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Your Financial Future: Protect your family assets by planning

4 min read
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The economy continues to be unsettled with each passing week. First Republic became the third bank in two months to be taken over by the government and sold to a bigger bank. All three had a run-on depositor trying to withdraw all of their money. No bank including the largest have all deposits sitting in the vault. The money is lent out to other customers to buy houses, autos, credit cards and many other things. Most people should not withdraw all of their funds. No depositors lost any money in any of the three bank failures. The same cannot be said for the stockholders in these banks, as they probably lost all, if not most, of their investment.

The stock market is very nervous about many bank stocks and afraid that problems may spread. This probably is not true. The bigger banks are stress-tested and held to higher standards. On Tuesday, the S&P 500 was down more than 350 points. The Federal Reserve started its regularly scheduled meeting today and will announce tomorrow if it is raising interest rates again, probably by a quarter point. While inflation has come down some, it is still much higher than desired. It is a difficult balancing act for the Fed to control inflation and not cause too severe of a recession.

In the last two weeks, two longtime national retailers also filed for bankruptcy – Bed, Bath & Beyond and David’s Bridal. This week 40-year-old Jenny Craig announced that it may close all physical operations by the end of the week. Many huge tech companies such as Amazon, Facebook and Google have announced large employee layoffs. Changing consumer preferences and purchasing patterns are behind these closings.

Another looming issue is the government debt ceiling. Treasury Secretary Janet Yellen said the government could run out of authorization to pay its bills by June 1. This is to pay for things already purchased. The House wants to negotiate some reduction in spending as part of its approval process. The president does not want to do so. Neither side wants to really deal with the problems this could cause in the economy and it could make borrowing more money more expensive. There is some wiggle room about the date because government cash flow from incoming tax revenues is much larger than interest payments on the debt. This is just one more issue for the economy.

Not surprising with all of the turmoil occurring, consumer confidence fell in April. The Conference Board does a survey of U.S. consumers to gauge their feelings about the economy. Most people expect a recession sometime this year. There is no consensus about how severe it may be with either consumers or economists.

What can you do to protect your family? The basic answer is to have a written plan. Time segments of your assets in buckets according to when you need access to the funds. Some things such as emergency money that needs to be available immediately should be in the bank. You will not earn much on these funds, but that is the trade-off that is necessary to have availability.

Money that will be needed in the next couple of years should be held without much stock market volatility. You need to know that it will be available when needed. Hopefully you can earn enough on it to beat inflation. Longer term money could be in the stock market if you can deal with the possible volatility. You should never own an investment that makes you lose sleep at night.

Don’t be greedy, and have a plan that recognizes a new economic world. What happened years ago might not be what happens in the future.

Your Financial Future is written by certified financial planner Gary W. Boatman, MBA and CFP, who also wrote the book, “Your Financial Compass: Safe Passage Through The Turbulent Waters of Taxes, Income Planning and Market Volatility.”

If there is an area that you would like to see discussed in the column, send your suggestions to gary@BoatmanWealthManagement.com.

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