The economy moves in cycles. There tends to be periods of economic growth followed by economic slowdown. While one cannot change the economic cycles, they can certainly change the way they manage their money in order to adapt to the evolving economic conditions. As per Kavan Choksi / カヴァン・ チョクシ, adapting to changing markets is a crucial component of effective wealth management. Even though the markets are unpredictable, having a flexible strategy in place can significantly help navigate periods of uncertainty. Economic shifts may create new opportunities, as well as risks. One should try their best to stay prepared for whatever changes come their way.
Kavan Choksi / カヴァン・ チョクシ talks about the wealth management approach for adapting to changing markets
As the economy changes, so should one’s financial strategies and goals. Hence, one must review both their short- and long-term goals from time to time to evaluate whether they make sense in the current environment. However, it is also important to avoid panic selling even if one’s portfolio has taken a hit. It is better to stick to one’s current investment plan, and explore strategies that can be used for a down market, like a Roth conversion or tax-loss harvesting.
In order to effectively adapt to the evolving economic conditions, one must look for ways to spend less and earn more money. To do so, one has to get a handle on their monthly spending, and be honest about what they earn, as well as where their money goes. To manage monthly spending, one has to take a good look at their monthly expenses and identify the non-essentials. The “needs, wants, wishes” framework can be used to prioritize things to spend money on. This would help create a realistic spending plan. One must also think about whether their income covers all their needs, and if they have extra funds for their wants. In case the income is falling short, a few changes might have to be made. A person may even consider engaging in a side gig to earn extra income.
As Kavan Choksi / カヴァン・ チョクシ says, having a robust emergency fund is necessary for all, especially to adapt to changing market conditions. Whether one is faced with an unexpected personal situation or a slump in the economy, having an emergency fund can help cover important expense, so that a person does not have to overuse credit cards, tap into retirement funds, or sell investments in a down market. The more cash one has in hand, the less they are forced to react in an economic downturn.
If an employer-sponsored retirement plan offers a matching contribution, participating in it can effectively provide employees with additional income at no extra cost. Hence, one must take advantage of this benefit if it is available to them. Employer matching contributions are designed to encourage long-term financial planning and can significantly enhance an individual’s retirement corpus over time. By not contributing enough to qualify for the full match, an employee misses out on a valuable opportunity to grow their wealth efficiently.