Strengthen Your Financial Resiliency During the Fed Debt Crisis

David Treece, MBA, AIF®, CLTC® |
Categories
Annuities
Financial Education

My office has been getting calls from clients who are concerned about a potentially catastrophic debt default amidst political brinkmanship and how it may affect their financial portfolio. 

Is there a risk of the market tanking? Yes, but we don't expect it. However, being prepared for whatever may happen in the markets is still a smart strategy.

I‘m happy to share the advice I have been giving as well as provide tips to help you protect your personal finances no matter what may happen in the economy.

No Matter Who’s at Fault, a Possible Default Impacts Everyone

The potential consequences of a failure to raise the debt ceiling can have indirect effects on personal finances. Here are 3 ways that your money may be affected:

  1. Higher borrowing costs: If the debt ceiling is not raised, borrowing costs for cars, mortgages, and small businesses may increase. This could lead to higher interest rates on loans and credit cards, affecting your ability to borrow and make monthly payments.
     
  2. Market volatility: The uncertainty surrounding the debt ceiling can cause stock market volatility. Investors may experience fluctuations in the value of their investments. It is essential to have a well-diversified portfolio aligned with your risk tolerance to mitigate the impact of market swings.
     
  3. Business and consumer confidence: The fear of a debt default and the potential economic consequences can erode business and consumer confidence. This may result in reduced spending, hiring freezes, and delayed investments. It is crucial to remain cautious and adaptable during uncertain times.

5 Ways to Strengthen Your Financial Resiliency

While you can’t control government actions, you can take proactive steps to help protect yourself from possible market fluctuations. At TreeceFi, these strategies are an integral part of our philosophy. We are well-versed in controlling risk for our clients from the start. 

  1.  Assess your financial situation: Review your current financial position, including savings, investments, and debts. Understand your cash flow, expenses, and emergency fund to determine your level of financial resilience.
     
  2.  Diversify your investments: Ensure your investment portfolio is well-diversified across different asset classes. The one thing that we do that is different is that we work with money managers who will go to cash in a crisis. One of those we work with is already in cash. Another one is partially in cash. We also work with guaranteed products like annuities. So, even if the market goes down, your money is still going to be there. There are annuity products to meet every need, including fixed, variable, indexed, and others. We can help you determine which type may be best for your situation.

Beyond your financial portfolio structure, these personal finance tips can help protect your financial security:

  1. Shore up your emergency fund: Maintain an adequate emergency fund that covers at least six months' worth of living expenses. This fund will serve as a safety net during times of financial setbacks.
     
  2. Revisit your budget to pay down debt: Prioritize essential expenses and consider reducing discretionary spending. If you have high-interest debt, create a plan to pay it down and minimize its impact on your financial stability.
     
  3.  Stay informed and adapt: Keep up with current events, economic news, and market trends. Check in regularly with us to discuss any concerns or adjustments needed in your financial plan.

We ensure clients have financial life preservers on at all times

In times like these, it is important to take a deep breath, check in, and review your portfolio to ensure you have the risk control in place to be ready for whichever way the markets go.

Markets are always rising and falling. By taking proactive steps, you’ll be best prepared to brave this wave of possible economic fluctuation. 

Team Treece is here for the ride with you. Schedule a time to chat for guidance tailored to your specific circumstances.

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A diversified portfolio does not assure a profit or protect against loss in a declining market. 

The guarantee of an annuity is backed by the claims paying ability of the issuing insurance company.

Although it is possible to have guaranteed income for life with a fixed annuity, there is no assurance that this income will keep up with inflation. There is a surrender charge imposed generally during the first 5 to 7 years or during the rate guarantee period.

Index annuities are insurance contracts that, depending on the contract, may offer a guaranteed annual interest rate and some participation growth, if any, of a stock market index. Such contracts have substantial variation in terms, costs of guarantees and features and may cap participation or returns in significant ways. Investors are cautioned to carefully review an index annuity for its features, costs, risks and how the variables are calculated.

There is a surrender charge imposed generally during the first 5 to 7 years that you own a variable annuity contract. Withdrawals prior to age 59½ may result in a 10% IRS tax penalty, in addition to any ordinary income tax. Investment sub-account values will fluctuate with changes in market conditions. An investment in a variable annuity involves investment risk, including possible loss of principal. Variable annuities are designed for long-term investing. The contract, when redeemed, may be worth more or less than the total amount invested. Variable annuities are subject to insurance-related charges including mortality and expense charges, administrative fees, and the expenses associated with the underlying sub-accounts. Investors should consider the investment objectives, risks and charges and expenses of the variable annuity carefully before investing. The prospectus contains this and other information about the variable annuity. Contact your financial professional to obtain a prospectus, which should be read carefully before investing or sending money.

The views stated in this piece are not necessarily the opinion of Cetera Advisors LLC and should not be construed directly or indirectly as an offer to buy or sell any securities. Due to volatility within the markets, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.

All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful.

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