Let’s face it, the current Congress we have no longer seems to be the best and brightest our country has to offer. Nor do they seem to have Americans’ best interest in mind. There seems to be a huge gap between the younger, less experienced congress members who simply want to shout the loudest, stay in the headlines, and raise money, and the older, established, knowledgeable congress members who do know how to legislate, but seem loath to do so. This has never been more prominent than with the looming debt ceiling crisis. Would members really withhold raising the debt ceiling and throwing millions of people out of work and wiping out trillions of dollars in household wealth just to prove a point or raise campaign cash? The cynic in me says, yeah, they might.
To prepare for such an event, plan now. Consider some pre-crisis cash stashing. Many have depleted their cash after the pandemic. Now is the time to replenish and bulk up that emergency fund. At the very least, keep 3-to-6 months of cash on hand for emergencies. I usually advise clients to work up to a higher amount such as 9 months of cash or even more.
Destroy your debt! Eliminating or reducing debt is in essence giving yourself a raise. The less you are spending on debt payments, the more you are able to keep in your budget. Paying off or paying down your debt is a wise investment and can help you build your cash fast. If you have a lot of debt work on creating a debt plan. Work with a CFP® to figure out whether you should snowball or avalanche your debt payoff.
Even if there’s a market crash due to poor political decisions regarding the debt ceiling, keep planning for your future. That is, keep saving and investing. Whether you are investing through a workplace plan, an IRA, or your own taxable brokerage account, consider upping your investments during the downturn. Downturns are when many people make good future investment returns. You are in essence, dollar-cost-averaging. A downturn is a good time for buying low, and eventually selling high. Plan for the long term, not the news cycle.
The debt ceiling didn’t even exist until 1917. It’s basically a guiding mechanism and the two parties have been using it as a political weapon ever since. We’ve never worried about it during times of war, or to reward companies and the wealthy with tax cuts. It seems to popup before election years or when one party has a sense that they are losing favor with voters. Here’s a great summary of previous debt ceiling battles, The Debt Limit Time Machine. Have a read and see if you can discern what will happen with the current round of deliberations.
The press is claiming that the US will suffer from not extending the debt ceiling. The press are also putting out hair-on-fire headlines about millions losing their jobs and trillions of household wealth being eliminated. There is potentiality to those claims, but reality is somewhere in between. To what extent is yet to be seen and unfortunately, we will not know until it happens. Judging by recent instability in the equities markets and the Fed clamoring to raise rates, it seems Wall Street is already getting a bit of tummy rumble.
As an independent CERTIFIED FINANCIAL PLANNER™, I can help you plan for your future and your goals. Contact me and let’s get started on a new goal whether it’s a savings plan, retirement plan, debt reduction, or something more specific. #talktometuesday #education #Hireaplanner #stressfree #savings #ceiling #2023 #debtfree #budget #CFPPro #LetsMakeAPlan #debt #limit