Ingram's November 2022

S M A L L B U S I N E S S A D V I S E R F I N A N C I A L A D V I S E R

by Abdur Nimeri

Recession Ahead: How to Protect Your Finances

Even in the current economy, businesses may be able to uncover growth opportunities. Inflation is breaking records at more than 8 percent, and a global recession is likely on the horizon for 2023. While the news can be daunting, there are several steps you can take to stabilize your finances during a rocky economy. Create a financial plan (or update the one you have). A fi nancial plan is your guiding light in a tumultuous market be cause it documents your short-and-long-term goals. If you don’t already have a formal financial plan, your financial team can work with you to outline your different goals and values, and the financial steps needed to achieve them. Your financial plan should reflect where you are in life. If you are building your wealth, your financial strategies are go ing to look different from someone who is preparing to sell a business and retire. Whatever is important to you and whatever you want to accomplish should be reflected in your plan. Then when the markets shift, you can feel confident in your financial approach, and ensure you assets are protected during difficult economic times. Finally, your financial plan can be your budgeting tool as you navigate rising inflation for your day-to-day expenses.

er risk tolerance when you’re building wealth as a new investor than when you’re maintaining wealth as you near retirement. Either way, it is important to dis cuss what you are comfortable with in your meetings with your financial team. Your risk tolerance can also change with the flows of the market. Communication with your financial team is critical so you can rebalance your portfolio if needed. Remember, changes can always be made, but as mentioned earlier, you want them to align with your financial plan. Check your tax efficiency. Anoth er important part of your financial strategy is your tax efficiency. Taxes naturally play a big part in your ex penses and your portfolio strategy. As we near a recession, it is a great time to talk with your financial adviser about your taxable accounts. You may want to consider tax-loss

Now is a great time to either start your fi nancial plan or review and adjust your plan with your financial team. Check your emotions. We’ve all heard that we should buy low and sell high, but when the market is headed for a recession, it can be difficult to know exactly what you should do with your investments—and it may feel like time is of the essence. Through out history, multiple events have impacted the markets, and, ultimately, the markets have rebounded. To help keep your perspective, according

harvesting. This is when you sell some invest ments at a loss to off set gains you may have realized from other in vestments, which can help reduce your tax bill. Or, you may want to convert an account to a different position to support your finan cial goals, which would

As we near a recession, it is a great time to talk with your financial adviser about your taxable accounts.

also change your tax bill.

to the National Bureau of Economic Research, between 1854 2020, the average U.S. recession lasted 17 months. This is im portant to remember as we move through the latest cycle, and you review your financial decisions—the economy is cyclical. Instead of quickly reacting to the day-to-day events of the mar ket, lean on your financial plan and the goals you’ve already set in motion. Call your financial team and let them know your concerns. Ask questions about what they are seeing so you can ensure your goals are still on track. For most investors, their investment portfolio is built on a long-term strategy, so volatility in the short term is less import ant than the long view. Keep your emotions in check to avoid over-correcting and instead, strategically respond to the market evolution with your end goal in mind. Understand your risk tolerance. When you create an in vestment strategy, understanding your risk tolerance is critical. This can be determined by several factors based on your short- and long-term goals. For example, you will likely have a high

Turn off the noise. We live in a 24/7 news cycle, which can be over whelming and produce anxiety. It is hard to escape the constant chatter that surrounds the economy; how ever, it is important to take a break. Rather than becoming consumed with the daily headlines, lean on your financial plan and team. A strong partner will provide consult and com fort in volatile times. The different cycles of the econo my are intimidating, but know they are cyclical and will rebound. As we head into more economic uncertainty, rely on your financial plan and team to steer you through.

Abdur Nimeri is co-chief investment officer for UMB Private Wealth Management.

P | 303.839.2273 E | AbdurNimeri @umb.com

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Kansas City’s Business Media

November 2022