by Blake Herzog
After the ups and (primarily) downs of 2022, the stock market is no longer looking like the sure thing it never really was, and real estate is getting more unpredictable by the minute.
Inflation and interest rates are taking major bites out of your spending power and the whispers of recession are deafening.
What can you do to shore up your finances in 2023?
It’ll be a combination of ensuring your foundation is solid and making smart investments based on the amount of risk you can afford. First, the basics:
• If you aren’t already following a budget with your spending, this is an excellent time to start. Start setting up your own spreadsheets or investigate apps and other programs designed to make it easier, such as Mint, YNAB or EveryDollar.
• Set a goal of putting aside enough cash in a savings account or short-term CDs to cover three to 12 months of expenses to protect yourself against unexpected job losses or medical bills. Save even more if you’re working in a field where job openings are sparse. Look into every type of retirement savings account available to you.
• Know how much you want to save for retirement, which will depend heavily on the kind of lifestyle you want to have once you are done working.
• Carry all the insurance you’re going to need, including life, health, home and vehicle.
Wise investing will require a diverse portfolio.
• You should be in the stock market but focus on some of the more recession-proof sectors including utilities, health care, basic consumer goods, discount retail and transportation services.
It’s especially tempting to bail if you’re near or beyond retirement, but you should have at least some of the funds you won’t need for three to five years invested so you can benefit from longer-term gains.
• Real estate can stay part of your portfolio as long as you’re not anticipating a profitable quick flip. Buy whatever will be in your means, and be prepared to rent it out for a few years so you can benefit from that consistent revenue stream before venturing out to put it back on the market.
If you’re not looking for that level of involvement look for real estate investment trusts (REITs), which often offer above-average returns.
• If you do move at least some of your money out of stocks, you can put it instead in some of the typical investment havens like short-term treasury bonds, money market accounts and municipal and corporate bonds while looking at some alternative investment options for funds you won’t need to access in the near future such as commodities and managed futures.
• Get help from wealth and financial management pros whenever you can. Economic conditions are become more unpredictable even for those who do it for a living so it’s more important than ever to rely on those with the training to steer your investment portfolio through choppy waters.
