You’ve worked hard to get where you are today. Years of dedication and hard work have helped you build your wealth. Protecting future wealth becomes increasingly important during volatile situations such as an election year, national debt, wars, and inflation.  

A comprehensive financial plan becomes even more important as you age and your earnings and savings increase. Shielding your wealth from economic instability isn’t just about protecting current assets—you could do that by putting it in various bank accounts at multiple banks. It’s about making smart decisions that help ensure your hard work continues to pay off, no matter what the economy and security markets throw your way.

In today’s blog, we’ll look at various forms of economic instability that could impact you and the tactics you can use to protect your current and future wealth:

• Market volatility
• Persistent inflation and rising costs
• Recessions or economic downturns
• Change in your employment 
• An unexpected change to your situation

Depending on the complexity of your financial situation and your inclination to manage assets yourself, it may be appropriate to consider working with a team of St. Louis fiduciary financial planners, such as Trinity Wealth Advisors. 

With over 100 years of combined experience, we help successful individuals and families create comprehensive financial and retirement plans to withstand the potential for economic uncertainties in the future.  

Read our latest guide: Personalized Financial Planning in St. Louis

Your Financial Foundation: A Comprehensive Financial Plan

Think of a financial plan as a blueprint for managing your financial journey. It should address your financial goals and provide a process for protecting your current wealth while pursuing your short- and long-term goals. 

Ideally, you will work with a team of experienced St. Louis financial planners with the CFP® designation to help you formulate your financial plan. Your St. Louis CFP® can help you craft a customized financial plan that’s just right for you. Ideally, this will be a plan specifically crafted to your family’s needs, not a cookie-cutter, one-size-fits-all plan that may or may not be appropriate for you. 

Economic Instabilities That Could Impact You

Market Volatility

The stock market can be unpredictable, with up and down fluctuations that impact the performance of your investments. While it’s normal for the market to have ups and downs, significant volatility over longer periods can significantly impact your wealth. The seriousness of the impact increases as you get closer to your retirement date.

Tactics to Protect Your Wealth:

• Diversify Your Portfolio: To minimize risk, spread your investments across multiple asset classes. If one type of asset class takes a hit, your other investments can offset the loss.  Likewise, using different management styles and managers is another excellent diversification approach!

• Tactical Investment Strategies:  When current economic forecasts are challenging, the right strategy may well be to incorporate more defensive managers. Tactical managers have better tools to navigate risk and frequently position their investments to reduce losses in down markets and recover more moderately in up markets.
• Rebalance Regularly: Review your portfolio regularly to ensure it continues to be aligned with your risk tolerance and financial goals.

• Understanding your Financial Biases:  Regardless of your life stage, being emotionally prepared for major life events and market volatility is crucial for the stability of your financial future. Emotional reactions can lead to impulsive decisions, often driven by financial biases. Recognizing and managing these biases is essential.

Persistent Inflation and Rising Costs

Inflation reduces the purchasing power of your assets. Rising costs of goods and services can eat into your savings and investment returns, making it harder to maintain your current standard of living. You need a rate of return that offsets inflation and produces a premium.

Tactics to Protect Your Wealth:

• Invest in Inflation-Protected Securities: Consider Treasury Inflation-Protected Securities (TIPS) or other investments that offer returns that adjust for inflation.

• Increase Savings Rate: Boost your savings rate to counteract the effects of inflation. This can help ensure that your future wealth continues to grow even as everyday expenses are going up.

• Adjust Your Budget: Review and adjust your budget regularly to account for rising costs. Cutting unnecessary expenses can help you stay on track to pursue your long-term financial goals.

• Focus on your real rate of return: Gross return minus inflation equals your real return. This way, you are accounting for the reduced purchasing power of your assets.

Recessions or Economic Downturns

There are several reasons why economies fluctuate, impacting the earnings of the companies you invest in. Depending on the reason for a downturn, the economy may experience negative growth, which can create job losses as companies cut expenses.  Preparing for these periods or reacting to current economic conditions can help weather the storm.

Tactics to Protect Your Wealth:

• Build an Emergency Fund: Set aside 6-12 months of living expenses in a liquid, easily accessible account. This provides a cushion during tough times.

• Focus on Essential Expenses: Prioritize essential expenses and consider cutting back on non-essential spending during economic downturns.

• Explore Adding an Income Stream:  If applicable, add a new source of income to reduce your reliance on your pension & Social Security if retired, or one job or business if still working. A temporary side business or freelance work can provide beneficial stability.

Change in Your Employment

Job changes, whether planned or unplanned, can impact your financial well-being. It’s important to be prepared for the unexpected during periods of economic uncertainty when companies cut costs to stay profitable. 

Tactics to Protect Your Wealth:

• Enhance Your Skills: Continuously upgrade your skills and qualifications to improve your employability and increase your chances of securing a better job in the future.

• Review Your Financial Plan: Regularly update your financial plan to reflect changes in your employment status that impact your current and future income levels.

A Significant Change in Your Life

Life events such as marriage, divorce, children, or significant health issues can drastically impact your financial future. A comprehensive financial plan can help you anticipate these changes and prepare for their impact.

Tactics to Protect Your Wealth:

• Obtain Appropriate Types of Insurance: Consider life, health, disability, and long-term care insurance to protect you and your family from these financial risks.

• Update Your Financial Plan: Regularly review and update your financial plan to account for significant life changes. This ensures that your goals and strategies remain aligned with your current situation.

Seek Professional Advice: Consult a St. Louis financial fiduciary advisor who can guide you through significant life changes and recommend adjustments to your current financial strategy. Professional guidance can provide clarity and help you make informed decisions.

Learn more about Trinity Wealth Advisors: St. Louis Financial Advisors That Help You Focus on What Matters Most to You

Trinity Wealth Advisors Difference: Where Expertise Meets Affordability

We believe in proactive financial guidance. This means we actively work to help you manage the complexities of today’s financial environment while ensuring that your focus remains on pursuing long-term goals.

“Trenchwork” is a term we use to explain how involved we are in managing your wealth.  We can be quite detail-oriented, so we capture the small important things unique to you. All of our advice and services are designed to be timely and accurate.

No financial situation is too complex for our team of St. Louis CFPs®. We tackle in-depth issues such as tax reduction, social security benefit options, and charitable giving strategies while providing you with comprehensive wealth management services. 

We have decades of experience navigating up and down markets objectively with outside money managers creating portfolios that are managed prudently during a variety of market conditions… and without in-house bias.  We also provide accountability compared to risk-focused benchmarks so you don’t have to wonder how you are doing.  

Ready to talk about strategies to protect your wealth?  Connect with us for an introductory conversation.