Despite the US markets experiencing the second longest bull market on record, now is the time to prepare your finances for the (inevitable) recession. The latest contribution to the CFP Board’s LetsMakeAPlan.org blog offers insights into the current market, why we should be expecting a bear market and recession soon, and how we can prepare financially – the markets can only remain bullish for so long!
By considering the current status of your finances and taking the right steps to make sure you have a good handle on them, you’ll be significantly decreasing the likelihood of any surprises when a recession hits. If you need guidance throughout this process, enlist the help of your financial planner to evaluate your current financial plan and investment portfolio, minimize current debt and share best practices for building an emergency fund.
To get started, here’s a checklist to follow:
- Revisit/Create Your Financial Plan: As flight attendants remind us, “items may have shifted during flight.” The same goes for your financial plan—hopefully for the better, but regardless, right after tax season is a good time to update the game plan.
- Maintain a Healthy Emergency Reserve Fund: For those still working, maintain 6 to 12 months of expenses (12 to 24 months for retirees) in a safe, liquid account.
- Pay Down Debt: There’s nothing like a recession and bear market to expose the dangers of carrying too much debt.
- Maintain a Diversified Portfolio: …and don’t forget to rebalance your portfolio to the desired level of asset allocation
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