So if you're looking for a way to financially protect yourself and at the same time make the most of what you have, consider hereThere are several options that should be done.
"If you're not working or looking for a better position, now it's a good time to take advantage of the very strong employment market to secure your position," said Florida-based. The official financial planner to do said Mari Adam.
Investing in a housing boom
Mortgage: Fix Fixed Rate Now
If you're about to buy or refinance your home, get the lowest fixed rate available As soon as you can fix it.
However, "Don't jump into large purchases that don't suit you just because interest rates may rise. Hurry up to buy high-value items such as homes and cars. It's a recipe for trouble that doesn't fit the budget, regardless of future interest rates. "
If you already have a floating rate home mortgage loan facility and you use part of it for a home improvement project, ask the lender if you are willing to effectively fix the interest rate on your outstanding balance. increase. Greg McBride, Chief Financial Analyst at Bankrate.com, has proposed creating a fixed rate mortgage loan.
If that isn't possible, consider paying off that balance by getting another lender and HELOC at a lower promotion rate, McBride said.
Cover short-term cash demand
It's always good to have liquid assets in case of an emergency or a serious market downturn. It's an idea. But it's especially important when you're faced with a big event that you're out of control of, such as a layoff. Layoffs usually increaseduring a recession.
This is enough to cover cash, money market funds, or money market bonds for months of living, emergencies, or high expected costs (such as down payments and college tuition). It means securing a good amount of money. ).
This is also recommended if you are nearby or retired. In that case, you may want to secure a year or more of living expenses that you would normally pay with a withdrawal from your portfolio, said Rob Williams, Managing Director of Charles Schwab's Financial Planning, Retirement Income and Wealth Management. Said. This should be the amount needed to supplement the payment of bonds such as social security and private pensions.
In addition, Williams proposes that low volatility investments such as short-term fixed income funds will take two to four years. It will help you overcome any market recession and give your investment time to recover.
Credit Cards: Minimize Bites
If your credit card has a balance (usually high floating rates), McBride will give you a credit card. , Proposed a zero rate balance transfer card that locks at zero rate for 12 to 21 months.
"It isolates you from rate hikes next year and a half, and it gives you a clear runway to fully pay off your debt," he said. “Reducing debt and increasing savings can help us survive rising interest rates and is especially valuable in times of economic downturn.”
Another option if you don't move to a zero-rate balance card Is to get a relatively low fixed rate personal loan.
In any case, the best advice is to make every effort to repay your balance quickly.
Rebalance your portfolio as needed
If stock prices are skyrocketing, it's easy to say that you are tolerant of risk. However, over time, it must inevitably be able to withstand the volatility associated with investment.
So review your holdings to make sure they match the risk tolerance of the potentially rocky road ahead.
And if you get overweight in any area after years of rising stock prices, rebalance your portfolio. For example, if growth stocks weigh too high, Adam proposes to redistribute some money to slow-growing, dividend-paying value stocks through investment trusts.
Also, make sure you have at least some exposure to bonds. Inflation has had the worst quarterly returns on high quality bonds in 40 years, but don't count them.
"Bonds are likely to succeed if the Fed's aggressive rate hikes to curb inflation result in a recession. Bonds are of higher quality than stocks. Tends to be much gentler, "Bennyhoff said.
Understand what it means to "lose" money
If you keep money in your savings account or CD, the interest you earn is It is as follows. It may be overtaken by inflation. Therefore, as long as you maintain your principal, you lose purchasing power over time.
Again, if maintaining your principal for more than a year or two is more important than the risk of losing your principal (which can happen when investing in stocks). , Inflation-based losses may be worth it to you. Because I have what Benny Hoff calls a "sleepy return."
But for long-term goals, get bigger profits and figure out how comfortable you feel at risk to prevent inflation from eating up your savings and profits.
"If we can increase our wealth over time, we will be better and safer as a person," Adam said.
Keep it cool. Do your best. Second, "let go"
The rapid news coverage of rising gas and food prices and the story of the potential World War are disturbing. But don't trade in the news. Building financial security over time requires cool and stable hands.
"Make sure your feelings about the economy and markets don't hinder your long-term growth. Keep investing and stay disciplined. History, people, or even professionals. The best way to reach long-term goals is to continue investing and stick to allocations. "
During the crisis of the last century, stocks usually returned faster than anyone expected at this time and were on average strong over time.
For example, the S&P 500 has averaged 11% annual revenue until 2021, according to data analyzed by First Trust Advisors since the financial crisis of 2008. increase. The worst year of the period was 2008, when stocks fell 38%. However, in most of the years that followed, the index recorded a rise. And four of those annual profits ranged from 23% to 30%.
"If you build a well-diversified portfolio that matches time and risk tolerance, the recent market decline is likely to be just a moment in your long-term investment plan," Williams said. rice field.
Remember: No one has the complete information, so it is impossible to make a complete choice.
"Collect facts. In addition to those facts, make the best decisions based on your individual goals and risk tolerance," Adam said. Then she added, "Let's go."
