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Economists reveal five financial moves you should make in 2025, regardless of whether Trump or Biden wins the election
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The upcoming presidential election has the entire country in an uproar, and for good reason. Whoever is elected next – be it former President Donald Trump or President Joe Biden – will have a significant impact on Americans around the world.
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Depending on who wins, this could mean higher deficits, higher taxes, inflationary changes and other economic changes on a broader scale. While it’s too early 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 from now on. Here’s what they suggested.
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Focus on the future ahead, not the here and now
Regardless of which presidential candidate is next to occupy the Oval Office, one thing is certain: It’s important to make financial moves that benefit you in the long run.
“My advice to anyone when it comes 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 24/7 financial news services believe that the key to investing success involves stock bias and market timing – getting out of stocks before a decline and return to stocks before 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 is impossible to time markets, and even if they experience greater volatility during or after the next election, they are likely to recover as they always have.
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Diversify, rebalance and prioritize tax-efficient investments
Regardless of what political changes are on the horizon, portfolio diversification is key to mitigating risk and maximizing those returns.
Dennis Shirshikov, economist and professor of economics at City University of New Yorksuggested spreading your investments across different asset classes such as stocks, bonds and real estate to withstand any market volatility.
But don’t stop there – make sure you prioritize your retirement and other tax-advantaged accounts.
“Take full advantage of retirement accounts like 401(k)s and IRAs,” Shirshikov said. “If tax rates increase, maximizing contributions now could provide significant tax savings.”
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At the same time, look into municipal bonds and other tax-advantaged accounts. This will also reduce your tax burden and help combat any changes in tax policy.
Every now and then – and this depends on your circumstances and any life changes you’ve experienced recently – you’ll also want to rebalance your portfolio.
“Market fluctuations are common during 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 stock investments have significantly outperformed, your portfolio may be more heavily weighted in stocks than you initially intended. Rebalancing helps maintain the desired risk level and investment strategy.”
Establish a financial plan
Political changes are normal in presidential elections, which is why Johnson emphasized focusing on the long term. This starts with creating a financial plan, ideally with a qualified financial advisor who is also a fiduciary.
“All investors must establish what is called an Investment Policy Statement (IPS) and follow it. Investing without a plan is like driving without a roadmap or GPS,” said Johnson. “Investors should not worry about broad market movements or the crisis of the moment.”
An IPS is essentially a written document that outlines your return objectives, risk tolerance, time horizon and any applicable restrictions – such as liquidity needs and tax circumstances. It establishes the ground rules for the investment process and guides the overall investment plan. It also includes your desired asset allocation and any changes at different stages of your life.
“It’s best to develop an IPS in a very calm market,” Johnson said. “Developing an IPS in a volatile market or during big stories is problematic. The purpose 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 reviewed when your individual circumstances change – perhaps a divorce or other unforeseen life change.”
If you don’t already have an IPS, now is a good time to create one. Just don’t be based on fear or uncertainty about the changes that could occur in the next elections.
Review your budget and savings regularly
Market changes will happen once the next president is elected, but you can adapt. One way to do this — in addition to maintaining a diversified portfolio — is to keep an eye on your budget and maintain the liquidity of some assets. This way, you will be prepared for any short-term fluctuations and can ride them out until things are more in your favor.
Starting with your budget, Shirshikov suggested reviewing and updating it whenever you experience any notable changes in income or expenses, as well as whenever you reach or set a new financial goal.
When creating or reviewing your budget, he also suggested taking into account possible changes in healthcare costs, tax policies and inflation rates that could arise after the election.
Don’t forget your emergency fund, too.
“Given the economic uncertainties that can accompany election years, it is prudent to bolster your emergency fund,” Shirshikov said. “The goal is to have at least six to twelve months of living expenses saved in a high-yield savings account (HYSA).”
Stay informed
The next president, regardless of who it is, will make some changes, so you’ll want to stay informed to safeguard your financial future.
“Staying informed about economic trends and political changes is crucial,” said Shirshikov. “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 will help you overcome any immediate or short-term fluctuations or market volatility.
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This article originally appeared on GOBankingRates. with: Economists reveal five financial moves you should make in 2025, regardless of whether Trump or Biden wins the election