EBONY HAZELEGER: Preparing to survive financial storms

There comes a point in our lives where we go through financial storms. If your income were to drop dramatically tomorrow, would you survive? If you are at the age of 60 and your pension fund is tied in the stock market, and the market takes a hit today, would retirement dreams also disappear? If you lose your job and do not have an emergency rainy-day fund, and the worst were to happen, would you run out of money while trying to get yourself back on your feet?

So how does one get ahead and prepare for the worst when times are good? If you survived tough financial situations in the past and want to decrease the impact of financial stress in the future, start by splitting up your funds into three buckets: a short-term emergency fund, a retirement savings fund, and a midterm lifestyle savings — such as a vacation — fund. If you are able to focus on these three buckets of money, you’ll be able to weather any type of crisis.

Be sure to manage your finances in the most prudent way as possible. Do not take out any more debt than you should. Create a checklist as a vision board and make it a goal to check it off regularly. According to www.credit.com, this is an example of what should be included on your list:

1. Gather your data — bills, credit reports, credit score, etc.;

2. Make a list of your debts and income;

3. Lower your interest rates;

4. Pay more than you have to pay;

5. Earn more money;

6. Spend less money;

7. Create a budget and debt pay-off plan and stick to them;

8. Rinse and repeat.

Keeping your skills sharp and your employability high will protect you against economic adversity. If you feel your paycheck will be affected during a financial crisis, now is the time to become a more valued employee. Earning additional professional certifications can be a possible added bonus to your position. If you decide to go back to school, see if your employer offers tuition reimbursement programs. These benefits are widely available and underutilized. You may have to foot the bill upfront and submit a request for reimbursement in accordance with your employer’s tuition assistance policy.

Rebalancing your investments not only helps to protect your money, but it will also keep you on track for your retirement goals. The most important thing is to set your allocations of stocks and bonds at 70/30 as the baseline. That way, if the stock market does crash, you will not make snap decisions such as panic selling. It’s crucial to keep your debt levels down and not to invest money in the stock market that you will not need to spend in the next five years. Another option is to put your money in a tax-free vehicle that will allow a guarantee of protection of your money from the volatile market.

To find out more about maximizing your retirement income and investing your money without the stock market risks, give my office a call today.