gains in the next couple of years. It is crucial that you stay up to date on changes like these in order to amend your financial strategies as needed to protect what you’ve already built.
Talk to a Financial Advisor
Protecting your wealth doesn’t have to be difficult or overwhelming. At WealthFlow Financial, we are here to help you along the way. If you don’t already have an advisor helping you be proactive with your finances, reach out to us at (301) 798-5250 or schedule a phone call now.
About Jay
Jay Shareef is vice president, financial advisor, federal benefits consultant, and co-founder at Wealthflow Financial. As a U.S. Army veteran, Jay is passionate about helping federal employees create a bulletproof plan for retirement and navigate the often confusing and complicated federal benefits landscape. He spends his days educating and providing clients with unbiased insurance benefits and retirement strategies to help his clients create guaranteed income for life. As a problem-solver and trustworthy resource, Jay always puts his clients and their needs first so they can find financial peace of mind. To learn more about Jay, connect with him on LinkedIn.
About Chris
Chris Rhoads is a co-founder and vice president of Wealthflow Financial. As a registered investment advisor and independent financial professional, Chris is committed to helping his clients in retirement and he takes a holistic approach to financial planning that includes insurance and risk management, investments and wealth management, retirement income planning, and estate and tax planning. Chris has been married to his wife, Tia, since 2009 and they live in Frederick, MD, together with their two young daughters. In his free time, Chris enjoys traveling, watching sports, and being active in causes about which he cares passionately. To learn more about Chris, connect with him on LinkedIn.