As economic instability increases, individuals and small businesses have growing concerns respecting inflation, interest rate changes, and other unpredictable events that might affect savings and retirement. The best defense is to remain educated regarding the changes that are occurring and learn how to preserve your wealth amid changing and evolving economic circumstances. Comerica is here to help you navigate these complex issues and provide guidance and advice.
The impact of financial volatility
Due to changing economic policies and evolving domestic and international markets, inflation and interest rate changes can occur that may affect investments and the profitability of certain markets. As of August, tariffs have raised inflation on certain consumer goods, changing the calculus for personal and business-related expenditures.1 . Additionally, future interest rate changes remain potentially volatile depending on job market reports and unemployment rates. As the economic landscape alters from month to month, these changes can have an impact on investment strategies, liquidity, and long-term financial goals. Here are some ways to weather this economic landscape and keep your personal savings and business safe.
Wealth preservation strategies
Diversification of personal finance management, strategic saving, and proactive planning are key. Here are some tips to protect your savings and assets and remain solvent through complex economic changes:
1. Track expenses and set aside a monthly savings dividend for large purchases or emergencies. By doing so, you will have a better picture of where your finances are going, have a steady source of savings, and be more prepared to weather any unexpected financial changes or setbacks.
2. Have a financial plan. It is vital to have a short-term and long-term vision of where your finances should be directed. Consider the immediate expenses that you need to budget for as well as longer-term expenses and investments and strategically save your money accordingly.
3. Invest in an insurance plan. Life insurance as well as disability and long-term care insurance can offer a vital safety net and are thus a worthwhile investment for individuals who are concerned about unforeseen changes that can affect their savings and retirement. For more information on keeping your insurance up-to-date, see: https://www.comerica.com/insights/wealth-management/wealth-preservation/updating-insurance.html
4. Consider diversifying your portfolio. Putting all your investments in one market can put you at risk of losing money if an economic event occurs that puts a specific market in jeopardy. However, by investing in bonds, stocks, and other diverse investments, you ensure that even if there is a downturn in one area of investment, you have a high chance of maintaining a return on your other investments in spite of potential market volatility elsewhere.
5. Create and review your estate/succession planning. Prepare and annually review your estate planning documents to ensure that (1) your goals have not changed, (2) that your insurance policies are still aligned with these goals, and (3) that no changes have occurred that would impact state tax credits or other tax-related concerns. By doing this annual review, you will have a clear picture of whether your short- and long-term plans remain consistent with your current finances or whether adjustments need to be made. View our estate planning page for more advice on this process.
Knowledge and proactive preparation are the best defenses against unpredictable economic changes such as inflation, market downturns, and interest rate changes. Taking steps such as diversifying your investment portfolio, setting short-term and long-term goals with your finances, and tracking your expenses and savings regularly will help you to weather these changes and protect your wealth. Connect with your Relationship Manager or with a Comerica Advisor to schedule a personalized insurance review and explore solutions that fit your goals.
[1] https://www.comerica.com/insights/economic-insights/general-economic-commentary/hotter-than-expected-core-cpi.html