By Jim Shellenberger, CFA, CFP®
Change is a normal part of life, whether we like it or not. But the colossal amount of uncertainty we experienced these past two years has impacted us more than the typical and natural life changes.
As a nation recovering from a global pandemic, we’ve had many stark reminders of just how unpredictable life can be. When that unpredictability gains steam, we start seeing shocks to the stock market’s stability and the economy, as evidenced by increasing inflation, recession woes, ongoing stock market volatility, and geopolitical concerns stemming from the war in Ukraine.
This has been particularly challenging for young professionals who are just getting established in their careers and trying to build a strong financial future. If all these ups and downs have made it hard for you to make decisions or plan for the future, you aren’t alone. Here are 5 smart money moves you can make to feel a little more prepared for whatever comes next.
1. Strengthen Your Emergency Fund
As the old proverb says: “Prepare the umbrella before it rains.” Building an emergency fund is the same as preparing the umbrella—it is the foundation of financial preparedness. It can be hard for young professionals to focus on saving as they worry about establishing their careers or providing for their families, but it is one of the best things you can do to prepare for uncertain times.
Generally, you should have enough money to cover 3-6 months of basic living expenses (mortgage, utilities, groceries, etc.). If you’re single, or your household only has one source of income, consider saving on the higher end of this scale to make sure you’re covered in the event of a job loss or reduction in income.
This money should be held in a highly liquid account so that it is readily available should an emergency occur. Look for an account that offers a competitive interest rate. You worked hard for that money, now put it to work for you.
2. Watch Your Spending
If the emergency fund is the umbrella, then budgeting and tracking expenses are the sturdy rain boots you wear when the storm clouds come rolling in. Tracking spending habits can be difficult, especially in trying times, but thankfully there are several apps that will do it for you.
Once you have a good idea of where you currently spend money, you can begin to build a budget around where you want your money to go. This can be modified as needed as time goes by and life changes so you’re better prepared to withstand potential fluctuations in income.
3. Manage Risk
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 most.
Be sure to review your insurance policies, taking care to bring them up to adequate coverage levels. This should include life, health, auto, and homeowners insurance at a minimum, but disability, umbrella liability, and long-term care coverage may be appropriate as well.. These risks are often overlooked and can be devastating to a financial plan. Making sure you’re adequately covered now will save you time, money, and energy in the future.
Disability insurance, in particular, is an important level of coverage that many young professionals neglect. But the truth is, you are more likely to become permanently disabled than die during your working years. (1) Without adequate disability insurance, chances are you won’t be able to safeguard your income in the event you are seriously injured or disabled.
4. Evaluate Your Investment Allocation
Investment allocation and risk tolerance are important factors to consider when assessing financial preparedness. If your investment allocation does not align with your risk tolerance, it can lead to unwise investment decisions.
It’s common for people to feel worried when they see their investment values fall during a financial crisis, but a properly diversified investment allocation specifically tailored to your level of risk tolerance can alleviate quite a bit of the stress surrounding market volatility. This helps to keep you invested through the downturns so you can benefit from the upswing when the market eventually recovers.
In this case, “stay the course” is typically tried-and-true advice, especially if you have a long time frame before retirement (as most young professionals do) and a sufficient emergency fund to get you through difficult times.
5. Partner With a Financial Advisor
It’s always wise to enlist the help of a professional who can provide objective advice—especially when it comes to something as important as your finances. Making smart financial decisions doesn’t have to be difficult or overwhelming, and we at Elevate Wealth Management are here to help you along the way.
If you’re ready to take the next step in your financial journey, we’ll be here to walk with you through all of life’s most unexpected hurdles. Schedule an introductory meeting by reaching out to us at firstname.lastname@example.org or 307.673.5675.
Jim Shellenberger is a Financial Advisor at Elevate Wealth Management, an independent, asset based fee-only wealth management firm serving young professionals, pre-retirees, and retirees in Sheridan, Wyoming, and surrounding areas. With the mission of serving and educating, Jim is dedicated to providing comprehensive, top-notch services that not only seek to help his clients reach their goals, but also empower them to make the best financial decisions for their lives and walk toward their future with confidence. Jim is known for going the extra mile, not only specializing in investment management as a former investment analyst, but building long-lasting relationships so he can give honest, customized advice and strategies that are designed to make an impact on their lives.
Jim has a bachelor’s degree in business administration with a minor in finance from the University of Wyoming and is a Chartered Financial Analyst® professional as well as a CERTIFIED FINANCIAL PLANNER™. (2) He is proud to be a Wyoming native and loves exploring the outdoors with his family—hiking, fishing, hunting, and backpacking. Faith is an integral part of Jim’s life, and he always looks forward to attending church on Sundays, Bible study on Fridays, and being part of his church community. He’s also an avid sports fan! Fun fact: Jim owns shares in the Green Bay Packers. To learn more about Jim, connect with him on LinkedIn.
Nothing presented herein is or is intended to constitute investment advice or recommendations to buy or sell any types of securities and no investment decision should be made based solely on information provided herein. There is a risk of loss from an investment in securities, including the risk of loss of principal. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for an investor’s financial situation or risk tolerance. Diversification and asset allocation do not ensure a profit or protect against a loss. All performance results should be considered in light of the market and economic conditions that prevailed at the time those results were generated. Before investing, consider investment objectives, risks, fees and expenses. Past performance is not indicative of future results. Exclusive reliance on the information herein is not advised. 080922DWM080923
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