McIntyre Elder Law » How to Survive an Economic Downturn

How to Survive an Economic Downturn

So, I don’t know if you’ve seen the news lately. If you haven’t, allow me to save you some time flipping through channels by telling you that our economy has had better days. The recent outbreak/pandemic of COVID-19 has caused quite a bit of economic turmoil that may extend beyond the pandemic itself. The question for many people, including our clients is: how can we best survive this crisis?

Don’t Pull Out

Many folks react to an economic downturn by pulling their money out of their accounts that may be subject to risk as the economy falls. This is a valid reaction and quite understandable. However, this is ultimately a bad choice on a micro and macro level.

On a macro level, if everyone pulls their money out of the market, then the economy will grind to a screeching halt. The economy functions based on the flow of money running through it. If we take all of the money out, then the economy cannot function. This is what happened in the Great Depression. People pulled their money out of banks and stashed them in their mattresses. It wasn’t until President Roosevelt, in one of his fireside chats, encouraged citizens to deposit their cash back into the banks, that the economy began to slowly recover.

On a micro level, if the individual pulls their money out of the market then they lose the chance to either recover what they’ve lost or to take advantage of deals. Now, this does not mean that you should just keep your money where it is, just don’t pull out of the market. In other words, it is perfectly advisable to restructure your portfolio to both protect your downside and take advantage of deals.

Speaking of deals, your money has more buying power in a down market. As the old saying goes, “when there’s blood in the street, it’s time to buy.” Many people get excited at the prospect of a down economy. Good stocks that were, in the past, too expensive to buy are now available at a lower price. It’s important to keep this in mind when evaluating your crisis investment strategy.

Ultimately, it’s important to keep your money in the market. Restructure to best protect yourself and earn more. But, don’t pull out.

Keep Planning

Economic instability means uncertainty. Uncertainty is something that is extremely hard to cope with. In fact, the only way to manage uncertainty is to plan. Planning mitigates uncertainty by helping you gain control over the things within your power. It also helps you to gain some peace of mind, something that cannot be understated. Positivity and security in a time of crisis is not only empowering but necessary to make solid and productive choices.

So, how should you plan? Step one is to meet with professionals and get a game plan in order. This means you should be talking to your financial planner and your attorney. Your financial planner is going to help you make the best decisions with regard to your retirement accounts and investment accounts in light of the economic downturn.

Your attorney is going to help you protect yourself, your family, and your assets by ensuring that your estate plan is solid.

Bulletproofing your Estate Plan

Estate planning is not a one and done deal. It is an ever-evolving strategic blueprint for your future. When things happen that change the way your future may look, it’s important to adjust the blueprint. Economic strive is a pretty good example of a change to one’s future. However, it would be nice to have an estate plan that can withstand a tumultuous future. We call this a bulletproof estate plan.

So, how do you make sure your estate plan is not just solid but bullet proof? First you need to make sure you lay a solid foundation with your foundational documents. Your foundational documents are your General Durable Power of Attorney, your Healthcare Power of Attorney, your Living Will, and your Last Will and Testament. These documents are essential to any estate plan. However, just having these documents in place does not mean you’re bulletproof. These documents in of themselves need to be bulletproof.

In other words, these documents need to be specific, they need to include the proper terms and powers, and, most importantly, they need to anticipate possible future contingencies—like an economic downturn.

The second and last step is further planning. Once you’ve laid your foundation, it is important to ensure that you have a plan in place to use the tools i.e. the foundational documents, you have at your disposal. Maybe that includes more tools to protect assets like trusts or a Ladybird Deed. Maybe it includes making sure you have the ability to pay for long-term care. Either way, further planning is essential to ensure that your estate plan can withstand anything the future throws at you.

Conclusion

Economic downturn does not have to mean you lose everything. With a solid plan in place, you can weather any storm. Ask us how you can ensure that your estate plan is bullet proof. Call us at (704) 249-7040 or visit us on the web at www.mcelderlaw.com.