Yahoo Finance Economists Reveal 5 Money Moves You Should Make in 2025 Regardless of Whether Trump or Biden Win the Election
The upcoming presidential election has the whole country abuzz, and for good reason. Whoever is elected next — whether it’s former President Donald Trump or President Joe Biden — will have a significant impact on Americans everywhere.
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Depending on who wins, it could mean higher deficits, higher taxes, inflationary changes and other economic changes on a wider scale. While it’s too soon to predict with complete certainty what will happen after the election, there are some things you’ll want to do on an individual level to safeguard your future financial security.
GOBankingRates spoke with two economists, Robert R. Johnson and Dennis Shirshikov, about what Americans should do with their money starting now. Here’s what they suggested.
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Focus On the Future Ahead, Not the Here and Now
Regardless of which presidential candidate next takes the Oval Office, one thing’s for sure: It’s important to make money moves that’ll benefit you in the long run.
“My advice to anyone with regard to money is to stop focusing on the short-term — this year — and focus on the long term. Many people who listen to and are guided by the 24/7 financial news services believe that the key to investment success involves a bias toward action and timing the markets — getting out of stocks before a decline and getting back into stocks prior to a stock rally. Nothing could be further from the truth,” said Robert R. Johnson, PhD, CFA, CAIA, and professor of economics and finance at Heider College of Business, Creighton University.
It’s impossible to time the markets, and even if they experience greater volatility during or after this next election, they’re likely to rebound as they always have.
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Diversify, Rebalance and Prioritize Tax-Efficient Investments
No matter what political changes are on the horizon, portfolio diversification is key to mitigating risk and maximizing those returns.
Dennis Shirshikov, an economist and professor of economics at the City University of New York, suggested spreading your investments across different asset classes like stocks, bonds and real estate to withstand any market volatility.
But don’t stop there — make sure you’re prioritizing your retirement and other tax-advantaged accounts.
“Take full advantage of retirement accounts such as 401(k)s and IRAs,” Shirshikov said. “If tax rates rise, maximizing contributions now can provide significant tax savings.”
At the same time, look into municipal bonds and other tax-advantaged accounts. These will also reduce your tax burden and help combat any tax policy changes.
Once in a while — and this depends on your circumstances and any life changes you’ve recently experienced — you’ll also want to rebalance your portfolio.
“Market fluctuations are common around election periods,” Shirshikov said. “It’s a good time to rebalance your portfolio to ensure it aligns with your risk tolerance and investment goals. For example, if your equity investments have significantly outperformed, your portfolio may be more heavily weighted toward stocks than you initially intended. Rebalancing helps maintain your desired risk level and investment strategy.”
Establish a Financial Plan
Policy changes are par for the course with presidential elections, which is why Johnson emphasized focusing on the long term. This starts by creating a financial plan, ideally with a qualified financial advisor who’s also a fiduciary.
“All investors should establish what is called an Investment Policy Statement (IPS) and follow it. Investing without a plan is like driving without a roadmap or GPS,” Johnson said. “Investors should not concern themselves with broad market moves or the crisis du jour.”
An IPS is essentially a written document that outlines your return objectives, risk tolerance, time horizon and any applicable constraints — like liquidity needs and tax circumstances. It sets the ground rules for the investment process and guides the overall investment plan. It also includes your target asset allocation and any changes at different stages of your life.
“It is best to develop an IPS in a rather calm market,” Johnson said. “Developing an IPS in a volatile market or during major stories is problematic. The whole point of an IPS is to guide you through changing market conditions. It should not be changed as a result of market fluctuations. It only needs to be revised when your individual circumstances change — perhaps a divorce or other unanticipated life change.”
If you don’t have an IPS already, now’s a good time to make one. Just don’t base it on the fear or uncertainty of the changes that might come with the next election.
Review Your Budget and Savings Regularly
Market changes are bound to happen once the next president is elected, but you can adapt. One way to do this — besides keeping a diversified portfolio — is to keep a close eye on your budget and keep some assets liquid. That way, you’ll be prepared for any short-term fluctuations and can ride them out until things turn more in your favor.
Starting with your budget, Shirshikov suggested reviewing and updating it whenever you experience any notable income or expense changes, as well as whenever you meet or set a new financial goal.
As you create or revise your budget, he also suggested factoring in potential changes in healthcare costs, tax policies and inflation rates that may arise post-election.
Don’t forget about your emergency fund either.
“Given the economic uncertainties that can accompany election years, bolstering your emergency fund is prudent,” Shirshikov said. “Aim to have at least six to twelve months’ worth of living expenses saved in a high-yield savings account (HYSA).”
Stay Informed
The next president, irrespective of who they are, is going to make some changes, so you’ll want to stay informed to safeguard your financial future.
“Staying informed about economic trends and policy changes is crucial,” Shirshikov said. “But it’s equally important to avoid making impulsive financial decisions based on short-term market movements.”
Avoid knee-jerk reactions and instead focus on long-term strategies as these will be what get you through any immediate or short-term fluctuations or market volatility.
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This article originally appeared on GOBankingRates.com: Economists Reveal 5 Money Moves You Should Make in 2025 Regardless of Whether Trump or Biden Win the Election
