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 overly 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 cover you in the event of job loss or reduced pay. You can also contact your service providers regarding your mortgage along with 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 a common way 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. Keep Investing
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 Calamita Wealth Management, we are here to help you along the way. Schedule an introductory phone call using our online calendar or reach out to us at (704) 276-7325 or firstname.lastname@example.org.
Todd Calamita is the founder and managing principal of Calamita Wealth Management, an independent, fee-only wealth management company located in Charlotte, NC, serving people locally and across the country, that focuses on providing wealth management solutions to affluent individuals over age 50 and their families. Todd has more than 20 years of experience in the financial services industry and is passionate about helping people have a better life by designing and implementing customized financial plans that bring clarity and confidence. Todd is a CERTIFIED FINANCIAL PLANNER™(CFP®) and CERTIFIED DIVORCE FINANCIAL ANALYST® (CDFA®) and holds a Bachelor of Business Administration from Ohio University and a Master of Business Administration from the Weatherhead School of Management at Case Western Reserve University. He has authored a book, Plan Smart: Conquering 10 Common Money Traps, as well as numerous articles on wide-ranging personal finance topics, from taxes to retirement accounts. He has also been featured in a Financial Boot Camp TV series as a volunteer showing people how to make smart decisions with their money. When he’s not working, you can find Todd spending time with his wife, Teresa, and their two sons, Colin and Cameron. He enjoys rock climbing, swimming, and traveling, and he has a black belt in Tang Soo Do, a Korean martial art. To learn more about Todd, connect with him on LinkedIn.