Layoffs, Inflation, And A Down Market: Bulletproof Your Finances Against Any Crisis

A layoff notice, rising inflation, and a bearish market – sounds like a financial nightmare, doesn't it? But there's a silver lining. With the right tools and mindset, you can protect your finances from any crisis.

You must first master yourself before you master your finances Before you do anything, you need to understand what your values are. What is important to you?

Freedom? Flexibility?

Only you can answer this, but it will be the north star of your financial plan. Every decision made should come back and check the “values” boxes for you.

Know Your Finances

I know what you’re thinking. “Duh?” Not as straightforward as you think.

When was the last time you looked at your last 3 months of credit card or bank statements? 

Do you know what your net worth is off the top of your head? Have you reviewed your benefits at work? Is your insurance covering everything?

These are just 4 of many questions you need to be able to answer. Until you map out where you currently are, you can’t possibly create a roadmap of where you will be going. Follow these steps:

- Create a budget including fixed and variable expenses.

- List out all accounts with balances: bank, investments, loans, credit cards.

- List out all owned property: house(s), car(s), and any other property worth something.

- Review all your insurance policies: coverage, deductibles, and premiums.

- Review the provided benefits, if any, from your employer.

Building Your Plan: Check Your Vitals

Just like a doctor checks your vitals, your finances have them too. 

1. Emergency fund.

A healthy savings account is critical to helping protect your finances if you are being laid off, missing time from work, or an unexpected expense that pops up. 1-income households should carry at least 6 months of expenses. 2-income households should carry at least 3 months of expenses. If you do not have job security, I would consider making this 12 months.

2. Take advantage of your employer’s 401(k) matching contribution.

Everybody doesn’t have this, but if your employer matches contributions to your 401(k), make sure you contribute the amount to get the full match offered.

3. No high-interest debt.

High-interest debt would be any debt at 7% or higher. Pay this down before you put any money into investments beyond your employer’s matching contribution. It may also be worth looking at refinancing options for your debt to lower the interest rate owed on the debt which would save you money.

4. Maximize disability insurance coverage.

Your employer will typically cover a portion, but not all, of your disability insurance. This is insurance that pays in the event you miss work for 90+ days due to sickness or injury. This is important because without your income, the rest of your plan can crumble.

5. Invest 15% of your income.

After you’ve built up your emergency fund, taken advantage of your employer’s match, paid off all high-interest rate debt, and gotten full disability insurance coverage... It’s time to prioritize investing. I know what you’re thinking: “FINALLY!” You need to protect against what can go wrong so you can afford the luxury to invest for everything that can go right.

You may not be able to immediately, but you’ll want to get to the point you are investing at least 15% of your income across various accounts. What types of investment accounts you use will vary based on your income, goals, time horizon, and tax situation.

It’s A Marathon Not A Sprint

If this seems overwhelming, it’s because it is. Don’t think you need to do all of this right now. The goal is to work towards it over time. Checking 1 of these boxes at a time is better than not checking any at all. If it’s too much to do alone, consult a financial advisor to help build your plan.

Disclaimer

This article provides general information only. It doesn't constitute financial advice. Everyone's financial situation is unique, so always consult with a CERTIFIED FINANCIAL PLANNERTM Professional or a trusted financial professional who understands your individual circumstances. Investment decisions should be based on an individual's specific financial needs, goals, and risk profile. Past performance is not an indicator of future results, and it's important to remember that investing involves risk, including the potential loss of principal.

Armando Sallavanti is a registered representative of and offers securities and investment advisory services through MML Investors Services, LLC. Member SIPC (www.sipc.org). Supervisory Office: 2 Bala Plaza, Ste 901, Bala Cynwyd, PA 19004. Tel: 610.766.3000.

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