With the recent news about failed banks, it’s natural to feel a bit anxious and insecure about your finances. Yet, it’s also important to think through decisions related to your personal money or your family’s wealth slowly and logically. It can be easy to act on strong emotions before you’ve thought through possible scenarios.
So, what should you do to protect your money and future?
Experts agree that one of the reasons Silicon Valley Bank failed was that it hadn’t diversified well enough. It’s a commonly taught lesson in finance worth revisiting. By diversifying, you can lower your risk and protect your financial future. There are many ways to diversify your investments that go beyond a diverse stock portfolio. From investing in real estate to investing in your family business or getting involved in impact investments, there are many possibilities.
Bonds and savings accounts are basic financial tools that everyone should include in their financial plan. One strategy to keep your money safe is to use various ownership categories or create accounts at separate banks. This means you can have different accounts that are insured separately by FDIC, meaning more of your money is protected than if you kept it all in one account. Of course, ensure ahead of time that the bank is FDIC insured and that your account applies for the insurance. Bonds are another great investment tool during times of high inflation, as they have a fixed rate.
Having cash or liquid assets on hand is essential for protecting your financial well-being. In addition to an emergency fund with about 6 months to a year of expenses, everyone also needs to have money available. How much you need may depend on your age, marital status, whether or not you have children, your employment situation, health, and more. Speaking with an experienced financial planner can help you ensure you have enough.
It’s tempting to make decisions based on our emotions. Yet, when it comes to your wallet and your family’s wealth, it’s best to take a slower, more logical approach. Pulling money out of the stock market during a downward trend often results in losses that could be recovered when the stock market bounces back. Over the long haul, the stock market generally recovers after a downturn, although at times it may take several years. On the other hand, you can even consider taking advantage of low prices in stock.
Avoiding making decisions out of panic applies to more than the stock market. No matter what situation you’re facing, whether it’s a job loss, separation, or difficult moment in your family’s business, take a moment to think and evaluate. Seek professional help before making rash decisions you’ll regret.
When it comes to protecting your family’s legacy, a plan is essential. Without a plan for the future, family businesses and generational wealth can easily disappear within a generation or two. Passing on values means initiating discussions about money and teaching financial literacy. In addition, families hoping to pass on generational wealth should also consider creating family governance. During this process, families create protocols and establish values to provide guidance for future generations.
Remember, you’re in control of your finances and your future. With these “do’s” and “don’ts” you can take positive steps toward managing your money and your family’s legacy.
Elaine King is an experienced financial planner with expertise in working with families. She’s helped over 1,200 families plan for a successful future. Contact her to set up an appointment today! Follow Elaine King on Facebook, YouTube, Instagram, and Twitter.