Even if you have only a little bit of awareness about it, current events affect your financial life, often in a big way. Figuring it all out and making sense of it all is key to keeping your finances healthy in the long term.
The upcoming election (now just two months away), market volatility, current economic conditions, and a global pandemic make it challenging to make sense of it all. If you have questions about how these events affect your financial goals, you are not alone.
The worries, concerns, and curious nature of politics is definitely a real thing, but does it mean that your finances are at risk as we decide on who will sit in the highest seat of our country’s government?
Sometimes we make “political news” take on a face that includes the fringes because politicians make it that way. Social injustices should not be tinged with politics because there is no leaning right or left when it comes to justice and racism, is there?
The Upcoming Presidential Election
Does this sound familiar? “If Joe Biden gets elected, everyone will dump all their stocks so they won’t have to pay the higher capital gains taxes he’ll impose on investors.” Or if Donald Trump is re-elected, “His reckless spending and masks-off attitude toward ending the pandemic will force states to re-impose lockdowns that will put millions more Americans out of work.”
With the Democratic and Republican conventions in the past, we’re heading into the home stretch of what promises to be the most unusual election in U.S. history. No matter which side of the political aisle you’re on, you’ve probably either read or heard some of the lurid doomsday predictions made by so-called market prophets.
Trash Talking and Current Events
The sad thing is that these wildly inaccurate pundits spew the same hyperbole during every presidential election year. Depending on who wins the office, they say, the market will either skyrocket or plummet. Yet the market almost always ignores these politically motivated prognostications. Why?
Because history shows that, over the long term, market performance isn’t affected by who wins presidential elections. Instead, investors react almost exclusively to events that affect the economy in general and corporate profits in particular. That’s why natural disasters, wars, and pandemics disrupt the marketplace much more so than any election or political event in the U.S.
Yes, it does seem that sometimes a statement by the president can shift markets quickly, both up and down. We have seen a lot of that during the past four years, mostly because the man saying it has broken all the norms when it comes to talking about American policies and direction. Most of the time whatever is said never comes to fruition or if it does it takes way longer than stated. In any event, it does affect your finances even if it’s temporarily.
That probably wouldn’t change whether Biden is elected or Trump wins.
Financial Planning Considerations in Uncertain Times
As you can probably appreciate, many folks don’t like to plan under normal circumstances. But when it comes to uncertain times, you really have no other choice but to pull a plan together. The key question is where do you start and how do you do it in a way that you can take action quickly?
One of the things I advise individuals (and businesses) going through turbulent times is to look at the short term first. Define short term as the next 90 days. That allows you to have a more flexible and even optimistic plan that can be adjusted when necessary, but based on some real time trend. The question is where do you start?
Keys to Planning in Uncertainty
Be a leader. Why? No one has the answers and waiting and being a follower never gets you the brass ring. Instead, lead the family, the office, or whatever group you are trying to move forward!
Even though you might not have an answer for every problem, start with your best ideas and go for it. If it’s at work then get the “team” involved, but understand that all eyes will be on you, so fight any temptation you might have to turn the lead over to someone else.
2. Your Cash
How far out can your cash on hand take you? At home and at your place of business? One week? One month? One quarter? How much do you have available to you in terms of lines of credit, credit cards, or potential equity (from you or others close to you) to fill shortfalls in the cash flow? The goal is to remain cash positive for the next 90 days. Sit down and figure it all out. Be realistic and honest and face the result.
What expenses can be eliminated, delayed, or negotiated? Your goal here is to forecast a profit each month for the next 90 days just as if your finances were a business. I do it that same way, too.
What changes have to be implemented now until things return to normal? If it’s your business, what changes do you need to make until your employees return? What changes are you making now to protect your family and/or your team if you’re still open and running a business?
5. Have a Vision
Vision can change your world going forward to better prepare you for events like COVID-19. What new products or services do you need? What information, skills, and abilities should you acquire now to protect yourself and your family and business in your near- and long-term future?
Keep this simple framework in mind whether you’re dealing with uncertain times or not, but especially when there is uncertainty. You’ll be amazed at how quickly these keys can help to focus you on the next right thing to do! That focus will bring positivity and energy to you and help you get through what has been a most troubling time. And oh, by the way, those times will come again one day when these troubles are gone. When? No one knows.
There is no panacea to chase away uncertain times as a result of current events. They are quite cyclical and come and go over time. If you‘re very lucky, you may miss some of them. More likely you won’t and you will have to deal with them, so you’d better have some kind of a plan and learn from these experiences now.
Where do you stand right now as you face the fall season? Are you in a position to take on uncertainty or are you nervous and unsure about the remainder of 2020 and beyond? How do politics, pandemics, and current events affect your thinking about your future?