A Guide to Safeguard Your Financial Plans During Election Season

Practical tips for safeguarding your financial plans, regardless of election outcomes.

“Recession Risks Rise as Consumers Turn Cautious” a recent article headline declared.

Your feeds are likely saturated with economic doom and gloom. Negative stats about the stock market greet us each morning. Warnings about a possible recession are our nighttime stories.

With the upcoming election, it’s hard to quiet the noise in the media—and inside ourselves. Many of us worry that if the “other” party wins, then we’ll face financial ruin. The stock market will plunge. We’ll be forced to pay higher taxes. And on and on.

These fears are typical. However, they’re not entirely rational. For starters, many believe that if “their” president isn’t elected, then the economy will crash. But the truth is the president has minimal effect on the economy. And significantly less than the Federal Reserve. Take a look at how the economy has acted for the last one-hundred years and you’ll see its constant growth, regardless of the president’s political affiliation. Yes, there have been plateaus. Yes, there have been plunges. But, over the long-term, the economy has always grown. It continues to grow today.

As the election approaches, it’s crucial to take a step back, look to history for reassurance, and remain focused on your financial goals.

This article offers practical tips for safeguarding your financial plans, regardless of election outcomes.

Play Your Game

“What should I take seriously?” Whether on Fox or CNN, we wonder what news to pay attention to—if any. So many numbers and statistics are spinning. Different news sources are either condemning or endorsing different economic policies.

This is what we call noise—the overwhelming amount of information available to us. And you have to train yourself to ignore it. It’s pretty simple. But it’s possibly the best advice I can give you.

Think of noise this way: A baseball player steps up to home plate. The crowd is roaring around him: a mixture of cheers and jeers. Does the baseball player listen to those jeers and let them dictate his play? No! He ignores the crowd. He focuses on the game. He swings his bat. And he hits a home run.

The same principle applies to financial planning. Ask yourself, What are my financial goals? Are you saving for your children’s education? Preparing for retirement? Planning to buy a home?

Write down your goals, then assess how the election’s outcome might impact them. Will the election truly derail your plan? In most cases, it won’t.

Whether you’re saving for retirement, funding a child’s education, or saving for a house, these are long-term goals. And they remain largely unaffected by short-term political—and economic—shifts.

Long-Term Goals vs. Short-Term Market Fluctuations

As an investor, you know the market is volatile. Some days it performs well, while other days it dips significantly. If you’re closely watching these fluctuations, it’s easy to feel anxious and overwhelmed. You may worry about losing money. Or even losing it all.

However, short-term market fluctuations are to be expected, especially as we approach an election. But remember, these are just that—short-term fluctuations. You’re playing the long game.

Think of financial planning like a marathon. Marathon runners don’t sprint the first mile. That’s madness! It sets them up for failure. Instead, they pace themselves for the long haul.

Similarly, your financial planning should not be a sprint in the early years. There will be losses. There will be fluctuations that affect your savings. But it’s only the first mile. You have 25.2 miles left.

A word of caution: If you need money immediately—say, you’re planning to make a down payment on a house or pay for a child’s education within the next year—then you should avoid stocks. Short-term market fluctuations can have disastrous effects on short-term financial plans. Of course, the temptation is to invest in stocks, because the reward can be great! You might worry about missing out if you don’t invest. Remember, your situation and needs are unique. If you need money within the next year, avoid risky investments. Play it smart. And play it safe.

3 Principles to Protect Your Financial Well-Being

As the election draws near, it’s important to revisit three timeless principles to safeguard your financial well-being. These principles have stood the test of time. And they will continue to do so in the years to come.

1. Save Your Money.

This may seem obvious, but it’s a reminder we all need. Whether you’re building an emergency fund or working toward a financial goal, prioritize saving.

2. Understand Your Investments.

When investing in a retirement plan, many investors select funds they believe will succeed and then leave funds untouched. They assume their portfolio is diversified enough to weather market downturns. However, this is a dangerous assumption. Without understanding how your investments behave, you may inadvertently select funds that operate with similar assets. You’re not diversified. Instead, you’re overexposed.

For example, one client invested his retirement savings across eight funds. He believed his strategy was conservative. He thought he was safe. But when a recession hit, his savings decreased by 30% because his funds were too similar. So, if you are invested in many tech companies, and the tech sector tanks, you might find yourself in trouble.

A similar mistake can occur with individual stocks. While it’s true that the stock market has grown over the long term, not all stocks share this success. In fact, over the last 100 years, 52% of individual stocks have had negative returns over their lifetimes.

You might be confused. If the stock market is continually growing over the decades, then what’s with this stat? The answer is simple: The overall market growth is driven by a small number of top-performing stocks. Investing without a clear understanding of a stock’s behavior can lead to short-term gains but long-term losses.

3. Leave Room for “Error.”

Life is unpredictable. You will hit bumps along the way—some minor, some major. If you don’t account for potential setbacks, your carefully laid financial plans could be derailed.

Here are a few things to keep in mind:

• If you’re a single-income household, you should have a larger emergency fund than the typical recommendation.
• If you’re planning to have children, budget accordingly. Children will significantly impact your financial landscape.
• If you’re nearing retirement, do NOT invest all your savings in stocks.

Those who build contingency plans into their financial strategies tend to have a greater peace of mind.

As the election approaches, stay calm and focused. You’ve made it through turbulent elections before, and you’ll navigate this one, too.