With a $20 trillion dollar deficit expected by 2020, it’s easy to feel overwhelmed and worried about the future. That’s why so many Americans, both young and old, are finding themselves confused about how to best budget for what may be a cash strapped country.
We’re not saying it’s the next Great Depression (at least not yet), but the looming deficit does significantly raise the risk of a financial crash because it makes it harder for government to respond to market fluctuations. So, how can you stay ahead of that? And what financial planning strategies work best when instability remains on the horizon? Here’s what you need to know.
• First, save under the assumption that social protection programs may not necessarily still be in place within 10 or 20 years. This includes social security, disability, and most welfare systems. A severe market crash could result in these programs being rapidly stripped back due to lack of cash flow.
• Experts estimate that the Social Security Trust Fund will run out of money sometime within the next 13 years. This makes having a nest egg even more important; you don’t want to retire with nothing but welfare under you.
• Even if you’re in your 50s, there’s still time to save. Go for low-risk, high return investments first, like high interest saving accounts, U.S. Savings bonds, life insurance policies with cash value, and stable stocks that pay dividends. Stay away from sudden trends and investments in “up and coming” businesses unless your broker is absolutely sure it’s the right move.
• Be careful with the Bitcoin bubble. If you have a significant amount of money to play with, there’s nothing wrong with investing in a small mining setup, but don’t assume you’ll make a fortune overnight or even over the coming years. Without expensive equipment, most investors find they spend more on power and equipment than they make. That said, if you’re technically inclined, there’s nothing wrong with running a small setup to offset some costs. Just know that many people are finding it more lucrative to buy into cryptocurrencies than to mine them.
• Consider newer membership-based healthcare services. Like insurance policies, these pay monthly in a varying amount. As long as you make your payment, you get access to as many general practitioner visits as you like. For aging Americans, this is ideal; it ensures you have at least baseline access to healthcare long into the future.
• Track non-cash assets closely, reviewing often to see if there’s opportunities to save or liquidate. This includes everything from extra food stocks in the pantry to old equipment in the garage. Balance your desire to keep these items with your desire to save – and in the case of equipment, the speed of depreciation. It’s better to sell an old vehicle for $2000 now than wait two years and get $500.
• Eliminate as much debt as you can right now, even if that means you have to scrimp or consolidate to get there. If we do hit an eventual financial crisis, your position will play a significant role in how much you struggle when it happens. Review your credit card and loan debt for free on places like Credit Karma and dispute or resolve anything listed through either Equifax or Transunion.