Yahoo Finance I’m an Economist: 4 Major Money Moves You Should Make Before the Trump vs. Biden Election
As the 2024 U.S. presidential election between Joe Biden and Donald Trump looms on the horizon, you may be wondering how the outcome could impact your personal finances. It’s impossible to predict exactly what will happen. But elections bring a certain amount of economic uncertainty, and there are a few financial steps you should consider taking before the ballots are cast.
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Rather than trying to time the market based on election projections, the wisest thing to do is to shore up your finances with moves that make sense regardless of who wins.
To get their advice, GOBankingRates spoke to Aaron Cirksena, founder and CEO of MDRN Capital, as well as Dennis Shirshikov, adjunct professor of economics at CUNY and head of growth at GoSummer.
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Diversify Your Investment Portfolio
In any time of uncertainty, it’s important to avoid putting all your eggs in one basket. A well-diversified investment portfolio can help reduce your vulnerability if certain sectors take a hit.
“Before the election, it’s crucial to diversify your investment portfolio to mitigate risk,” said Shirshikov. “Given the potential for market volatility, having a mix of stocks, bonds and other asset classes can help protect your investments. Consider including international assets to hedge against domestic market fluctuations.”
If you have a stock-heavy portfolio, for instance, you may want to rebalance toward high-quality bonds, which tend to be less volatile. International diversification is another consideration — holding some foreign stocks and bonds can help protect you from U.S.-centric political risks.
But remember that trying to guess which industries will boom or bust under a particular administration is risky business. Instead, work with a financial advisor to build an asset allocation aligned with your long-term goals and risk tolerance.
Lock In Low Interest Rates on Loans
A new administration could usher in policies that cause interest rates to go up. If you’re planning major purchases like a new car or home renovation, financing sooner rather than later could mean making the most of low rates before any potential changes after the election.
“With uncertainty surrounding the election, it’s wise to lock in low interest rates on any major loans or mortgages,” said Shirshikov. “Current rates are relatively low, and securing these rates can save you money in the long run, regardless of who wins the election and how interest rates might shift.”
If you have an adjustable-rate mortgage, this may be an opportune time to refinance into a fixed-rate loan and secure a stable monthly payment for years to come. Even if you already have a fixed-rate mortgage, crunch the numbers to see if refinancing could meaningfully lower your rate and save you money over the life of the loan. Just be sure closing costs don’t eat up too much of the potential benefit.
Increase Your Emergency Savings
No matter who wins, having a solid emergency fund is always good advice. The lead-up to a high-stakes election is as good a time as any to boost your reserves.
“Building a robust emergency savings fund is always a smart financial move, but it’s particularly important in uncertain times,” said Shirshikov. “Aim to have at least six months’ worth of living expenses saved to buffer against any economic downturns or job market instability that could result from post-election economic policies.”
If the election outcome spooks the markets, you don’t want to be in a position where you’re forced to sell investments at a loss to cover surprise costs. An adequate emergency fund gives you some peace of mind, and some breathing room just in case a new administration’s policies end up impacting your employment or healthcare costs, for example
Have a Plan To Minimize Capital Gains Tax Implications
Capital gains taxes aren’t going away, but how much you owe could change depending on who takes office. It’s wise to have strategies in place to manage your tax liability regardless of what shifts may come.
“For people earning over $500,000 annually with significant capital gains in nonqualified accounts, they should keep in mind capital gains management,” said Cirksena. “Having a plan to minimize tax implications could be beneficial.”
You might consider increasing contributions to tax-advantaged accounts like 401(k)s, IRAs and 529 college savings plans where investments can grow tax-deferred or even tax-free. Maxing out these vehicles not only minimizes current tax burdens but also shields a portion of your wealth from future policy changes.
Work with a financial planner who can help you create a capital gains strategy that works for your unique circumstances.
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This article originally appeared on GOBankingRates.com: I’m an Economist: 4 Major Money Moves You Should Make Before the Trump vs. Biden Election