As you know, recessions and market corrections can be stressful and scary. But as someone who's made a career out of helping people take control of their finances, I'm here to tell you that these times also present opportunities to reassess and make any necessary adjustments to your financial plan. Here are a few issues to consider:
Is your cash flow tight right now? If so, it's time to get serious about your budget. Look for areas where you can cut back on spending, especially discretionary expenses. And if you need to fund any shortfalls, make sure you're using the most advantageous source of cash. You may also need to prioritize your obligations and take advantage of opportunities to extend due dates or alter payment schedules in order to minimize fees, penalties, and any negative impact on your credit.
Do you need to review or increase your emergency fund? Take a close look at the size of your emergency fund and assess how many months it can support your living expenses.
Have you experienced a disruption in your employment? If you've been laid off through no fault of your own, you may be eligible for unemployment benefits. Make sure you have a plan in place to weather any potential job loss.
Were you planning to retire in the near future? If so, it's important to review your options and make sure you're still comfortable with retiring (or if you'd prefer to work a little longer). You may also need to review your budget and reduce spending in non-essential categories in the first few years of retirement.
Are you taking a distribution from an investment or retirement account? If so, consider the impact of changing your distribution schedule in order to protect these accounts. This could include deferring remaining distributions until the end of the year or spreading the distributions out over the rest of the year.
Do you have an annual gifting strategy in place to pass assets to your heirs? If so, consider gifting assets now, while valuations are low and while support may be particularly helpful to the donee.
Are you in a position to help family members in need of financial assistance? If so, consider making intrafamilial loans when the AFR (applicable federal rate) is low. This can help avoid gift tax, lock in a favorable interest rate for the borrower, and act as an "advance" on an inheritance when structured with your heirs.
Do you need to update your estate plan? If so, it's important to review the impact of any change in asset values on the ultimate distribution of your estate, including probate and non-probate assets. You may also want to consider implementing wealth transfer techniques that take advantage of low valuations and rates, such as grantor retained annuity trusts (GRATs), charitable lead annuity trusts (CLATs), irrevocable dynasty trusts (IDGTs), and private annuities.
In short, recessions and market corrections can be tough, but they're also an opportunity to reassess your financial plan and make any necessary adjustments. By taking a careful look at your budget, emergency fund, retirement plans, and estate plan, you can protect your financial well-being and come out of these times in a stronger position.
The commentary on this website reflects the personal opinions, viewpoints and analyses of the Ascend Investment Partners employees providing such comments, and should not be regarded as a description of advisory services provided by Kesler, Norman & Wride, LLC dba Ascend Investment Partners or performance returns of any Ascend Investment Partners Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Ascend Investment Partners manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
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