(StatePoint) Financial experts agree that no one is completely immune from risk when a recession occurs, and that an economic downturn can have a significant impact on your personal and financial situation. However, they also agree that it is important to avoid panicking and to remain focused on your long-term financial plans and strategies.
When thinking about what a recession means for you and your future, here are six things to consider:
• Think about how a recession could affect your retirement plan and whether your savings and investments need to be adjusted. Does your financial strategy appropriately take into account your age, risk tolerance, target retirement timeline and desired lifestyle post-retirement? If you are close to retiring, you may want to make more conservative investments ahead of a recession. Younger investors may be better positioned to maintain a higher-risk portfolio through a downturn and may even have opportunities to buy up more securities while prices are low.
• Take time to evaluate your entire investment portfolio, rebalancing it as necessary to minimize risk in your asset allocation while keeping your long-term goals in mind. You might also consider loss harvesting in taxable accounts to take advantage of potential tax savings or boost your tax refund.
• Closely review your budget and cash flow, with an eye toward identifying any expenses or other spending that can be proactively trimmed to free up money now, or that can be cut in the future if you feel a financial pinch. Consider holding off on major purchases or delaying travel until the market improves. You may even want to redirect some of your savings — perhaps your monthly contribution to a child’s college fund — to boost your cash reserves.
• Think about upcoming changes in your personal life, planned or otherwise. Are you having a baby? Sending a child off to college? Do you or a family member have any health concerns that may require additional care? Consider how these developments could impact your finances and the risks they might introduce.
• Similarly, take stock of your professional situation. Your job likely provides your biggest source of income. If you are not sure that your job would be secure in the event of a recession, update your resume and think about where and how you might begin to search for a new one if you are laid off.
• A Certified Financial Planner professional can help you evaluate the current state of your finances, understand the potential impact of a recession and devise a course of action that keeps you on track to achieve your goals. To find a CFP professional near you, visit www.letsmakeaplan.org. Talking to a financial advisor now is a smart investment in protecting your future.
Don’t wait to make a recession plan. By taking proactive steps now, you can better safeguard you and your family’s financial future.
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