Keeping Your Finances Together in Times of Uncertainty

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The early part of 2025 has been full of surprises or at least things many people have never seen before, and with all of the change that is afoot, many people wonder about their financial security. While we probably understand that, as the saying goes, the only thing that is constant is change, it is also true that most people prefer stability rather than radical change. However, sometimes the changes going on around you force you to live outside of your comfort zone, and that is the case for many people in these times, especially for those who may not have the luxury of knowing their wealth has already set them up to be fine no matter what happens around them. It may not seem that interesting to say, but when uncertainty is swirling around you, that is exactly the time to go back to basics, and that is all the more true financially speaking. So, in this issue of the newsletter, we want to provide three tips to help you not only survive these changing times we’re living in, but also help you to come through them in a better place.

Managing Your Money Responsibly
I tend not to use the word budgeting very often because when people hear the word, they can tend to shut down because they inherently think of restriction. I prefer to think of navigating your day-to-day money decisions in terms of managing your cash flow or having a plan for how to spend and save your money. It is not one or the other, but both that are important, and what is actually most important is the part about having a plan for it. If you don’t have a plan for your money, your money will tend to go out, and you will wonder where it went. Understand, there is nothing wrong with spending your money, even on things that some people may not consider smart purchases. The thing about having a plan for how to spend your money is that you determine what your priorities are, and in doing so, you can take better control of where your money is going based on those priorities. If you have enough income to handle both your required and desired priorities, that’s great. On the other hand, if your income is more limited, you may have to make some value decisions on what is more important to spend your money on in line with your priorities. Included in your cash flow decisions should usually be some form of saving. While spending is usually more fun than saving, if you find it in you to save, you will be in better shape when those “rainy days” come. The question is not is a rainy day coming, but when is it coming? The time to save for the rainy day is when the sun is shining, so if you have the income to meet your needs and wants but still have money available to save, it is in your best interest to ensure you are setting aside something to prepare for when things are not as favorable, like is the case for many people today. Part of freeing up your income to spend and save the way you want is keeping as much money in your pocket as possible. You can do that by ensuring you aren’t paying more in taxes than necessary, even if that means you don’t get a big tax refund, which really is you getting paid late for money you earned. Finally, the more you can stay self-sufficient the better. Sure, we may need a helping hand from time to time, and there’s nothing wrong with being in that situation, but if you are financially able to take care of your needs and wants without external assistance, you put yourself in greater control of your destiny.

Firming Up Your Foundation
When the unexpected happens, you want to have provisions in place to handle those situations. Two key elements of a solid financial foundation are Cash Reserves and Insurance. I call them the 2 foundational elements of the 4 Pillars of Financial Success. Cash Reserves are important if you run into an unexpected major expense, or your income is interrupted, like many people are experiencing right now. An important question to answer is how much of a Cash Reserve is worthwhile. The answer depends on what you want that reserve to account for. Whatever that amount is, you may need to build up your Cash Reserves, which takes us back to the saving element of managing your money responsibly. The other important factor in the Cash Reserves discussion is that if you have to use it because the unexpected happened, it is incumbent on you to take steps afterwards to rebuild your reserve for the next situation that comes up. Because there will be another situation; it is just a question of when. Insurance is also a foundational piece of your financial puzzle because there are some situations, expected or unexpected, that you don’t want to have to pay for on your own. For example, if your home was destroyed, it would be impractical for you to attempt to tackle the cost of rebuilding it out of your own pocket. That would be an unexpected situation you could address with homeowners insurance. On the other hand, life insurance allows you to leave more money for the people you care about than you could reasonably save on your own. Of course, life insurance addresses an outcome that is a known situation, but what is unknown is the timing, and life insurance can remove that element of uncertainty, making sure the people you want to protect are covered. In uncertain times, there are risks that we are subjected to, and addressing these foundational pieces of your finances can reduce some of the risks you have to deal with so you can be clear minded to focus on the things most important to you.

Planning Ahead While Remaining Flexible
Financial planning encompasses addressing the day-to-day money management as well as establishing the foundational pieces that can put you on the road to financial success, but it also takes the next step of helping you prepare for the future to allow you to create your desired lifestyle. It is extremely helpful to have a plan so you can figure out what will be required for you to get from where you are now to where you ultimately want to get, but it is equally as important that once you have made a plan that you take the necessary steps to implement the plan. You also have to understand that a plan is about taking the information you currently have and making your best guesses about what the future may hold, recognizing that you may not have all of the information needed to ensure the plan is perfect. However, as you implement the plan, you will move closer to your desired destination, giving you better information to work with so that you can revise the plan as needed to achieve your desired outcome. More than likely, the desires you have will require you to have put money aside for the future you envision, so once again, we return to the importance of managing your day-to-day to save for the future. This saving is different from the Cash Reserves saving we discussed earlier in that for longer term plans, you can and should use investments that are likely to grow to help you fund your future dreams and goals. Of course, investing involves taking some risk, but historically, that risk is rewarded provided that you give yourself enough time for your investments to grow. One way of reducing that risk is by having diversification within your investment portfolio so that your fortunes don’t rise and fall based on the performance of one or a small handful of entities. While much of the investment space focuses on retirement plans, like 401k Plans, that provide an initial tax deduction and tax deferred growth, part of having a flexible plan is creating tax diversification within your investment portfolio. Whatever you do in your plan, it is important to keep an eye on whether the steps you take are moving you in the desired direction and at the pace necessary to achieve your goals. If you discover that you are off course or if your objectives change over time, the plan needs to allow you the latitude to make adjustments along the way so that as time goes on, you are honing in on the outcome you desire. Having a plan doesn’t eliminate uncertainty, but it does provide you with structure to account for the uncertainty and at the same time work towards the desired life you want.

Stewardship Emphasis
You may not be able to avoid a storm that comes, but with the right preparation, you can shield yourself from the damage it can cause.

The Empowerment Channel    |   Volume CCXXXVI   |    Dedicated to Promoting Financial Education through Stewardship